Input service credit extends to outsourced processing services with a manufacturing nexus, even when received outside the factory.

Cenvat credit was treated as admissible on service tax paid to third-party processors for services used in processing goods sent to job workers for manufacture of components used in final products. The definition of input service was applied broadly to cover services used directly or indirectly in or in relation to manufacture, and it was confirmed that receipt of the service outside the factory does not by itself defeat credit where a manufacturing nexus exists. The service charges were also reflected in the assessable value of the final products, supporting entitlement to credit. On that basis, the demand and penalty were held unsustainable and consequential relief followed.

---

---

Issues: Whether Cenvat credit of service tax paid on services rendered by third-party processors, used in processing goods sent to job workers for manufacture of components ultimately used in the assessee's final products, was admissible as input service credit.

Analysis: The definition of input service was applied broadly to cover services used directly or indirectly in or in relation to manufacture of the final product. It was held that there is no statutory requirement that input services must be received within the factory premises. Services rendered outside the factory, if having nexus with the manufacture of the final product, qualify for credit. The notification granting exemption to the taxable service of production of goods on behalf of the client was also noticed, and binding precedent was followed to hold that the place where the service was received did not defeat entitlement to credit. The service charges were further reflected in the assessable value of the final products.

Conclusion: The service tax credit was admissible to the assessee.

Final Conclusion: The demand and penalty could not be sustained, and the appeal succeeded with consequential relief.

Ratio Decidendi: Input service credit is available where the service has a direct or indirect nexus with manufacture of the final product, even if the service is received outside the factory premises.

---