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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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PJ/Case Laws/2010-11/1040

Canteen service/facility - Whether input service under CCR, 2004
Case: Commissioner of Central Excise, Ahmedabad - I v/s Ferromatik Milacron India limited
 
Citation: 2011-TIOL-18-HC-AHM-ST 

Issue:- Whether the canteen service/ facility; provided in the factory of the assessee was an input service, in or in relation to manufacture, directly or indirectly of the final products, within the meaning of and comprehension of Rule 2 (i) of the CENVAT Credit Rules, 2004?
 
Whether the CENVAT credit of the Service Tax, so paid for receiving the outdoor caterer’s services by them for providing canteen services to their employees, was eligible for availment and utilization in terms of Rule 3 of the CENVAT Credit Rules, 2004?
 
Brief Facts:- Respondent-assessee is a manufacturer of Injection Moulding Machines and parts thereof. Canteen services were being provided by the respondent to its employees, in view of statutory requirement under Section 46 of the Factories Act. During audit, it was noticed that during the period 1st March, 2006 to 30th September, 2006, respondent had availed Cenvat credit on Service Tax in respect of canteen services. Department alleged that respondent was not entitled to the credit on the ground that canteen services cannot be treated as input service as defined under the CENVAT Credit Rules, 2004. Accordingly, Show Cause Notice was issued. The Adjudicating Authority confirmed the demand of recovery of service tax and penalty was imposed alongwith interest.
 
Appeal before Commissioner (A) was dismissed. Respondent has filed appeal before the Tribunal. The Tribunal allowed the appeal. Hence, Revenue has filed this appeal before the Tribunal.  
 
Appellant’s Contentions:- Revenue submitted that the main definition of input services extended CENVAT credit of service tax paid on services which were used in or in relation to the manufacture of finished excisable goods. That the inclusive part of the definition which covers additional business activities cannot be stretched beyond what is prescribed in the main definition. Accordingly, canteen services even if they are assumed to be activities relating to the main business of manufacture, the same would not be covered under the inclusive part of the definition, because extension of such facilities would not have any direct or indirect nexus to the manufacture of goods.
 
It was accordingly submitted that the definition of the term input services as appearing in Rule 2(l) of the Rules would not bring the service in question within the scope of input service so as to be eligible for credit under Rule 3 of the Rules.
 
Reasoning of the Judgment:- The High Court found that for the purpose of carrying out its manufacturing activities, it was mandatory for the respondent to provide canteen facilities to its workers.  The High Court perused the definition of input services as given under CCR, 2004.
 
Further, the High Court held that as per the provisions of Section 46 of the Factories Act, it is mandatory for the employer to provide canteen services to the staff. Thus, provision of canteen service is a statutory requirement. Provisions of canteen service are a statutory requirement. Provisions of canteen services being indispensible, it is incumbent on a manufacture of goods, to provide the same if he desires to run his factory. In view of the definition of Input service which means any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products, the input service does not have to used directly in the manufacture of final products, it may be a service which is only indirectly used in relation to the manufacture of final products. In the circumstances, canteen services which are indispensible in relation to manufacture of the final products would certainly fall within the ambit of input service as defined under the rules.
 
It was held that moreover, Rule 3 of the Rules insofar as the same is relevant for the present purpose provides that the manufacture shall be allowed to take credit of the service tax leviable under Section 66 of the Finance Act; paid on any input service received by the manufacturer of final product on or after the 10th day of September, 2004. A plain reading of the said rule makes it clear that the said provision does not qualify the nature of input service availed by the manufacturer.
 
The High Court held that the Tribunal was justified in holding that the service tax paid on outdoor catering services by the canteen located in the respondent’s manufacturing premises has to be considered as an input service relating to business and that Cenvat credit is admissible in respect of the same. The view taken by the Tribunal being in consonance with the provisions of the Rules does not suffer from any legal infirmity so as to warrant interference.
 
Judgment:- Appeal dismissed.
 
Comment:- It is important decision which says that if the services are provided due to legal requirement then the cenvat credit is available on the same. This analogy will have far reaching effect in days to come.
 

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