Input service credit for branch-office renting used in marketing and business support was upheld under Cenvat rules.

Cenvat credit on service tax paid for renting immovable property used at branch offices for marketing, customer coordination, product development, warranty support, troubleshooting and training was treated as admissible where the activities were connected with the assessee's business and sales of manufactured goods. The definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 was applied broadly to cover advertisement, sales promotion and allied business-support functions, and credit was not denied merely because the premises were outside the factory or because the ER-1 return did not describe the service in the format preferred by the department. The demand, interest and penalty were held unsustainable.

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Issues: Whether Cenvat credit on service tax paid for renting of immovable property used for marketing and allied branch-office activities outside the manufacturing unit was admissible under the Cenvat Credit Rules, 2004.

Analysis: The rented premises at Delhi and Mumbai were used for marketing, customer coordination, new product development, warranty support, troubleshooting, training and other business functions connected with sales of the appellant's manufactured goods. The definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 was held to include such activities, particularly where they relate to advertisement or sales promotion and the broader business of the assessee. The Tribunal also noted that the credit could not be denied merely because the premises were outside the factory or because the ER-1 return format did not specifically narrate the service in the manner suggested by the department. The confirmation of demand, interest and penalty was therefore unsustainable.

Conclusion: The credit was admissible and the denial of credit, interest and penalty was set aside in favour of the assessee.

Ratio Decidendi: Services used for marketing, sales promotion and other business-support functions at branch premises qualify as input services when they are connected with the assessee's business, even if the premises are outside the factory.

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