CENVAT credit on factory setup services remains available where the services are in relation to manufacture after the amendment.

CENVAT credit remained available for consultancy and allied services used to set up and expand a plant after 01.04.2011 because the post-amendment definition of "input service" still covered services used directly or indirectly, or in relation to manufacture. Setting up a factory was treated as an activity intrinsically connected with manufacture, since production cannot begin without such setup, and the deletion of the express reference to "setting up" did not remove such services from the main limb of Rule 2(l) unless specifically excluded. On that basis, the credit was held admissible and the related demand, interest, and penalty could not be sustained.

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Issues: Whether CENVAT credit on input services used for setting up a plant and factory after 01.04.2011 was admissible.

Analysis: The disputed credit related to consultancy and allied services used for setting up and expanding the plant after 01.04.2011. The relevant definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004, as applicable after the amendment, was held to have a wide main limb covering services used by a manufacturer directly or indirectly, or in relation to manufacture. It was held that setting up a factory is an activity directly in relation to manufacture, because manufacture cannot commence without such setup. Since such services fall within the main part of the definition and are not specifically excluded, credit remains available even though the express inclusive reference to setting up was deleted by amendment.

Conclusion: The appellant was entitled to CENVAT credit on services used for setting up the plant and factory after 01.04.2011, and the demand, interest, and penalty could not be sustained.

Ratio Decidendi: Services used for setting up a factory, when employed in relation to manufacture, fall within the main part of the post-amendment definition of input service under the Cenvat Credit Rules, 2004 unless specifically excluded.

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