Availability of Cenvat credit on Local Travel, Medical Insurance and Outdoor Catering services

PJ/Case Laws/2011-12/1155

Case: Affinity Express India Pvt. Ltd. Vs Commissioner of C. Ex., Pune-I

Citation: 2011 (22) S.T.R. 177 (Tri. Mumbai)

Issue:- Cenvat credit on local travel, medical insurance and outdoor catering is allowed. The cenvat credit on meal coupons paid by employees is not available to employers.

Brief Facts:- Assessee was exporting services. They were utilizing the services of local travel, medical insurance, outdoor catering service and meal coupons. As the assessee were exporting services, the cenvat credit taken on said input services accumulated. Therefore, it filed a refund claim under Rule 5 of the Cenvat Credit Rules, 2004.

The Adjudicating Authority has allowed the refund claim. In Appeals, the Commissioner (Appeals) rejected the claim for local travel and medical insurance.

Assessee is in appeal against the rejection of refund for Local travel and medical insurance. Revenue is disputing the allowances of the refund of input credit service claimed for the outdoor canteen/meal coupons services.

Assessee’s Contention:- The assessee submitted that they have taken credit on business related services in terms of Rule 2(l) of Cenvat Credit Rules, 2004 and are eligible for input service credit. The assessee relied upon decision of Bombay High Court in case of Ultratech Cement [2010-TIOL-745-H.C.] and also relied on the decision of Stanzen Toyotetsu India Pvt. Ltd. Vs CCE.[2009 (14) S.T.R. 316 (Tri. Bang.)] and H.E.G. Ltd. Vs. CCE, Nagpur [2010 (17) S.T.R. 178 (Tri. Del)].

With regard to outdoor catering and meal service, assessee relied on judgment given in GTC Industries Ltd. [2008 (12) S.T.R. 468 (Tri. L.B.)] wherein it was held that the input service credit on outdoor catering service is available to assessee in case the cost of food has been borne by employer.

The assessee also submitted that the denial of refund claim to them is beyond the scope of the show cause notice. It was also submitted that they have taken due credit on input services and filed returns accordingly and the same has been accepted by the department without any dispute. The appellant further submitted that prior to 1.05.2006, they were providing the service to their foreign clients under the head of Business Auxiliary Service, hence they have correctly taken the credit and are entitled for refund claim under Rule 5 of Cenvat Credit Rules, 2004.

Department’s Contention:- The department submitted that the services exported by the assessee have come under the service tax net with effect from 1.05.2006. In that event, any input service credit availed by them prior to 1.05.2006 is not eligible for credit. The department also clarified that the services were not taxable which the assessee were exporting in the month of April 2006. Hence the credit of any input service accumulated in the month of April 2006, the assessee is not entitled to claim the refund of the same.

With regard to services of local travel and medical insurance claim the department relied on the decision of Vikram Ispat Vs. CCE [2010(19)S.T.R. 52 (Tri. Mum)]. With regard to outdoor catering service the department relied on the decision of the Bombay High Court in the case of Ultratech Cement. Finally the Department submitted that the input service credit refund by the assessee on the meal coupon service is not eligible as the same are not covered by the outdoor catering service.

Reasoning of Judgment:- The Tribunal found that the assessee had availed input service credit on the services availed in April, 2006. And in the impugned order, it has been clearly held that no export of service has taken place during April, 2006 hence the assessee is not entitled to take the credit of input service availed in April, 2006. It was held that as per CCR, 2004 an assessee was entitled to take credit on input service at the time of availment of service not at the time of providing the services. It was held that in view of these finding the order of Lower Authorities is totally irrelevant. Hence, the assessee is entitled to avail input service credit of services availed by them in the month of April 2006 also.

The Tribunal with regard to the input service credit on local travel and medical insurance, relied upon the decision of the High Court of Bombay in case ofUltratech Cement [2010-TIOL-745-H.C.] and held that it is squarely applicable wherein it has been held that any input service availed by the assessee in course of their business is entitled for input service credit. The Lower Authority has not raised any objection that these services are availed by the assessee in the course of their business. Hence the denial of input service on medical insurance and local travel is not sustainable

The Tribunal with regard to meal coupons, it was noted that it had been clarified that these meal coupons are given to the employees to take meal from factory canteen free of charge. As the cost of food against these meal coupons has been borne by the assessee, the Tribunal held that, the assessee is entitled to claim input service in view of judgment in case of Ultratech Cement [2010-TIOL-745-H.C.]

With regard to outdoor catering service, the Tribunal relied upon the High Court of Bombay in case of Ultratech Cement wherein it was held that the assessee is not entitled for input service credit for the charges recovered by them against the subsidized food from their employees. Accordingly, the credit availed by the assessee on the amount recovered by them from their employees against the canteen services is denied.

Decision:- Appeals of both assessee and department partly allowed.

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PJ/Case Laws/2011-12/1155

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