Input service credit for repairs to existing taxable-service premises remains available despite construction and works-contract exclusions.

CENVAT credit for service tax on RCC column strengthening and related repair and maintenance services is available where the work concerns existing premises used to provide taxable output services. Rule 2(k) of the CENVAT Credit Rules, 2004 applies to goods inputs and does not govern input-service credit. The services fall within Rule 2(l), including its coverage of modernisation, renovation and repairs of an output-service provider's premises. The construction and works-contract exclusion does not apply to repairs or renovation of existing infrastructure. Invoices and accounting treatment may support classification of the expenditure as repairs and maintenance.

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Issues: Whether service tax paid on RCC column strengthening and allied repair and maintenance work undertaken on existing studio and audio-recording buildings qualifies for CENVAT credit as an input service.

Analysis: Rule 2(k) of the CENVAT Credit Rules, 2004 concerns inputs in the nature of goods and does not govern credit of service tax paid on disputed services. The services were used for repair, maintenance and strengthening of existing premises from which taxable output services were provided. They consequently fall within both the means and inclusive portions of Rule 2(l), which specifically covers modernisation, renovation and repairs of premises of an output-service provider. The exclusion for construction or execution of works contract does not cover repair or renovation of existing infrastructure in these circumstances. The documentary invoices and accounting treatment also supported the character of the expenditure as repairs and maintenance.

Conclusion: CENVAT credit of Rs. 3,05,114 on the disputed repair and maintenance services is admissible, and the related demand and penalty are unsustainable.

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