Cenvat credit on expansion-related services upheld where the existing factory was operational and the services supported manufacture.

Cenvat credit was held admissible on services used for repair and maintenance, erection, installation, commissioning and consulting engineering in connection with expansion of an existing production facility. The amended input service definition excluded "setting up," but the factory was already operational and the services were used for capacity expansion, not for establishing a new unit. As the services were not covered by any exclusion and the expanded capacity remained integrally connected with manufacture of the final product, the denial of credit was unsustainable and was set aside.

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Issues: Whether cenvat credit was admissible on services used for repair and maintenance, erection, installation, commissioning and consulting engineering in connection with expansion of the existing production capacity.

Analysis: The credit was denied on the premise that the expression "setting up" had been removed from the inclusive part of the definition of input service with effect from 01.04.2011. On the facts, the factory was already in existence and engaged in production, and the services were used only for expansion of the existing capacity, not for setting up a new factory. The services were also not covered by any exclusion in the amended definition, and the expanded capacity remained integrally connected with manufacture of the final product.

Conclusion: The credit was admissible and the denial was unsustainable; the order denying credit was set aside and the appeal was allowed.

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