CENVAT credit on mandatory employee medical services qualifies as input service when linked to statutory factory obligations.

CENVAT credit was held admissible on service tax paid for para medical staff services used to provide medical facilities to factory employees, because those facilities were required to be maintained under the Factories Act, 1948. The services had a direct statutory nexus with the running of the factory and were treated as input services used in relation to manufacture, rather than as activities unconnected with production. The analysis confirms that services incurred to discharge a legal obligation for employee medical and first-aid facilities can qualify for credit where they support the manufacturing operations.

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Issues: Whether CENVAT credit of service tax paid on para medical staff services availed for providing medical facilities to employees in the factory was admissible when such medical facilities were required to be maintained under the Factories Act, 1948.

Analysis: The services in question were connected with the statutory obligation to provide medical and first-aid facilities in the factory. Where a manufacturer is required by law to maintain such facilities, the expenditure incurred on those services has a direct statutory nexus with the running of the factory and cannot be treated as unconnected with manufacture. The reasoning applied the settled principle that input service is not confined to services used directly in production and may include services used indirectly or in relation to manufacture, especially where the service is mandated by law.

Conclusion: CENVAT credit on the service tax paid for para medical staff services was admissible, and the appeal succeeded.

Ratio Decidendi: Services incurred to discharge a statutory obligation for maintaining employee medical facilities in the factory qualify as input services when they are used in relation to manufacture.

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