Input service eligibility covers technology consultancy actively supervised during development, enabling Cenvat credit and consequential export refund.

Scientific and technical consultancy used to develop and transfer technology qualifies as an input service where contractual rights of supervision and monitoring show that the recipient used and consumed the service during development. Invoicing and exporting the service on the same date do not, by themselves, establish export without use. Cenvat credit is therefore admissible for such consultancy. Where refund claims under Rule 5 were rejected solely because the consultancy was treated as ineligible, the refund follows consequentially once input-service credit is allowed, subject to the prescribed procedure and applicable notification.

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Issues: (i) Whether scientific and technical consultancy service used for development and transfer of technology qualified as an input service eligible for Cenvat credit; (ii) Whether refund of service tax credit under Rule 5 was available in respect of that service used for export of services or goods.

Issue (i): Whether scientific and technical consultancy service used for development and transfer of technology qualified as an input service eligible for Cenvat credit.

Analysis: The identical issue in the assessee's own earlier proceedings had been settled in its favour. The technology-development agreements gave the assessee rights of supervision and monitoring over the research activity, demonstrating use and consumption of the consultancy service during its development. The fact that the service was invoiced and exported on the same date did not establish that it had been exported without use.

Conclusion: Scientific and technical consultancy service qualified as an input service and Cenvat credit was admissible, in favour of the assessee.

Issue (ii): Whether refund of service tax credit under Rule 5 was available in respect of that service used for export of services or goods.

Analysis: The refund claims had been denied solely on the basis that the consultancy service was not an input service. Once credit on that service was found admissible, refund followed consequentially, subject to compliance with the prescribed Rule 5 procedure and the applicable notification.

Conclusion: Refund under Rule 5 was available consequentially, in favour of the assessee.

Final Conclusion: The denial of credit and the connected refund claims could not be sustained because the consultancy service was an eligible input service used in the exported activity.

Ratio Decidendi: A service is used as an input service where the recipient participates through contractual supervision and monitoring in its development; contemporaneous invoicing and export do not by themselves negate such use or entitlement to credit and consequential export refund.

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