Input service nexus with manufacture sustains CENVAT credit, and ISD-distributed credit cannot be denied without challenging the distributor.

CENVAT credit on chartered aircraft services remained admissible where the services had a demonstrable nexus with manufacture or business activities integral to manufacture, even after the post-01.04.2011 definition of input service. The Tribunal treated services used directly or indirectly in or in relation to manufacture as covered under Rule 2(l), and rejected the objection that further documentary proof of actual use was required. It also held that credit distributed through a registered Input Service Distributor could not be denied to the recipient unit in the absence of proceedings against the distributor. The demand was therefore dropped and the Revenue's challenge failed.

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Issues: Whether CENVAT credit was admissible on chartered aircraft services distributed through the corporate office as Input Service Distributor, and whether denial could be sustained on the grounds of the post-01.04.2011 definition of input service and alleged want of documentary proof of actual use.

Analysis: The definition of input service post-01.04.2011 was examined in the light of the main part of Rule 2(l) of the CENVAT Credit Rules, 2004 and the wide meaning of manufacture under Section 2(f) of the Central Excise Act, 1944. Services used directly or indirectly in or in relation to manufacture were held to remain covered, and services connected with business travel for manufacturing and allied activities were treated as having the requisite nexus. The Tribunal also accepted that disputes about the admissibility of credit distributed by a registered Input Service Distributor could not be fastened upon the recipient unit in the absence of proceedings against the distributor. The record was treated as sufficient to show receipt and distribution of the service credit, and the plea based on non-production of further documents was not accepted as a ground to deny credit.

Conclusion: CENVAT credit on the chartered aircraft service was held admissible, and the Revenue's objections based on the amended definition of input service, alleged lack of proof of use, and ISD distribution were rejected.

Final Conclusion: The impugned order dropping the demand was upheld, and the Revenue's appeal failed.

Ratio Decidendi: Where a service has a demonstrable nexus with manufacture or business activities integral to manufacture, it remains eligible as input service even after the 01.04.2011 amendment, and credit distributed by a registered Input Service Distributor cannot be denied to the recipient unit without challenging the distributor's availment.

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