Cenvat Credit admissibility in case of outdoor catering service.

PJ/CASE LAW/2015-16/2595

Case:-SRF LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I

Citation:-2014 (36) S.T.R. 830 (Tri. - Del.)

Brief Facts:-The dispute in the present two appeals relates to the availability of Cenvat Credit of Service Tax paid on Outdoor Catering.

Appellant Contentions:- Ld. Advocate has admitted that the credit to the extent would not be available and submits they have already reversed the proportionate credit. However, he submits that during the relevant period the earlier decisions were in favour of the assessee and as such it is not the case of imposition of penalty. As regards interest, he submits that the credit in question was reversed without utilisation in which case the decision of the Hon’ble Karnataka High Court in the case of CCE v. Bill Forge Pvt. Ltd. - 2012 (279) E.L.T. 209 (Kar.) = 2012 (26) S.T.R. 204 (Kar.) would apply. Moreover, he too submits that it is not a case of any malafide intention so no question to invoke the penal provision arises.

Reasoning of Judgment:- After hearing both the sides, the Tribunal find that the dispute in the present two appeals relate to the availability of Cenvat credit of service tax paid on outdoor catering. Tribunal find that the legal issue stands decided by the Larger Bench decision of the Tribunal in the case of CCE v. GTC Industries Ltd. - 2008 (12) S.T.R. 468. However, in terms of the law declared by the Hon’ble Bombay High Court in the case of CCE, Nagpur v. Ultratech Cement Ltd. - 2010 (260) E.L.T. 369 (Bom.) = 2010 (20) S.T.R. 577 (Bom.), the credit would not be available to the extent of charging of the cost of outdoor catering from the employees.
Ld. Advocate fairly admits that the credit to the extent would not be available and submits they have already reversed the proportionate credit. However, he submits that during the relevant period the earlier decisions were in favour of the assessee and as such it is not the case of imposition of penalty. As regards interest, he submits that the credit in question was reversed without utilisation in which case the decision of the Hon’ble Karnataka High Court in the case of CCE v. Bill Forge Pvt. Ltd. - 2012 (279) E.L.T. 209 (Kar.) = 2012 (26) S.T.R. 204 (Kar.) would apply.
As regards the availability of credit, where the employees are not charged, it was found that the issue is covered in favour of the assessee. The appellants are not contesting the credit involved in respect of the cases where the cost is being recovered from the employees. Accordingly, the impugned order is set aside and the authority below is directed to quantify the exact quantum of credit required to be reversed and also to verify the appellants’ claim of reversal of the same. As regards interest, if the credit stands reversed before utilisation, the interest would not be leviable in terms of Karnataka High Court decision. The adjudication authority would also get the said fact verified and would pass fresh orders accordingly.
As regards penalty, Tribunal agreed with the ld. Advocate that it is not a case of any mala fide intention so as to invoke the penal provision. Accordingly penalty imposed is set aside.

Appeals are disposed of in above terms.

Decision:-Appeal disposed off.

Comment:- The crux of the present case is that Cenvat credit of Service Tax to the extent charged from employees should be proportionately reversed. Moreover, if the credit stands reversed before utilization, the interest would not be leviable on such amount in light of the decision given in the case of Bill Forge Pvt. Ltd. However, it is worth noting that the Rule 14 of the Cenvat Credit Rules, 2004 has been amended to recover interest if cenvat credit wrongly taken is also utilised by the assessee. Further, as regards imposition of penalty, it was concluded that the issue was in favour of the appellant except to the extent of charges recovered from the employees and so penalties were set aside.

Prepared By: Meet Jain

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PJ/CASE LAW/2015-16/2595

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