Input service credit extends to temporary factory storage sheds used for finished goods and linked to manufacturing activity.

Services used to erect, commission and install a temporary storage shed within factory premises for storing finished goods were treated as input services under Rule 2(l) of the Cenvat Credit Rules, 2002. The definition was read to include services used in relation to setting up a factory and storage up to the place of removal, and the shed was found to have a direct nexus with manufacturing and post-manufacture storage. On that basis, credit of service tax on the construction-related services was admissible and denial of Cenvat credit was unsustainable.

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Issues: Whether credit of service tax paid on erection, commissioning and installation services used for setting up a temporary storage shed within the factory premises for storing finished goods is admissible as input service under Rule 2(l) of the Cenvat Credit Rules, 2002.

Analysis: The service was used for creating a temporary storage shed in the factory premises for storage of the finished products manufactured by the appellant. The definition of input service under Rule 2(l) includes services used in relation to setting up of a factory and storage upto the place of removal. On the plain language of the rule, services used for setting up storage facilities within the factory premises fall within the inclusive part of the definition. The temporary shed in question was for finished goods and thus had a direct nexus with the manufacturing activity and post-manufacture storage. The reasoning also accords with the cited view that services for a temporary storage shed are input services.

Conclusion: The credit was admissible and the denial of Cenvat credit was unsustainable.

Ratio Decidendi: Services used for setting up storage facilities within the factory premises for finished goods qualify as input service when the governing definition expressly includes setting up of a factory and storage upto the place of removal.

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