Cenvat credit on repair-related construction services and employee insurance was treated as admissible for an existing factory.

Cenvat credit was stated to be admissible on construction and architectural services where the services were used for repair and renovation of an existing factory building and plant, because the exclusion for construction-related services was said to apply to initial setting up, not to repair or renovation of an existing unit. Credit was also stated to be admissible on insurance-related services, including group mediclaim, group personal accident, and motor vehicle insurance, where they were treated as employee-welfare and business-linked services with nexus to manufacture rather than personal consumption. The disputed disallowance, demand, penalty, and interest were said to be set aside on those issues.

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Issues: (i) Whether Cenvat credit was admissible on construction and architectural services used for repair and renovation of an existing factory building and plant; (ii) Whether Cenvat credit was admissible on insurance-related services such as group mediclaim, group personal accident, and motor car or vehicle insurance.

Issue (i): Whether Cenvat credit was admissible on construction and architectural services used for repair and renovation of an existing factory building and plant.

Analysis: The exclusion of construction-related services from input services applies to services used for initial setting up of a factory. The services in question were found to have been used for repair and renovation of an already existing factory. Repair, renovation, and modernisation are specifically covered by the inclusive part of the definition of input services, and the exclusion inserted by Notification No. 3/2011-CE (N.T.) dated 01.03.2011 did not bar credit on such facts.

Conclusion: Cenvat credit on construction and architectural services was held admissible and the disallowance was set aside.

Issue (ii): Whether Cenvat credit was admissible on insurance-related services such as group mediclaim, group personal accident, and motor car or vehicle insurance.

Analysis: The insurance services were treated as statutory and employee-welfare related services connected with the business of manufacture and not as personal consumption. Such services were considered to have nexus with the business activity and with manufacture of final products, and were supported by prior decisions allowing credit on similar services.

Conclusion: Cenvat credit on the insurance-related services was held admissible and the corresponding demand, penalty, and interest were set aside.

Final Conclusion: The appeal succeeded to the extent of the disputed Cenvat credit on both categories of input services, while the amount admittedly paid remained undisturbed, resulting in a partial allowance of the appeal.

Ratio Decidendi: Input services used for repair and renovation of an existing factory, and welfare-linked insurance services having nexus with the business of manufacture, are admissible for Cenvat credit; the exclusion for construction services does not apply to initial setup alone when the facts show repair or renovation of an existing unit.

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