Cenvat credit for steam used in canteen and laundry was upheld as having a nexus with manufacturing activity.

Cenvat credit on furnace oil used to generate steam was treated as admissible where the steam was consumed within the factory for canteen and laundry functions. The canteen use was regarded as statutorily required, and laundry activity was viewed as connected with manufacture because it supported utensils and uniforms used in the manufacturing premises. Applying the broader nexus test for inputs used in or related to manufacture, ancillary in-factory uses of the steam fell within credit entitlement. On that reasoning, restriction of credit for canteen and laundry consumption was not justified, and the associated disallowance and penalties were unsustainable.

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Issues: Whether Cenvat credit on furnace oil used for generation of steam was deniable to the extent the steam was utilised in the canteen and laundry within the factory premises.

Analysis: The steam was generated from furnace oil on which Cenvat credit had been validly taken, and part of that steam was used within the factory for canteen and laundry functions. The canteen requirement was treated as statutorily mandated, and the laundering of utensils and uniforms was regarded as connected with the manufacturing activity. Applying the principle that input use must bear a nexus with manufacture or with purposes connected or related to manufacture, the use of steam in the factory premises was held to fall within the broader manufacturing nexus. The reasoning drawn from the cited authority on the phrase "any other purpose" supported inclusion of such ancillary uses within the credit entitlement.

Conclusion: The credit could not be restricted on the ground that steam was used in the canteen and laundry, and the disallowance and penalties were unsustainable.

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