Services directly or indirectly used in relation to manufacture of final products are eligible for Cenvat credit

Brief of the case:

The Hon’ble Punjab & Haryana High Court in the case of Bellsonica Auto Components India Private Limited held that services directly or indirectly used in relation to manufacture of final products are eligible for Cenvat credit. In the present case, civil construction work was done for setting up factory which was directly used for manufacturing final products and land was taken on lease to set up factory over it was indirectly used in manufacture of final products.

 Facts of the case:

• The assessee company is engaged in the business of manufacturing metal-sheet components for motor vehicles which fall under heading No.87082100 of the Central Excise Tariff Act, 1985.
• The department during an audit in the year 2010 observed that the assessee had availed credit of service tax paid on civil construction work done in factory premises and on renting of immovable property service (in respect of property on which the plant is erected)
• Commissioner of Central Excise confirmed the demand along with interest and imposed penalty. Aggrieved by the order, assessee is in appeal before the High Court.

 Contention of the Assessee:

• It was contended that the services of renting of immovable property and civil construction services procured by the assessee has direct nexus with the manufacturing of final products. It is because without setting up of factory the production not possible and for setting up factory the land was taken on lease.
• Further, the same are anyway includible in the definition of input services as they have some bearing with the manufacture of final products and could safely be included via inclusive clause of definition of input services as defined u/rule 2(l) of Cenvat Credit Rules,2004.

 Contention of the Revenue: