CENVAT credit eligibility turns on nexus with manufacture, including specialised safety goods and pre-registration services.

Specialised safety and security goods installed in a factory for protection and storage of gold were treated as eligible CENVAT inputs because they were used in or in relation to manufacture and were essential to the manufacturing activity. Service tax credit was also held available on input services received before Central Excise registration, since registration was not a condition precedent and eligibility depended on receipt, use, and nexus with manufacture. Services received after registration but before the plant became ready for manufacture were likewise treated as creditable where they related to setting up and functioning of the business. The stated effect is that substantive nexus with manufacture governs credit eligibility.

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Issues: (i) Whether CENVAT credit was admissible on specialised safety and security goods installed in the factory for protection and storage of gold. (ii) Whether CENVAT credit of service tax paid on input services received prior to obtaining Central Excise registration was admissible. (iii) Whether CENVAT credit on services received after registration but before the plant became ready for manufacture was admissible.

Issue (i): Whether CENVAT credit was admissible on specialised safety and security goods installed in the factory for protection and storage of gold.

Analysis: The goods, though forming part of the building structure, were found to be specialised items used in the factory for storage and safety of gold. The relevant test was whether the goods were used in or in relation to manufacture, directly or indirectly. On that basis, the goods were treated as inputs because they were essential to the manufacturing activity and the safeguarding of the final product.

Conclusion: CENVAT credit on the specialised safety and security goods was admissible.

Issue (ii): Whether CENVAT credit of service tax paid on input services received prior to obtaining Central Excise registration was admissible.

Analysis: Registration was held not to be a condition precedent for availing credit. The decisive considerations were receipt of the services, their use in or in relation to manufacture, and clearance of the final product on payment of duty. Credit was therefore linked to substantive eligibility and not to the timing of registration.

Conclusion: CENVAT credit on services received prior to registration was admissible.

Issue (iii): Whether CENVAT credit on services received after registration but before the plant became ready for manufacture was admissible.

Analysis: The services were held to be connected with the setting up and functioning of the manufacturing business and were not excluded merely because the plant was not yet fully ready for production. Since the services were used in relation to the manufacture of the final product, credit could not be denied on that ground alone.

Conclusion: CENVAT credit on services received during the interregnum period was admissible.

Final Conclusion: The denial of credit on both goods and services was unsustainable, and the assessee was entitled to the benefit of CENVAT credit with consequential relief.

Ratio Decidendi: Goods and services used in or in relation to manufacture, including specialised factory safety measures and qualifying pre-production or pre-registration services, are eligible for CENVAT credit if the substantive conditions of use and nexus with manufacture are satisfied.

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