Cenvat credit on coal block feasibility and exploration services was upheld as business-linked input service.

Cenvat credit was treated as admissible on input services used for pre-feasibility study, survey and exploration of a coal block undertaken to assess its suitability for manufacturing use. The services were found to have a clear nexus with the assessee's business because they were directed to determining the feasibility and availability of coal as a raw material for manufacturing requirements, bringing them within the scope of input service under Rule 2(l) of the Cenvat Credit Rules, 2007. Since the credit was correctly availed, the penalty imposed for its denial was held unsustainable.

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Issues: Whether cenvat credit was admissible on input services used for pre-feasibility study, survey and exploration of a coal block undertaken to assess its suitability for use in manufacturing activity, and whether the penalty imposed was sustainable.

Analysis: The service was obtained to determine the feasibility and availability of coal for the assessee's manufacturing requirements. Such activity was held to be integrally connected with the assessee's business and therefore covered within the scope of input service under Rule 2(l) of the Cenvat Credit Rules, 2007. As the credit itself was held to be correctly availed, the penalty based on its denial could not survive.

Conclusion: Cenvat credit on the pre-feasibility and exploration services was admissible and the penalty was unsustainable.

Ratio Decidendi: Services directly connected with assessment of raw material feasibility for manufacturing use qualify as input services when they have a clear nexus with the assessee's business.

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