2025 (6) TMI 588 - AT - Central Excise

CENVAT credit for factory set-up input services after 01.04.2011 under CCR definition change upheld on appeal

The dominant issue was whether CENVAT credit was admissible on input services used for setting up a factory after 01.04.2011, despite the amended ... CENVAT Credit on input services used for setting up its factory post 01.04.2011 - amendment in the definition of 'input service' under the CENVAT Credit Rules, 2004 - omission of explicit inclusion of services related to 'setting up' from its scope - HELD THAT:- The said issue has been examined by this Tribunal in the case of M/s. Aditya Aluminium vs. Commissioner of Central Excise, Customs & S.Tax, Bhubaneswar, [2023 (9) TMI 55 - CESTAT KOLKATA], Kolkata wherein this Tribunal observed that 'the subject input services have a direct nexus with the manufacture of finished goods in the 'means' clause of the definition of input services. Accordingly we hold that even if the word 'setting up of a factory has been specifically excluded from the definition.e.f. 01.04.2011, such services are covered within the ambit of main clause of the definition. Hence, it would still qualify as an input service as per Rule 1(1) of CCR, 2004.' As issue has already been settled that the input services have direct nexus with the manufacturing goods in the ‘means’ clause of definition of input services. Therefore, post 01.04.2011 also the services in question was covered within the ambit of main clause of the definition. Hence appellant do qualify to avail Cenvat Credit of input services used for setting up of its factory plant post 01.04.2011. In view of this there are no merit in the impugned order - appeal allowed. Issues: (i) Whether CENVAT credit is admissible for input services used in setting up a factory post 01.04.2011 when the inclusive part of the definition of 'input service' no longer expressly mentioned 'setting up'?Analysis: The question requires construing Rule 2(1) of the CENVAT Credit Rules, 2004 as it stood w.e.f. 01.04.2011, which contains a main (means) clause, an includes clause and an excludes clause. The main clause covers any service 'used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal.' The term 'manufacture' is wide (Section 2(f) of the Central Excise Act, 1944) and includes processes incidental or ancillary to manufacture. Services used for setting up a factory are activities directly or indirectly in relation to manufacture because without setting up the factory manufacture cannot occur. Where such services fall within the scope of the main (means) clause and are not specifically placed in the excludes clause, they qualify as 'input service' despite omission from the inclusive list. Earlier Tribunal decisions applied this construction, held that setting up activities fall under the main clause, and set aside demands based on exclusion from the inclusive part.Conclusion: The input services used in setting up the factory post 01.04.2011 qualify as 'input service' under Rule 2(1) of the CENVAT Credit Rules, 2004 and CENVAT credit availed on such services is admissible; the impugned demand, interest and penalty are set aside and the appeal is allowed.