Input service credit covers construction of staff quarters used as premises of the output service provider.

Service tax paid on construction of staff residential quarters was treated as an eligible input service for CENVAT credit because the definition of input service extended to services used in the premises of the output service provider. Since the staff quarters were accepted as the bank's premises, the construction service fell within Rule 2(l) of the CENVAT Credit Rules. The disallowance of credit was therefore held unsustainable, and the credit was admissible to the assessee.

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Issues: Whether service tax paid on construction of staff residential quarters could be treated as input service eligible for CENVAT credit.

Analysis: The definition of input service covered services used in the premises of the provider of output service. The staff quarters were premises of the bank, and there was no dispute on that factual aspect. On that basis, the service used for construction of the quarters fell within Rule 2(l) of the CENVAT Credit Rules and qualified for credit.

Conclusion: The disallowance of CENVAT credit was not sustainable and the credit was admissible to the assessee.

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