Broad input service nexus supports CENVAT credit where services are indirectly used for output operations.

CENVAT credit of service tax on input services was held admissible where the services were received and consumed in relation to the assessee's output services. The expression "in relation to" was applied broadly and was not confined to direct use; customs house agent services for importing components and equipment, as well as telephone, testing and advertisement services, were treated as having an indirect nexus with manufacturing, erection, installation and maintenance activities. The narrower approach adopted by the lower authorities was rejected, and the credit was found to have been correctly availed and utilised, so the demand, interest and penalty could not be sustained.

---

---

Issues: Whether credit of service tax paid on various input services was admissible where such services were used in relation to the assessee's output services.

Analysis: The relevant provisions required that the invoice or bill be issued within the prescribed period and that the input services be received and consumed in relation to rendering of output service. The expression "in relation to" was read broadly and not confined to direct use. Services such as customs house agent service for importing components and equipment, telephone, testing and advertisement were treated as having an indirect nexus with the manufacturing, erection, installation and maintenance activities carried on by the assessee. The lower authorities had proceeded on an unduly narrow view of direct use.

Conclusion: The credit was correctly availed and utilised, and the demand, interest and penalty could not be sustained. The appeal was allowed in favour of the assessee.

---