Meaning of setting up factory in input servcie under cenvat credit rule, 2004

[Krishan Gopal]

Dear Sir,

Please advise; meaning of setting up factory in the definition of input services under cenvat credit rules, 2004 before 31 March, 2011, whether it includes civil work, electrical work and mechanical work for construction of a factory, if Yes ! than what would be the impact of 'circular no.98/1/2008-st dated 04-01-2008' which states that  input service tax credit on construction of immovable property  can be taken only if the output is a 'Service' liable to service tax on renting of immovable property.

Query: Whether civil work, electrical work and mechanical work for construction of a factory (where goods are manufactured and excise duty is paid thereon) would be covered under construction of immovable property and input tax credit will be disallowed as per aforesaid circular as we are not  renting the aforesaid factory(immovable property). 

K.Gopal-9911052902

[MANDAVILLI RAMAKRISHNA]

service tax paid on the value of immovable properties other than plant and machinery is not eligible for cenvat credit same as central excise duty paid on the building materials purchase like cement etc.,

AI Summary

Cenvat credit eligibility: construction-related input services for a factory are disallowed unless treated as plant and machinery. Cenvat credit on input services for construction works of a factory is not available where services relate to immovable property (civil, electrical, mechanical building works), unless those inputs are identifiable as plant and machinery; departmental guidance limits credit for construction of immovable property to situations where the output is a taxable service like renting, thereby disallowing credit for building-related service tax paid for a manufacturing unit.