2026 (2) TMI 899 - AT - Central Excise

Input service eligibility for manufacture: CENVAT credit for factory-related services upheld and limitation-based demand rejected.

The note addresses whether services for factory, colony and related facilities qualify as input services under Rule 2(l) of the Cenvat Credit Rules, 2004 ... CENVAT credit - input service - services used directly or indirectly in or in relation to manufacture - eligibility of construction and colony-related services as input services - HELD THAT:- We find that Adjudication authority as per the impugned order dated 31.03.2015 confirmed the demand as per the SCN excluding the period from April 2009 to June 2011 since certain proceedings were already initiated for the relevant period. Further we find that Appellant rightly availed the credit on construction activities, guest house and colony maintenance, rent a cab prior to 01.04.2011 and has not availed any credit of these services after 01.04.2011 except the credit on air travel after 01.04.2011. The issue regarding definition of input services under Rule 2(l) of CCR, 2004 is settled that as per the decisions relied in ibid paras that all the activities either directly or indirectly in relation to manufacture of final products are covered. In view of the above discussion the impugned order is unsustainable and liable to be set aside. Accordingly, the impugned order is set aside, and the Appeal is allowed with consequential relief, if any, in accordance with law. The appeal is disposed. Issues: (i) Whether CENVAT credit availed on services including construction and maintenance of guest house, residential colony, classrooms, temple, rent-a-cab, security, repair of plant and construction of fly ash silo and similar services for the periods relevant to July 2009 to April 2014 (notably prior to 01.04.2011) are input services eligible for credit under Rule 2(l) of the Cenvat Credit Rules, 2004; (ii) Whether the demand raised by invoking extended period of limitation is barred.Issue (i): Whether the various services used for the factory, colony and related facilities constitute 'input services' eligible for CENVAT credit under Rule 2(l) of the Cenvat Credit Rules, 2004.Analysis: The definition of input service in Rule 2(l) of the Cenvat Credit Rules, 2004 includes services used by a manufacturer whether directly or indirectly in or in relation to the manufacture of final products and their clearance up to the place of removal. Authorities and decisions relied upon establish that services which ensure availability of workforce and uninterrupted running of a factory situated at remote locations - including construction and upkeep of residential colony, guest houses, classrooms, security, repair of plant and construction of storage/silo facilities, and rent-a-cab for operational needs - fall within that scope where they are intrinsically connected to manufacture. The record shows that credit for such services was availed prior to 01.04.2011 and that credits for such services were not availed by the claimant after the specified date except for limited items; the adjudicating findings confirming disallowance were examined against the settled interpretation of input services.Conclusion: The CENVAT credit on the specified services availed prior to 01.04.2011 is allowable; the activities in question qualify as input services under Rule 2(l) of the Cenvat Credit Rules, 2004. This conclusion is in favour of the assessee.Issue (ii): Whether the demand for credit reversal raised for periods including prior years is barred by limitation or is hit by extended period provisions.Analysis: The audit and correspondence timeline was considered, including the audit memo and subsequent notices. The adjudication excluded a portion of the period where earlier proceedings had been initiated. The material on record shows that the core objections were communicated within the audit process and that credits legitimately falling within the allowable period (notably prior to 01.04.2011) were correctly claimed. The tribunal examined whether the department's issuance of the show cause notice beyond one year was infirm in the facts of the matter and whether extended limitation could be sustained in view of the communications and available information.Conclusion: The demand as framed against the assessee is unsustainable on the facts and limitations considered; the extended-period invocation does not sustain the confirmed demand in the present proceedings. This conclusion is in favour of the assessee.Final Conclusion: The impugned order confirming demand and penalty is set aside and the appeal is allowed, with consequential relief as per law; the assessee is entitled to CENVAT credit for the services held to be input services for the relevant periods considered.Ratio Decidendi: Under Rule 2(l) of the Cenvat Credit Rules, 2004, services used by a manufacturer whether directly or indirectly in or in relation to the manufacture of final products (including services necessary to ensure availability of workforce and uninterrupted factory operation) constitute input services and are eligible for CENVAT credit where the connection to manufacture is established.