CENVAT credit on storage tank construction services allowed where the tank formed part of the output-service chain.

Rule 2(l) of the CENVAT Credit Rules, 2004 was applied broadly to treat construction-related services used for a storage tank as eligible input services where the tank formed part of the output-service chain. The tribunal relied on prior precedent that storage tanks used in providing services are capital goods and that credit is available on inputs and services used for their fabrication and installation. On that basis, service tax paid on the construction of the storage tank was held admissible as CENVAT credit, and denial of credit was found unsustainable.

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Issues: Whether CENVAT credit was admissible on service tax paid for construction services used for storage tank and related structures for providing output services.

Analysis: Rule 2(l) of the CENVAT Credit Rules, 2004 defines input service broadly as a service used by a provider of output service for providing output service. The dispute turned on whether the construction-related services availed for the storage tank could be treated as eligible input services. The issue had already been examined in prior tribunal precedent holding that storage tanks used in the service chain are capital goods and that credit is available on inputs and services used for their fabrication and installation. Following that reasoning, the services used for construction of the storage tank were treated as eligible for credit.

Conclusion: CENVAT credit on the service tax paid for construction of the storage tank was admissible and the denial of credit was unsustainable.

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