CENVAT credit on railway-track materials used inside port premises was held admissible for taxable port services.

CENVAT credit was available on steel plates, FRP corrugated sheets, tongue rails, fasteners, rail sleepers and MS bolts with nuts used to lay railway tracks within port premises for taxable port services. Rule 2(k) of the CENVAT Credit Rules allows credit on goods used for providing output services, and prior decisions were relied on to support credit for goods used in construction or installation connected with service provision. On that basis, denial of credit was held unsustainable and the credit was admissible.

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Issues: Whether CENVAT credit was admissible on goods such as steel plates, FRP corrugated sheets, tongue rails, fasteners, rail sleepers and MS bolts with nuts used for laying railway tracks within the port premises for providing taxable output services.

Analysis: The goods were used for laying a railway track inside the port premises and the appellant was admittedly discharging service tax on the port services rendered. Rule 2(k) of the CENVAT Credit Rules permits credit on goods used for providing output services. The reasoning was supported by prior decisions holding that goods used for construction or installation connected with provision of taxable services can qualify for credit.

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

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