Whether the assessee is entitled to avail the Cenvat Credit for Service Tax paid on outdoor catering service or not.

PJ/Case Laws/2012-13/1120

Case:COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, LTU, BANGLORE V/S. ACE DESIGNERS LTD.

Citation:2012 (26) S.T.R. 193 (KAR.)

Issue:- Whether the assessee is entitled to avail the Cenvat Credit for Service Tax paid on outdoor catering service or not.

Brief Facts:- Respondent-assessee is a manufacturer of CNC lathes and components. During the course of audit, it was noticed that assessee had availed Cenvat credit to the extent of Rs. 3,54,104 of service tax paid on outdoor catering services during the period April 2007 to March 2008.

Accordingly, a show cause notice dated 24.4.2008 was issued for recovery of cenvat credit. The Assessing Authority confirmed the demand with interest and imposed penalty.

In appeal, the Commissioner (Appeal) set aside the order passed by the Assessing Authority and allowed the appeal.

Aggrieved by the same, Revenue preferred an appeal before the Tribunal. The Tribunal by placing reliance on the Larger Bench decision of the Tribunal in the case of C.C.E, Mumbai Vs. GTC Industries [2008 (12) S.T.R. 468 (Tri-LB)], allowed the appeal. It was held that the assessee is entitled to avail Cenvat credit towards outdoor catering services which were availed for maintaining a canteen in the factory premises was an input service.

Aggrieved by the above, Revenue has preferred appeal before the High Court.

Reasoning of Judgment:- The High Court noted that an identical question had come up for consideration before the Division Bench of the High Court in the case of Commissioner of Central Excise v. M/s. Stanzen Toyotetsu India (P) Ltd. [2011 (23) S.T.R. 444 (Kan)) wherein it was held that “The services mentioned in the Section containing the definition of input service are only illustrative and it is not exhaustive. Therefore when a particular service not mentioned in the definition clause is utilized by the assessee/manufacturer and Service tax paid on such service is claimed as Cenvat credit, that the question is what are the ingredients that are to be satisfied for availing such credit. If the credit is availed by the manufacturer, then the said service should have been utilized by the manufacturer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business. If any one of these two tests is satisfied, then such a service falls within the definition of "input service" and the manufacturer is eligible to avail Cenvat credit of the Service tax paid on such service.

Canteen Service - It is in this context that when the assessee provides outdoor canteen facilities because of a statutory obligation imposed on him under Section 46 of the Factories Act it becomes a condition of service as far as the employees are concerned. He has paid the Service tax on outdoor canteen services. The said expenses incurred by the assessee will also be taken into consideration before fixing the price of the final product. It may be a welfare measure but certainly it is not a charity provided by the employer to the employees. It is an onerous legal obligation imposed on him.

The substantial questions of law framed in these appeals are answered against the revenue and in favour of the assessee.”

Following the above judgment, it was held that the question of law is answered in the said judgment.

Decision:- Appeal dismissed.

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PJ/Case Laws/2012-13/1120

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