Eligibility of Cenvat credit on outdoor catering services.

PJ/CASE LAW/2015-16/2939

Case:-DALMIA CEMENT LTD. VERSUS DEPUTY COMMISSIONER OF C. EX., TRICHY-II

Citation- 2015 (39) S.T.R. 982 (Mad.)

Brief Facts:-The Final Order, dated 18-6-2010 passed in Final Order No. 660 of 2010 by the CESTAT, Chennai [2010 (19) S.T.R. 172 (Tri.-Chen.) is being challenged in the present Civil Miscellaneous Appeal. The appellant has been doing the business of manufacturing cement. In the factory of the appellant various persons are working and in order to cater their needs canteen facilities are available. Since the appellant itself has not been able to run the service, the same has been let out to outsiders and now the outsiders are doing catering service. Under the said circumstances, the appellant is entitled to get Cenvat credit with regard to Service Tax. But the Department has issued the show-cause notice, dated 14-7-2008, wherein the claim of the appellant for having Cenvat credit in respect of Service Tax has been denied and the demand made in the show-cause notice has been upheld in order-in-original passed on 11-9-2008. Against the order passed in order-in-original, an appeal has been preferred before the second respondent. On 25-2-2009, the same has been allowed. Against the order passed by the second respondent, appeal has been filed before the third respondent. The third respondent has set aside the order passed by the second respondent by way of holding that the appellant is not entitled to avail Cenvat credit facilities with regard to Service Tax. Against the order passed by the CESTAT, the present Civil Miscellaneous Appeal has been preferred.
At the time of admitting the present Civil Miscellaneous Appeal, the following substantial questions of law have been settled for consideration :-
“(i)       Whether the Tribunal is right in holding that outdoor catering service is not an input service as defined under Rule 2(1) of the Cenvat Credit Rules, 2004 and consequently not eligible to be availed as Cenvat credit by a manufacturer or provider of output service?
(ii)        Whether the Tribunal was right in not following the ratio laid down by the Larger Bench of the Tribunal in the case of GTC Industries, which was not stayed and in taking a contradictory view without referring the matter to a Larger Bench?”
The short point that involves in the present Civil Miscellaneous Appeal is as to whether in case of outdoor canteen facilities an assessee can utilize Cenvat credit facilities and especially with regard to payment of Service Tax?

Appelants Contention:-The learned Counsel appearing for the appellant has directly drawn the attention of the Court to the decision reported in 2008 (12) S.T.R. 468 (Tribunal-LB) (Commissioner of Central Excise, Mumbai-V v. GTC Industries Limited), wherein the Larger Bench has held in a case like this the assessee can avail Cenvat facilities.

Respondents Contention:-The learned Counsel appearing for the respondent has drawn the attention of the Court to the following decisions:-
(a)        In 2012 (25) S.T.R. 175 ( Tribunal-Mumbai) (Commissioner of Central Excise, Pune-I v. Bosch Chassis Systems India Limited), it has been held that in case of outdoor catering if cost of outdoor service recovered from workers/employees, the employer/manufacturer cannot take credit of that part of service tax.
(b)        In 2012 (276) E.L.T. 94 (Tribunal-Mumbai) = 2012 (25) S.T.R. 73 (Tri.-Mumbai) (Semco Electric Private Limited v. Commissioner of Central Excise, Pune-I), the very same view has been expressed.

Reasoning Of Judgement:-From the divergent submission of authorities submitted by either side, the Court can easily discern the following settled aspects.
(a)        As per Larger Bench one can easily come to a conclusion that if outdoor catering service is available, the employer is entitled to avail Cenvat credit facilities in case of Service Tax.
(b)        In case of outdoor catering service and if costs of things is borne by employees or workers such facilities cannot be claimed by the employer.
In the show cause notice, the distinction pointed out by the respondent has not been shown wherein it has been simply stated that the appellant is liable to pay Service Tax without availing Cenvat credit facilities. Since the dictum of Larger Bench is that even in case of outdoor catering service Cenvat credit facilities are available to manufacture and since in the show-cause notice, the difference pointed out here has not been mentioned, this Court is of the view that the order passed by the Appellate Authority is liable to be set aside and if at all the Department wants to enforce their claim on the basis of the difference mentioned supra, the Department can very well start a new proceeding against the appellant. Since the view expressed by the Larger Bench has been followed in the present matter, the substantial questions of law settled on the side of the appellant are having substance.
In fine, this Civil Miscellaneous Appeal is allowed without costs and the final order, dated 18-6-2010 passed in Final Order No. 660 of 2010 by the third respondent/Tribunal is set aside. However, the respondent can invoke its liberty with regard to difference mentioned supra.

Decision:-Appeal allowed.

Comment:- The gist of the case is that the credit of outdoor catering services is available as per the decision of the Larger Bench of Tribunal in the case of GTC Industries Ltd. However, the cenvat credit is not available to the extent the cost is borne by the employees or the workers. However, this decision is for the prior period but now the definition of input service has been amended and cenvat credit of outdoor catering services is not admissible as it is specified in exclusion clause to the defination of input service.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2939

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