CENVAT credit on rented factory premises upheld where the service had direct nexus with manufacture of excisable goods.

CENVAT credit on service tax paid for renting of immovable property used as a factory was admissible because the rented premises were used for manufacture of excisable goods and the service had a direct nexus with the manufacturing activity. The Revenue's circular was inapplicable, as it dealt with commercial or industrial construction services rather than renting of immovable property services. On that basis, denial of credit was unsustainable and the assessee was entitled to avail the credit.

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Issues: Whether CENVAT credit of service tax paid on renting of immovable property services used for a factory taken on rent for manufacture of excisable goods is admissible.

Analysis: The factory premises were undisputedly taken on rent and used for manufacturing the final product on which duty was discharged. On those facts, denial of CENVAT credit on the service tax paid for renting of immovable property was held to be unsustainable because the service had a direct nexus with manufacture carried on from the rented premises. The circular relied upon by the Revenue was found to relate to commercial or industrial construction services and not to renting of immovable property services, and was therefore held inapplicable.

Conclusion: The denial of CENVAT credit was incorrect and the assessee was entitled to credit.

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