Cenvat credit on hired cranes and excavators was allowed where the equipment qualified as capital goods and supported works contract service.

Cenvat credit was admissible on service tax paid for hiring cranes, hydra cranes and excavators because the hired goods were classifiable under Chapter 84 and satisfied the definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004. The exclusion for services relating to motor vehicles under Rule 2(l) did not apply merely because the goods were hired equipment, and the services were used in providing the output taxable works contract service. The assessee was therefore entitled to input service credit, and the revenue's objection was rejected.

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Issues: Whether Cenvat credit of service tax paid on hiring of cranes, hydra cranes and excavators was admissible as input service credit and whether the goods could be treated as ineligible motor vehicles so as to deny credit.

Analysis: The relevant period was governed by Rule 2(l) of the Cenvat Credit Rules, 2004, which excluded certain services relating to motor vehicles, and by Rule 2(a) of the Cenvat Credit Rules, 2004, which defined capital goods. The services in question fell within supply of tangible goods service under Section 65(105)(zzzzj) of the Finance Act, 1994, but the goods hired were classifiable under Chapter 84 of the Central Excise Tariff Act, 1985. Once the goods satisfied the capital goods definition, the exclusion based on motor vehicle treatment did not apply. The services were also used for providing the output taxable service of works contract service.

Conclusion: The assessee was entitled to the Cenvat credit claimed, and the revenue's challenge failed.

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