Whether the canteen service/facility, provided in the factory of the assessee due to statutory provisions, is an input service and allowable for cenvat credit?

PJ/Case Laws/2010-11/1107

CASE LAWS

Prepared By:
CA. Rajani Thanvi &
Kavita Thanvi

Service Tax Section

Case: - COMMISSIONER OF C. EX., AHMEDABAD v/s FERROMATIK MILACRON INDIA LTD.

Citation: - 2011 (21) S.T.R.8 (GUJ.)

Issue:- Whether the canteen service/facility, provided in the factory of the assessee due to statutory provisions, is an input service and allowable for cenvat credit?

Brief Facts:-The respondent was manufacturing injection Molding Machines and parts thereof, falling under chapter 84 of the first schedule to the central Excise Tariff Act, 1985. The fact was revealed by audit party that they have availed the cenvat credit on service tax in respect of outdoor canteen services during the period 1-3-2006 to 30-09-2006. The appellant was of the view that the assessee cannot avail the cenvat credit of canteen services as these are not covered under the definition of input service. Consequently show cause notice issued for recovery of amount of tax and the same is confirmed with penalty and interest. Against the order of adjudicating authority the respondent filed appeal before Commissioner (Appeals) which was dismissed. Now the respondent is in appeal before the tribunal.
Appellant’s Contention:-
The appellant contended that the assessee was not entitled to the credit on the ground that canteen services cannot be treated as “input service” as defined under CENVAT Credit Rules, 2004.Further they contended that the main definition of input services also includes the services which were used in or in relation to the manufacture of finished excisable goods. But the inclusive part of the definition which covers additional business activities cannot be stretched beyond what is prescribed in the main definition. Accordingly, canteen services even they are assumed to be activities relating to the main business of manufacturer, the same would not be covered under the inclusive part of the definition, because extension of such facilities would not have any direct or indirect nexus to the manufacturer of goods. As such the impugned service is not covered under the scope of definition of input service as provided in Rule 2(l) of Cenvat Credit Rules, 2004.

Reasoning of Judgment:-
While deciding the case the hon’ble Tribunal has considered the provisions of rule 3 of Cenvat Credit Rules, 2004 and the statutory requirement under section 46 of the Factories Act. As the Rule 3 provides that manufacturer can avail the credit of service tax leviable under section 66 of Finance Act paid on any input service received by the manufacturer of the final product on or after the 10.09.2004. Further it is mandatory for the respondent to provide canteen facilities to its workers in order to carrying out its manufacturing activities. Accordingly provision of canteen services is a statutory requirement to run the factory and the definition of input service also says that any service used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final products will be covered under the purview of input services. Therefore the canteen services being vital in relation to manufacture of final products is also fall under the category of input service. Consequently it was held by the Hon’ble Tribunal that the service tax paid on outdoor catering services by the canteen located in the respondent’s manufacturingpremises has to be considered as an input service relating to business and that CENVAT credit is admissible in respect of the same.

Decision:
The appeal is dismissed.
Comment:
The tribunal has rightly held the issue of the services which are mandatory to acquire for assesses due to any statutory provision. The services which are statutorily required are invariably allowed for cenvat credit.
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