Cenvat credit on disputed service tax and business guest house charges was held admissible where the business nexus was established.

Cenvat credit cannot be denied at the recipient's end by disputing the taxability or classification of the service, because those questions lie on the provider's side; the denial on that basis was held unsustainable. Service tax paid on guest house accommodation used by employees and executives for official, business-related stay was also treated as admissible input service credit, since the expense had a sufficient nexus with business activity and was not shown to be personal residential use. The impugned credit denial was therefore unsustainable and the assessee was entitled to the claimed credit.

---

---

Issues: (i) Whether credit could be denied by questioning the taxability or classification of the service at the recipient's end; (ii) Whether service tax paid on guest house accommodation used by employees for official purposes qualified as input service credit.

Issue (i): Whether credit could be denied by questioning the taxability or classification of the service at the recipient's end.

Analysis: The objection that the service was not taxable could not be raised against the recipient for denying credit. The correctness of classification and tax liability lies within the jurisdiction of the service provider's side, and the recipient-end authorities could not vary credit entitlement on that basis.

Conclusion: The denial of credit on the ground of non-taxability or incorrect classification was not sustainable and was against the assessee.

Issue (ii): Whether service tax paid on guest house accommodation used by employees for official purposes qualified as input service credit.

Analysis: The accommodation was used by employees and executives connected with the manufacturing unit for business-related stay. The expenditure was part of business outlay and was not shown to be for personal residential use. On the facts, the guest house charges had a sufficient nexus with the assessee's business activities.

Conclusion: The credit on guest house accommodation charges was admissible in favour of the assessee.

Final Conclusion: The impugned denial of Cenvat credit was unsustainable, and the assessee was entitled to the credit claimed.

Ratio Decidendi: Credit cannot be denied at the recipient's end by disputing the taxability of the service, and business-related guest house accommodation used for official purposes can qualify for input service credit where the expenditure has a nexus with the assessee's business.

---