Business-nexus test for CENVAT credit allows input service credit on wider operational services.

CENVAT credit is available on service tax paid for mediclaim policy, depot security, vehicle insurance, car rentals and pest control where the services have a business nexus with the manufacturer's operations. The Tribunal rejected a narrow reading that would confine input service only to services used directly in or in relation to manufacture, holding that the definition extends to services relating to the business activity of the assessee. Services forming part of business costs and operations, even if not used within the factory or in the manufacturing process itself, can qualify for credit. The appellant was therefore entitled to the disputed credit.

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Issues: Whether the appellant was entitled to CENVAT credit of service tax paid on mediclaim policy, security at depots, vehicle insurance, car rentals and pest control activities.

Analysis: The denial of credit was based on a construction that confined input service to services used directly in or in relation to manufacture. The Tribunal held that this approach was too narrow and inconsistent with the wider scope of the definition of input service, which extends to services relating to the business activity of the manufacturer. It relied on the Larger Bench view that services having a business nexus, even if not used within the factory premises or directly in manufacture, can qualify for credit when they form part of the cost and business operations of the assessee.

Conclusion: The appellant was entitled to CENVAT credit on the disputed services.

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