Input service credit and refund cannot be denied for lack of nexus or one-to-one export correlation.

Under Rule 2(l) of the Cenvat Credit Rules, 2004, input services falling within the inclusive limb, including recruitment, training and coaching, were treated as eligible for credit; denial of refund for alleged lack of nexus with output services was therefore unsustainable. The refund scheme was also held not to require one-to-one correlation between exported services and the input services used for those exports, so rejection on that ground was contrary to the governing clarification. The refund denial was set aside and consequential relief followed for the assessee.

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Issues: (i) Whether the refund of unutilised Cenvat credit could be denied on the ground that the impugned input services had no nexus with the output services. (ii) Whether refund could be denied for want of one-to-one correlation between the exported services and the input services used.

Issue (i): Whether the refund of unutilised Cenvat credit could be denied on the ground that the impugned input services had no nexus with the output services.

Analysis: The definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 contains an inclusive component, and services such as recruitment, training and coaching fall within that inclusive part. The rejection based on lack of nexus was found unsustainable because the cited decision concerned the definition of input and not input service. The impugned services were treated as having been consumed in the assessee's business and were held eligible for credit.

Conclusion: The denial of refund on the ground of absence of nexus was unjustified and was set aside in favour of the assessee.

Issue (ii): Whether refund could be denied for want of one-to-one correlation between the exported services and the input services used.

Analysis: The Board's clarification stated that the refund scheme does not require correlation between exports and the input services used for those exports. Accordingly, insistence on a one-to-one correlation was held to be contrary to the governing refund scheme.

Conclusion: The denial of refund on the ground of lack of one-to-one correlation was unsustainable and was decided in favour of the assessee.

Final Conclusion: The refund rejection was held to be unjustifiable and the assessee's appeal succeeded with consequential relief.

Ratio Decidendi: Under the post-2011 input service definition, refund of unutilised Cenvat credit cannot be denied where the services fall within the inclusive limb and the refund scheme does not require a one-to-one correlation between exports and the input services used.

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