Cenvat credit on input services upheld where services were used directly or indirectly in relation to output service.

Input tax credit under the Cenvat Credit Rules, 2002 was admissible for travel agent, customs house agent, tour operation, telephone, insurance, courier and testing services where the invoices were issued after the notified date and the services were received and used in relation to the output service. The expression "in relation to" was treated as wide enough to cover services used directly or indirectly for providing the output service, including activities connected with import of components, manufacture, erection and installation, and allied business operations. A narrow view limiting credit to only direct use was rejected, and the credit was upheld as correctly availed and utilised.

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Issues: Whether service tax credit taken on travel agent, custom house agent, tour operation, telephone, insurance, courier and testing services used in connection with manufacture and output services was admissible under the Cenvat Credit Rules, 2002.

Analysis: The relevant provisions required that the invoice or bill be issued after the notified date and that the input service be received and consumed in relation to rendering of the output service. The services in question were connected with import of components, manufacture of water treatment plants, erection and installation activities, and allied business operations. The expression used by the rule is "in relation to" rendering of output service, which is wide enough to include services used directly or indirectly for providing the output service. The view that only direct use would qualify was held to be too narrow.

Conclusion: The credit was held to be correctly availed and utilised, and the appeal was allowed with consequential relief to the assessee.

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