Input service credit covers procurement-related services used to secure controlled raw material for manufacture, with disallowance unsustainable.

Services used to arrange and facilitate procurement of molasses for a distillery were treated as input services under Rule 2(l)(ii) of the Cenvat Credit Rules, 2004 because the raw material was under statutory control and could be obtained only with the Controller's permissions. As the services were incurred in relation to procurement of inputs required for manufacture of denatured spirit and alcohol, the service tax paid on them qualified for Cenvat credit. The corresponding disallowance was therefore not sustainable, and the related interest and penalty could not be upheld.

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Issues: Whether service tax paid on services procured for arranging and facilitating the supply of molasses for the distillery unit qualified as input service eligible for Cenvat credit under the Cenvat Credit Rules, 2004.

Analysis: Molasses were under strict statutory control under the Uttar Pradesh molasses control regime, and their procurement for the distillery unit could not be effected without the Controller's orders and permissions. The services taken by the assessee were used to facilitate procurement of the raw material required for manufacture of denatured spirit and alcohol. The expenses were incurred in relation to procurement of inputs, and the service tax had been paid on such services. On these facts, procurement-related services fall within the inclusive scope of input service under Rule 2(l)(ii) of the Cenvat Credit Rules, 2004.

Conclusion: The credit was admissible, and the disallowance, interest, and penalty could not be sustained.

Ratio Decidendi: Services used for procurement of inputs for manufacture, when integrally connected with the production process, constitute input service for Cenvat credit purposes.

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