Tribunal grants Cenvat credit for services in factory expansion post 01.04.2011

The Tribunal allowed Cenvat credit for services used in setting up a new furnace within an existing factory, post 01.04.2011. The Tribunal held that the new furnace installation was an expansion of the existing facility, not the establishment of a new factory, making the services eligible for credit under the main definition of Input Service. The services directly contributed to manufacturing, aligning with the eligibility criteria, and distinguished the case from a prior judgment involving a new factory setup. Consequently, the appeal was allowed, affirming the appellant's entitlement to the Cenvat credit.

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Issues:
Cenvat credit eligibility for services used in setting up a new furnace within an existing factory post 01.04.2011.

Analysis:
The appellant, an existing glass bottle manufacturing factory, installed a new furnace within the facility and claimed Cenvat credit for services like erection, installation, and engineering. The dispute arose as the department disallowed credit post 01.04.2011, citing the exclusion of "setting up of factory" from the definition of Input Service. The appellant argued that the new furnace was an expansion of the existing facility, not a new factory setup. They relied on various judgments supporting their claim, emphasizing that the services used fell under the main clause of the Input Service definition. The Revenue contended that a new plant was set up, not just a furnace, thus credit inadmissible post 01.04.2011. The Tribunal noted the existing facility's history, concluding that the new furnace was an expansion, not a new factory setup. The exclusion clause did not cover the services used, making the credit admissible.

In a similar case, the Tribunal allowed Cenvat credit for services related to machinery erection, emphasizing the nexus with manufacturing. The Tribunal reiterated that even without the term "setting up of factory" in the inclusive clause, credit eligibility must align with the main definition, covering services directly or indirectly related to manufacturing. The installation of the new furnace directly contributed to the final product's manufacture, making the services eligible for credit. The Tribunal distinguished a prior judgment cited by the Revenue, highlighting the different factual context of a new factory setup in that case. Consequently, the impugned order was set aside, and the appeal allowed, affirming the appellant's entitlement to Cenvat credit for the services utilized in setting up the new furnace within the existing manufacturing facility.

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