Broad input service definition allowed CENVAT credit for factory construction, employee transport, catering, and management accommodation services.

Rule 2(l) was applied broadly to hold that, for the relevant pre-01.04.2011 period, services used directly or indirectly in relation to manufacture and business activities qualified as input services. Commercial and Industrial Construction Service used for setting up the factory was covered because the later exclusion of construction services showed such credit had been available earlier. Rent-a-Cab Service for employee transport, Outdoor Catering Service for workers, and Real Estate Agent Service for arranging residential accommodation for management were also treated as having a sufficient business nexus. The disputed denial of CENVAT credit on all four services was therefore not sustainable.

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Issues: (i) Whether CENVAT credit on Commercial and Industrial Construction Service used for setting up the factory was admissible for the relevant period; (ii) whether CENVAT credit on Rent-a-Cab Service used for employee transportation was admissible; (iii) whether CENVAT credit on Outdoor Catering Service provided to employees was admissible; and (iv) whether CENVAT credit on Real Estate Agent Service used for procuring residential accommodation for management was admissible.

Issue (i): Whether CENVAT credit on Commercial and Industrial Construction Service used for setting up the factory was admissible for the relevant period.

Analysis: The definition of input service under Rule 2(l) was of wide amplitude and covered services used directly or indirectly in or in relation to manufacture, clearance up to the place of removal, and also services used in relation to setting up of a factory. The later exclusion of construction services from 01.04.2011 indicated that such services were within the ambit of input service for the prior period. The credit claimed related to a period prior to that exclusion.

Conclusion: Credit on Commercial and Industrial Construction Service was admissible, in favour of the assessee.

Issue (ii): Whether CENVAT credit on Rent-a-Cab Service used for employee transportation was admissible.

Analysis: Transportation of employees to the factory has a direct bearing on manufacturing activity and supports the efficient running of the business. Services of this kind fall within the wider expression of input service because they are used in relation to manufacture and activities relating to business.

Conclusion: Credit on Rent-a-Cab Service was admissible, in favour of the assessee.

Issue (iii): Whether CENVAT credit on Outdoor Catering Service provided to employees was admissible.

Analysis: The provision of canteen or catering facilities to workers, where required by the Factories Act, is integrally connected with the manufacturing business. Such service has nexus with the business of manufacturing and is covered by the inclusive scope of input service.

Conclusion: Credit on Outdoor Catering Service was admissible, in favour of the assessee.

Issue (iv): Whether CENVAT credit on Real Estate Agent Service used for procuring residential accommodation for management was admissible.

Analysis: Procuring residential accommodation for designated personnel in connection with their employment is an activity linked to business and falls within the broad ambit of input service where the service is used for the business requirements of the manufacturer.

Conclusion: Credit on Real Estate Agent Service was admissible, in favour of the assessee.

Final Conclusion: The disputed input services were held to fall within the scope of input service, so the denial of CENVAT credit could not be sustained and the appeal succeeded.

Ratio Decidendi: Prior to the 2011 exclusion, services having direct or indirect nexus with manufacture or with business activities, including setting up of a factory and statutorily connected employee welfare services, qualify as input services for CENVAT credit.

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