CENVAT credit of construction services and lease rental service can be availed against payment of duty or manufacture of final product for period prior to amendment of definition of input service under Rule 2(l).

The Respondent had taken land on lease on which it had constructed the factory for manufacturing metal components. Respondent accumulated the credit of service tax paid on lease rent for land as well as on erection, commissioning and installation engineer’s services. The department contended that credit of the said services cannot be availed as the words “directly or indirectly” and “in or in relation to” in the “input service” definition, should be interpreted strictly. It was also contended that the lease rental service has no nexus with manufacturing of metal components. The respondent’s contention is that it is covered under both ‘includes part’ and ‘means part’ of the definition of “input service” as defined under Rule 2(l) of CENVAT Credit Rules, 2004. The said rule specifically includes services in relation to setting up of factory. Further the amended input service definition (effective from April 01, 2011) specifically excluded the service related to construction and therefore prior to the said date, the same was eligible as the amendment was not retrospective in nature.

Held

The High Court held that service used for setting up immovable property is connected with manufacturing activity and therefore the CENVAT credit is allowed.