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Issues: Whether CENVAT credit on services used for erection, commissioning and installation of machinery for manufacture of sugar was admissible after the amendment to the definition of input service, and whether the demand could be sustained.
Analysis: The services in question were used for erection, commissioning and installation of machinery employed in manufacture of sugar. Such services were held to fall within the ambit of input service even after 1.4.2011, because the expression "in relation to manufacture" continues to broaden the scope of admissible credit where the nexus with manufacture is established. Credit cannot be denied merely because the term "setting up" was deleted from the inclusive part of the definition, when the services are directly connected with the manufacturing machinery and the manufacturing activity itself. The limitation issue was not examined further once the appeal succeeded on merits.
Conclusion: Denial of CENVAT credit on erection, commissioning and installation services was not sustainable, and the credit was admissible.
Ratio Decidendi: CENVAT credit remains admissible on services used in or in relation to manufacture where a direct nexus with the manufacturing process is established, even after deletion of the expression "setting up" from the definition of input service.
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