Whether credit of service tax paid on catering and guest house services for employees is admissible?

PJ/CASE LAW/2015-16/2877

Case:-COMMISSIONER OF C. EX., NASHIK VERSUS MAHINDRA & MAHINDRA LTD.

Citation:- 2015 (39) S.T.R. 298 (Tri. - Mumbai)

Brief Facts:-Revenue has filed this appeal against Order-in-Appeal No. CEX/ADK/19/APL/NSK/2007, dated 23-1-2007 passed by Commissioner of Central Excise & Customs (Appeals), Nashik. Vide the impugned order the ld. appellate authority has allowed Cenvat credit on input services, namely, Mandap keeper services, catering services, courier services, photography services, guest house services, mobile services, etc. availed by the appellant in the manufacturing unit. Revenue has filed this appeal on the ground that the guest house and catering services in respect of which input services credit has been allowed have no nexus with the business of manufacturing undertaken by the appellant and therefore, allowing of this credit is not in accordance with the law.

Appellants Contention:-The ld. Additional Commissioner (AR) appearing for the Revenue reiterates the grounds urged in the appeal memorandum and submits that in respect of these two input services, no nexus is established between the availment of services and the manufacturing activities.

Respondents Contention:-The ld. Deputy Manager (Excise) appearing on behalf of the respondent submits that as far as the catering services is concerned, the issue is already decided by the Hon’ble Bombay High Court in the case of Ultratech Cement Ltd. - 2010 (20) S.T.R. 577 (Bom.) wherein it was held that catering service is an eligible input service subject to the condition that if any cost is recovered from the employees, then the assessee would not eligible to avail Cenvat credit on the cost recovered from the employee. The appellant submits that during the impugned period December, 2004 to March, 2005, the appellant had recovered part of the cost from their employees and they are willing to reverse the proportionate Service Tax credit in respect of such cost recovered along with interest and therefore, the availment of Cenvat credit in respect of catering service cannot be disputed. As regards the guest house service, he submits that the guest house was used by the employees of the company and therefore this has some nexus with the manufacturing activity. Accordingly, he pleads for dismissing the appeal.

Reasoning of Judgement:-The tribunal have carefully considered the submissions made by both the sides. As regards the catering service, the decision of the Hon’ble High Court in the case of Ultratech Cement Ltd. case is in favour of the assessee and therefore admissibility of input Service Tax credit on catering service is beyond doubt. However, the assessee will not be eligible for proportionate Service Tax credit on catering service, wherein the cost of service has been recovered from their employees. Subject to reversal of such credit along with interest thereon, allowing of Cenvat credit on catering service is sustainable in law. As regards the guest house services it cannot be said that there is a nexus between the service and the manufacturing activities. Therefore, there is a merit in the contention of the Revenue that guest house service is not an eligible input service. Accordingly, we set aside the order allowing input Service Tax credit on guest house service. But for the above modification, the impugned order is upheld and the Revenue’s appeal is rejected.

Decision:-Appeal dismissed.

Comment:- The analogy in the case is that if providing canteen facilities to the employees is mandatory and if such facilities have nexus or integral connection with the manufacture of final product then the Cenvat credit of the service tax paid on the catering services is admissible. But, if certain amount for catering services is recovered from the employees, then proportionate Service Tax credit in respect of cost recovered from employees is not admissible and is liable to be reversed. Moreover, it was held that as the guest house service is not being connected with the manufacturing activities, the credit of service tax is not admissible.

Prepared By:- Neelam Jain

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PJ/CASE LAW/2015-16/2877

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