Input service refund claims cannot be denied later by re-testing valid pre-2011 CENVAT credit on a narrower standard.

Under the pre-01.04.2011 inclusive definition of input service, services linked to business activities, including outdoor catering, club or association, general insurance, cafeteria rent, rent-a-cab, bus or car hire, and support services, were treated as eligible when they had a business nexus. Refund claims under Rule 5 of the CENVAT Credit Rules could not be denied later by applying a narrower standard to credit already validly availed and not disputed at the stage of availment, especially where no Rule 14 recovery action was shown. The refund denial was therefore unsustainable and the claims were allowable.

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Issues: Whether the refund claims under Rule 5 of the CENVAT Credit Rules, 2004 could be denied on the ground that the disputed services were not input services, and whether services received prior to 01.04.2011, including outdoor catering, club or association, general insurance, cafeteria rent, rent-a-cab, bus/car hire charges, and support services to business or commerce, qualified as input services.

Analysis: The definition of input service applicable prior to 01.04.2011 had a wide inclusive scope and covered services having nexus with business activities, including activities relating to business. The credit taken on the disputed services had not been questioned at the time of availment, no recovery proceedings under Rule 14 were shown to have been initiated, and the Board circular clarified that the same yardstick applies for credit eligibility and refund eligibility. The services were received before the restrictive amendment and were shown to have a business nexus, while the cited precedents supported credit on each category of service in similar factual settings.

Conclusion: The disputed services qualified as input services, the denial of refund was not sustainable, and the refund claims were held allowable in favour of the assessee.

Ratio Decidendi: Where CENVAT credit on input services was validly availed under the pre-01.04.2011 inclusive definition and was not disputed at the stage of availment, refund under Rule 5 cannot be denied later by re-testing the same credit on a narrower standard, if the services have nexus with business operations.

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