Input service nexus with manufacture permits Cenvat credit for fly ash pond operations and inward transportation outside factory premises.

Cenvat credit is admissible for services, inputs and capital goods used to maintain and operate a fly ash pond, and for loading, unloading and transporting fly ash to a cement manufacturing unit. Fly ash is a raw material, and pond maintenance, extraction and inward movement activities have a direct nexus with manufacture. Rule 2(l) of the Cenvat Credit Rules, 2004 covers services used directly or indirectly in relation to manufacture and does not require eligible services to be performed within factory premises. The post-2011 omission of setting-up services does not exclude services independently covered by the principal definition.

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Issues: Whether Cenvat credit is admissible on services, inputs and capital goods used for maintenance and operation of a fly ash pond and for loading, unloading and transportation of fly ash to the manufacturing unit, notwithstanding that such services were rendered outside the factory premises.

Analysis: Rule 2(l) of the Cenvat Credit Rules, 2004 covers services used directly or indirectly in or in relation to manufacture and includes procurement and inward transportation of inputs. Fly ash was an undisputed raw material for cement manufacture. The pond-related maintenance and extraction activities, as well as loading, unloading and freight for bringing fly ash to the factory, had a direct nexus with manufacture. The definition does not require that every eligible input service must be performed within the factory premises. The post-1 April 2011 omission of setting-up services from the inclusive portion does not exclude services otherwise covered by the principal part of the definition.

Conclusion: Cenvat credit on the disputed fly ash pond-related services, inputs, capital goods, and inward movement services is admissible. The issue is decided in favour of the assessee.

Ratio Decidendi: A service used directly or indirectly in relation to manufacture qualifies as an input service under Rule 2(l) even when performed outside the factory, unless specifically excluded.

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