Cenvat Credit on canteen facility provided by Outdoor caterers to Factory employees

PJ/Case Laws/2011-12/1474

Case: CCE, Mysore v/s M/s Bhoruka Aluminium Ltd

Citation: 2012-TIOL-14-CESTAT-BANG

Issue:- Canteen facility provided to factory employees by Outdoor caterers – Admissibility of Cenvat Credit if service provided due to statutory obligation under Factories Act.

Brief Facts:- The respondent had taken CENVAT credit of the service tax paid by the outdoor caterers. In the show cause notice issued on 24/03/2009, the Assistant Commissioner of central excise having jurisdiction over the respondent's factory proposed to recover the above credit of Rs.257650/- from the respondent under Section 11A of the Central Excise Act read with rule 14 of the CCR, to levy interest thereon under Section 11AB of the act read with Rule 14, and to impose penalties on the noticee under section 11AC of the Act and Rule 15(3) of the CCR. The respondent contested the demand both on both on merits and on limitation.

Appellant’s Contention:- It was submitted by appellant that the high court decision cited by the respondent can be applied only to cases where it is statuary obligation of the manufacturer claiming CENVAT credit on outdoor catering service to the employees. It is submitted that the respondent can claim the benefit only if it is established that they had employed not less than 250 workers/ employees in their aluminum profile factory during the material period.

Respondent’s Contention:- It was submitted by the respondent that the Nagpur bench of the honorable Bombay high court had allowed credit on outdoor services as defined under rule 2(l) of CCR. Further it was submitted by the respondent that demand of duty is, in any case time barred. Respondent finally relied on judgement of honorable Karnataka high court in Stanzen Toyotetsu India (P) ltd. case.

Reasoning of Judgment:- The Tribunal held that if the respondent had employed not less than 250 people in their factory for the manufacture of aluminum profile during the period of dispute, they can claim benefit of honorable Karnataka high court judgement in Stanzen Toyotetsu India (P) ltd. case. As rightly pointed out by the appellant, the respondent has to show that, during the material period, they had a statutory obligation under the Factories Act to provide canteen facility to their employees. Once this condition is fulfilled, the respondent can claim the outdoor catering service in question to be an 'input service' and, for that matter, claim CENVAT credit of the service tax paid thereon as per the ruling of the Hon'ble Karnataka High Court. The case of the respondent is, apparently, supported also by the Hon'ble Bombay High Court's decision in the case of Ultratech Cements Ltd. as also by the view taken by that court in GTC Industries case. The original authority did not have occasion to verify the strength of employees in the respondent's factory as it proceeded on the premise that outdoor catering service was not covered by the definition of 'input service'. Though the appellate authority held the service to be a input service, it not advert to the statutory did obligation, if any, of the respondent under the Finance Act. These are the circumstances which warrant remand of the case to the original authority.

The orders of the lower authorities are set aside and this appeal and cross objection are allowed by way of remand with a direction to the original authority to take fresh decision on the substantive issue and the limitation issue in accordance with law and the principles of natural justice

Decision:- Appeal allowed by way of remand.

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PJ/Case Laws/2011-12/1474

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