Cenvat credit on consultancy for water supply infrastructure was allowed as it had sufficient nexus with mining operations.

Cenvat credit was held admissible on consultancy services used to lay pipelines for supplying water to mines, because the broader definition of input service under Rule 2(l) covered services used directly or indirectly in relation to manufacture and business operations. The consultancy for raising the dam embankment was also treated as eligible, as the dam secured water indispensable for mining operations and the procurement of an essential input for manufacture. The disallowances were therefore unsustainable, the appeals succeeded, and consequential relief followed from allowance of credit.

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Issues: (i) Whether Cenvat credit was admissible on consultancy services used for laying pipelines for supply of water to the mines; (ii) Whether Cenvat credit was admissible on consultancy services used for raising the height of the dam embankment to secure water supply for mining operations.

Issue (i): Whether Cenvat credit was admissible on consultancy services used for laying pipelines for supply of water to the mines.

Analysis: The definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 was applied broadly to cover services used directly or indirectly in relation to manufacture as well as services used in relation to the business of manufacture. The service in question facilitated supply of water, which was essential for the mining activity and had already been recognised in the appellant's own earlier cases as having the requisite nexus.

Conclusion: Cenvat credit was admissible and the disallowance was not sustainable.

Issue (ii): Whether Cenvat credit was admissible on consultancy services used for raising the height of the dam embankment to secure water supply for mining operations.

Analysis: The service was found to have a sufficient nexus with manufacture because the dam stored water that was indispensable for the mining process and for the procurement of the input water used in the captive mining operations. The inclusive scope of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 covered such consultancy services connected with obtaining an essential input for manufacture.

Conclusion: Cenvat credit was admissible and the disallowance was not sustainable.

Final Conclusion: The appeals succeeded, the impugned orders were set aside, and the assessee was granted the consequential relief flowing from allowance of credit.

Ratio Decidendi: Services having a direct or indirect nexus with manufacture, including services connected with the procurement of an essential input used in the manufacturing process, fall within the inclusive scope of input service for Cenvat credit purposes.

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