Service tax credit on leased line services allowed where the input service was necessary for providing the output internet service.

Service tax credit was admissible on leased line services used to provide the output internet service because the credit scheme covered input services consumed in relation to rendering the output service, and the leased lines were necessary for that purpose. The earlier decision in the assessee's own case had already accepted the same legal position, so the revisionary disallowance could not be sustained. The disallowance was set aside in favour of the assessee.

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Issues: Whether service tax credit was admissible on leased line services used for providing the output service under the Service Tax Credit Rules, 2002.

Analysis: The credit scheme was applied to input services consumed in relation to rendering the output service, and the relevant rule contemplated credit where the input and output services fell within the prescribed statutory category. The leased lines supplied by BSNL were necessary for rendering the assessee's internet service, and the earlier decision in the assessee's own case had already accepted the same legal position. In light of that binding approach, the revisionary disallowance could not be sustained.

Conclusion: Service tax credit on leased line services was admissible, and the disallowance was set aside in favour of the assessee.

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