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7. The definition of input service under Rule 2(l) of the Rules precisely covers any service used by a provider of taxable service for providing an output service, any service used by a manufacturer in or in relation to manufacture of final product and inclusive part of the definition, services used in relation to setting up, modernisation, renovation or repair of a factory, premises of a provider of output service or an office relating to such factory or premises etc. The expression any service read with for providing an output service would cover wide encompass of the definition of input service. The Honble Supreme Court in the case of Indian Chamber of Commerce (AIR 1976 SC 348) observed that the expression for has to be interpreted as for the purpose of. CBEC Circular No.120/01/2010-ST, dt.19.01.2010, clarified that the definition of input service qua a manufacturer and provider of output service. In our considered view, CENVAT Credit availed on input service, input and capital goods for setting up Dry Dock would be allowed for providing output service namely repair/refit service. This is also covered in the inclusive part of the definition of input service. Hence, the finding of the Adjudicating authority, is that the Appellant is exclusively engaged in the manufacture of exempted final product Ships and CENVAT Credit on input, capital goods is inadmissible, cannot be sustainable.

The relevant portion of the decision of Honble Karnataka High Court in the case of ANZ International is reproduced below:-

3.?With reference to the above said grounds urged in this appeal, we have carefully examined the same to find out as to whether the aforesaid substantial question of law would arise or not for our consideration in this Appeal. The CESTAT, having regard to the undisputed fact that the respondent is 100% Export Oriented Unit (for short ECU) in respect of which, benefit of CENVAT Credit Rules, 2004 is available for the inputs which will be used for manufactured goods of 100% export. Therefore, the Tribunal has applied Rule 6(6) and recorded the reasons stating that there is a provision of exporting the goods under bond. In the case of 100% EOUs, the input can be imported free of duty and they can obtain indigenously also free of duty. When duty is paid on the inputs, then the appellants are entitled for the Cenvat credit facility under the Rules Cenvat Credit Rules. There is nothing in the Rules which prohibits 100% EOUs availing Cenvat credit. Rule 5 of the said Rules provides for refund of Cenvat credit availed by the exporter where they do not utilize the goods as inputs for manufacture of 100% export. The case on hand is the precise case wherein the respondent has availed the Cenvat credit facility. They were not in a position to utilize the credit, they applied for refund of the Cenvat credit availed by them. The reason is that all their products were exported and there was no domestic clearance. Therefore, in terms of Rule 5 of the Rules, they are riglitiy entitled for the refund of the duty paid to the department. The learned counsel for the appellant has pointed out that in the case of Sterlite Opitcal Technologies Ltd. v. CCE, Aurangabad - 2006 (201) E.L.T. 428 (Tri.-Mumbai), wherein it is held that letter of undertaking accepted in lieu of bond for export even though finished goods were exempted, refund of Cenvat credit on inputs and packing materials are admissible in terms of Rule 5 of the Rules. Therefore, the Tribunal has held that 100% EOU is entitled to take Cenvat credit on the duty of the inputs procured indigenously and when they were not in a position to utilize the same, they are entitled for the benefit of the refund under Rule 5 of the Rules. Therefore, the orders impugned in the Appeal before the CESTAT held to be bad in law and the same were set aside. Therefore, we do not find that no substantial question of law does arise in this Appeal for our consideration to answer the same in favour of the Revenue. Accordingly, the appeal is devoid of merits and therefore it must fail and is dismissed.

10. In the case of Commissioner of Central Excise Vs M/s Drish Shoes Ltd  2010 (254) ELT 417 (H.P.), the Honble Himachal Pradesh High Court observed that the Rule 6(6) of CENVAT Credit Rules, 2004 applies both to exempted as well as dutiable goods as term used in later is excisable goods and not dutiable goods. In that case, the question of law was whether an assessee exclusively manufacturing wholly exempted goods (chargeable to Nil rate of duty) is eligible to avail CENVAT Credit of duty paid on the inputs and input services under Rule 6(1) of CENVAT Credit Rules, 2004 used in the manufacture of such exempted goods even if such goods are exported. In that case, the Respondent was engaged in the manufacture of finished leather and it had exported the manufactured leather. The Honble High Court held that an assessee manufacturing the goods chargeable to Nil rate of duty is eligible to avail CENVAT Credit paid on the inputs under the exception clause contained in Rule 6(6) of the said Rules, used in the manufacture of such goods, if the goods were exported. In view of the above discussion, the contention of the learned Authorised Representative for the Revenue is that there is no requirement of furnishing of Bond by 100% EOU, is not admissible.

11. As revealed from the Adjudication order that input service credit was denied mainly on the basis that the input service credit availed on the input services was shown in ER-1 return instead of ST-3 returns. The relevant portion of the Adjudication order is reproduced below:-

12.2.5 In the instant case, the Noticee has shown the CENVAT Credit availed on input services in their ER-2 return indicating that those services have been used by them in or in relation to manufacture of final products whether directly or indirectly. Had those services been used for providing output services, the Noticee would have shown the CENVAT Credit of Service Tax paid on such input services in their respective ST-3 returns. As already discussed, the criteria to qualify the services used as input service are different in case of Manufacturer and Output Service Provider. Therefore, if the service received were qualified as input service for providing output service viz. Transport of Goods by Road or Ship Management Service, the Noticee should have shown the same as CENVAT Credit in the relevant ST-3 returns filed with the jurisdictional Service Tax authorities.