Input service credit for plant setup remains available where services directly relate to manufacture and no exclusion applies.

CENVAT credit remains available for input services used to establish a manufacturing plant after deletion of "setting up" from the inclusive definition of input service. Rule 2(l) of the Cenvat Credit Rules, 2004 covers services used directly or indirectly in or in relation to manufacture through its means clause. Services connected with erection, commissioning, installation, fabrication, consultancy, recruitment, IT, transport, security and clearing activities may have a direct nexus with manufacture where necessary to establish production facilities. Deletion from the inclusive clause does not remove coverage independently available under the means clause. Credit is denied only where an exclusion clause applies, including construction-related services; the disputed services were not so excluded.

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Issues: Whether CENVAT credit is admissible on input services used for setting up a manufacturing plant after deletion of the expression "setting up" from the inclusive part of the definition of input service with effect from 01.04.2011.

Analysis: Rule 2(l) of the Cenvat Credit Rules, 2004 contains a means clause, an inclusive clause and an exclusion clause. Services used directly or indirectly in or in relation to manufacture fall within the means clause. Services required for erection, commissioning, installation and fabrication of plant and machinery, technical consultancy, recruitment, information technology, transportation of inputs and capital goods, security, clearing and forwarding, and related business activities had a direct nexus with manufacture because the factory could not be established for production without them. The deletion of "setting up" from the inclusive clause does not exclude services independently covered by the means clause; denial arises only where the service is specifically covered by the exclusion clause. The disputed services were not related to construction of a building or civil structure and were not otherwise excluded.

Conclusion: CENVAT credit on the disputed services used for setting up the plant is admissible; the assessee is entitled to the credit, and the demand, interest and penalty are unsustainable.

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