2026-VIL-1081-CESTAT-BLR-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - CENVAT Credit on Erection and Commissioning Services – Appellant availed CENVAT credit on erection and commissioning charges paid to sub-contractors. The adjudicating authority disallowed the credit on the ground that erection and commissioning is a post-manufacturing activity and does not qualify as input service under Rule 2(l) of CENVAT Credit Rules, 2004 - Whether CENVAT credit on erection and commissioning charges paid to sub-contractors is allowable when the assessee itself is a registered output service provider separately charging and collecting service tax on such services – HELD - The assessee is an independent output service provider registered under the Service Tax Act and erection and commissioning is an independent service which the assessee provides separately with applicable output service tax charged on such services. For providing such output services, the assessee availed services of sub-contractors who raised invoices on the assessee. There exists direct nexus between the charges paid to sub-contractors and the assessee's business of providing erection and commissioning services. The eligibility for CENVAT credit under Rule 2(l) of CENVAT Credit Rules, 2004 is established - CENVAT credit on erection and commissioning services is allowed - Since the confirmation of demand is unsustainable the levy of interest and imposition of penalty are also unsustainable - The impugned order is set aside and the appeal is allowed - CENVAT Credit on Management Consultant Services availed for identification of key market trends and developing business plans. Although the agreement was common for multiple group companies, a fixed percentage of the total contract fee was allocated to the assessee and a separate invoice was raised on the assessee for its share – Disallowance of credit on the ground that such services had no connection with manufacturing activity. The appellate authority additionally held that since services were used by the group company as a whole, CENVAT credit was not allowable - Whether CENVAT credit on management consultant services is allowable when the services relate to business activities such as identifying market trends and developing business plans, even though they do not have direct nexus with manufacturing – HELD – The CENVAT credit on management consultant services is allowable. Rule 2(l) does not require any direct nexus between the services and the manufactured product. The relevant criterion is whether the services are availed towards activities relating to business. Identifying key market trends and developing business plans are activities crucial to the business of the assessee and clearly establish the nexus with business activities. Additionally, the services qualify as market research activities which are specifically included in the definition of input service under Rule 2(l) of CENVAT Credit Rules, 2004. The services also fall under Section 65(105)(r) of the Finance Act, 1994. – the CENVAT credit on management consultant services is allowed - CENVAT Credit on Manpower Supply Services - Whether CENVAT credit on manpower supply services is allowable when the assessee demonstrates that contract labourers were engaged solely in manufacturing dutiable products and similar credit was allowed in subsequent periods – HELD - The manpower supply agency raises separate invoices for labourers supplied for dutiable and exempt products. The contract labourers in question were engaged solely in manufacturing dutiable products and accordingly, the assessee is eligible for full credit of the amount paid to the manpower supply agency. The fact that CENVAT credit on manpower supplied from the same agency was allowed for subsequent periods with an average quantum corresponding to the monthly average during the period in question establishes the eligibility for credit. The absence of corroborating evidence at the adjudication stage does not preclude credit when supported by subsequent period adjudication orders and invoices – CENVAT credit on manpower supply services is allowed - CENVAT Credit on Mediclaim and Accidental Insurance Policy – Whether CENVAT credit on mediclaim and accidental insurance policies for employees qualifies as input service under Rule 2(l) of CENVAT Credit Rules, 2004 – HELD – The CENVAT credit on mediclaim and accidental insurance policies for employees qualifies as input service. A mediclaim policy for employees constitutes an input service under Rule 2(l) of CCR, 2004, both under the main limb and the inclusive limb of the definition. It is not necessary for the assessee to establish an integral connection between the service and business of manufacture for the service to be categorized as input service. The findings of the adjudicating authority based on the requirement of direct or indirect use in relation to manufacture are not sustainable – CENVAT credit on mediclaim and accidental insurance policies for employees is allowed.
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