CENVAT credit allowed for pre-production input services following PEPSICO precedent under Rule 2(l)(ii)

CESTAT Chennai ruled on CENVAT credit eligibility for input services availed before commercial production commenced. Following precedent from PEPSICO INDIA HOLDINGS case, the tribunal held that services used for factory setup qualify as input services under Rule 2(l)(ii) of CENVAT Credit Rules 2004, as they relate directly to manufacturing activities. However, credit for Emergency Medical Services (Rs.31,518) was disallowed as appellant failed to prove these weren't for personal consumption. Credit disallowance for services by Lease Plan India (Rs.7,664.99) was upheld as uncontested. Appeal allowed partially; remaining service credits were permitted.

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Issues Involved:
1. Eligibility of CENVAT Credit on input services availed prior to commencement of commercial production.
2. Interpretation of "input service" definition post-01.04.2011.
3. Disallowance of specific services under the amended definition.

Summary:

1. Eligibility of CENVAT Credit on Input Services:
The appellant, M/s. Saint Gobain Glass India Ltd., availed CENVAT Credit on various input services before the commencement of commercial production. The Department argued that these services fall under "services used in relation to setting up of factory," which is ineligible for credit post-01.04.2011 as per the amended definition of "input service."

2. Interpretation of "Input Service" Definition Post-01.04.2011:
The Tribunal examined the definition of "input service" before and after 01.04.2011. Prior to this date, the definition included services used in relation to setting up a factory. Post-amendment, these words were omitted. However, the main part of the definition still includes services used directly or indirectly in or in relation to the manufacture of final products. The Tribunal noted that services used for the commencement of manufacture are in relation to the manufacture of final products.

3. Disallowance of Specific Services:
The Tribunal referenced previous decisions, including M/s. Pepsico India Holdings (Pvt.) Ltd. and M/s. Mangalam Cement Ltd., which held that services used for setting up a factory are covered under "input services" as they are directly or indirectly related to manufacture. The Tribunal found that the appellant did not avail credit on the setting up of buildings or roofs but on services like Erection, Commissioning, and Installation of machinery, which are eligible for credit.

Conclusion:
The Tribunal concluded that the disallowance of credit on the impugned services, except for Emergency Medical Services and services rendered by M/s. Lease Plan India Pvt. Ltd., cannot be sustained. The appeal was partly allowed, with disallowance upheld for Emergency Medical Services (Rs.31,518/-) and services by M/s. Lease Plan India Pvt. Ltd. (Rs.7664.99/-). The demand, interest, and penalties for other services were set aside.

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