Recognised input-service credit cannot be denied solely because direct nexus with output services is absent.

M/s. Texas Instruments (India) Pvt. Ltd., a wholly owned subsidiary of Texas Instruments Inc., USA, was engaged in semiconductor design and software development. For the period October 2010 to March 2011, it availed CENVAT credit on various input services.

The department disputed the credit on the grounds that certain services had no nexus with the appellant’s output services and that credit was supported by invalid or insufficient documents. The Commissioner (Appeals) upheld the denial of credit in Order-in-Appeal No. 175/2013 dated 23 July 2013. The appellant challenged that order before the Tribunal.

The appellant relied on a Software Development Agreement with its US group entity and on the Tribunal’s earlier decision in its own case, Final Order Nos. 20231–20238/2022 dated 12 May 2022, by which refund claims involving similar input services had been allowed.

The disputed services included rent-a-cab, outdoor catering, event management, cleaning, photography, and services described in invoices as “differential billing,” “reimbursement discount,” “visa charges,” “bonus,” “administrative expenses,” “newspapers,” and similar entries.

1. Whether CENVAT credit could be denied on services such as rent-a-cab, outdoor catering, event management, cleaning, and photography on the ground that they lacked nexus with the appellant’s output services.

2. Whether credit could be denied merely because the descriptions in the invoices were unclear or appeared unrelated to the appellant’s output services, including descriptions such as “differential billing,” “lab support services,” “travel expenses,” and “administrative expenses.”

3. Whether the appellant was entitled to CENVAT credit where invoices, bills, or challans had not been produced before the lower authorities, subject to verification of the documents and the appellant’s substantive eligibility.

The Tribunal applied the CENVAT Credit Rules, 2004, particularly the requirement that credit be supported by prescribed documents and relate to eligible “input services” used in or in relation to the provision of output services.

It held that credit cannot be denied solely for want of nexus in respect of services which have been judicially recognised as eligible input services, including rent-a-cab, outdoor catering, event management, cleaning, and photography, particularly where the same issue had been decided in the appellant’s favour in its own earlier case.

The Tribunal relied on its earlier decision in the appellant’s own case, Final Order Nos. 20231–20238/2022 dated 12 May 2022.

At the same time, eligibility must be established through valid documents and evidence showing that the services were actually received, service tax was discharged, and the services were used in the appellant’s business.

The Tribunal rejected the Commissioner (Appeals)’s broad finding that credit on rent-a-cab, outdoor catering, event management, cleaning, and photography services was inadmissible for lack of nexus.

It noted that such credit had been allowed in several decisions and specifically in the appellant’s own earlier case; therefore, denial on that ground was unsustainable.

However, the Tribunal treated the separately listed invoice descriptions as insufficiently explained. Since the appellant had not adequately established that descriptions such as “differential billing,” “reimbursement discount,” “bonus,” or “administrative expenses” represented eligible input services used in providing output services, the matter required factual verification by the original authority.

Likewise, because the appellant had either not produced or disputedly claimed to have produced the supporting invoices, bills, and challans, the Tribunal remanded the document-related issue for verification rather than granting credit outright.

The appeal was partly allowed by way of remand.

In respect of the services reflected through unclear invoice descriptions and the credit allegedly supported by invoices or other documents, the matter was remanded to the original authority to verify whether the services were eligible input services, whether service tax had been discharged, and whether valid supporting documents existed.

Credit was to be extended if the appellant was otherwise eligible.