Input service credit for mining plan and clearance services was allowed as integrally connected to future mining operations.

Services obtained after issuance of letters of intent for mining operations, including preparation of mining plans, environmental clearances, hydro studies and rainwater harvesting, were treated as input services under the Cenvat rules because they were undertaken to satisfy conditions attached to the intended mining lease and were integrally connected with future use of limestone in manufacturing. Although the full mining lease had not yet been granted when credit was taken, the services were held to be sufficiently linked to the assessee's business activity. Cenvat credit on the disputed services was therefore admissible.

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Issues: Whether services availed for preparation of mining plans and environmental clearances, after issue of letters of intent but before grant of full mining lease, qualify as eligible input services for Cenvat credit.

Analysis: The services were obtained pursuant to letters of intent for mining lease and were directed towards compliance with the conditions attached to those letters, including preparation of the mining plan and related environmental requirements. The invoices reflected that the services were used for mining plan preparation, hydro study, rain water harvesting and allied steps necessary for eventual mining operations. Though a full-fledged mining lease had not yet been granted when the credit was taken, the services were found to be integrally connected with the appellant's manufacturing activity through future use of limestone from the demarcated areas and were treated as falling within the scope of input services under the governing Cenvat rules.

Conclusion: The disputed services were eligible input services and the Cenvat credit was admissible in favour of the assessee.

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