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2015 (6) TMI 1091 - HC - Service TaxDenial of benefit of Cenvat credit - outdoor catering services - services provided in the factory for employees of the factory - whether the assessee can utilise the cenvat credit facilities in respect of outdoor catering services, provided in the factory for its employees and outward freight service as input service? - Held that - In an identical circumstance, this Court dealt with the issue with regard to outdoor catering service, in the case of CCE V. Ultratech Cement Ltd. 2010 (10) TMI 13 - BOMBAY HIGH COURT , where it was held that all services used in relation to the business of manufacturing the final product are covered under the definition of input service and in the present case, the outdoor catering services being integrally connected with the business of the manufacture of cement, credit of service tax paid out on catering services has been rightly allowed by the Tribunal. Outward freight charges - whether the services availed by a manufacturer for outward transportation of final products from the place of removal should be treated as an input service in terms of Rule 2 (1) (ii) of the CENVAT Credit Rules, 2004? - Held that - reliance placed on the decision of the case of CCE V. ABB Ltd., Bangalore 2011 (3) TMI 248 - KARNATAKA HIGH COURT , where it was held that By notification No.10/2008-C.E.(N.T.) dated 1.3.2008, the words clearance of final products upto the place of removal were substituted in the place of the words clearance of final products from the place of removal . The intention of the legislature is thus manifest. Till such amendment, the words clearance from the place of removal included transportation charges from the place of removal till it reached the destination, namely the customer. Therefore, the said input service was included in the early part of the definition 2(1)(ii). Credit of service tax paid on outward transportation allowed prior to 1.4.2008. Appeal disposed off - decided in favor of assessee.
Issues Involved:
1. Eligibility of Cenvat credit on service tax paid for outdoor catering services in the factory. 2. Eligibility of Cenvat credit on service tax paid for outward transportation of final products beyond the place of removal. Detailed Analysis: Issue 1: Eligibility of Cenvat Credit on Outdoor Catering Services The core issue is whether the assessee can utilize Cenvat credit for service tax paid on outdoor catering services provided in the factory for its employees. The Tribunal allowed the appeal by holding that Cenvat credit is admissible on 'outdoor catering service' as an input service relating to business, following the Larger Bench decision in Commissioner of Central Excise, Mumbai V. GTC Industries Ltd. and ABB Ltd. Vs. CCE Bangalore. This Court referenced a similar case (C.M.A.Nos.2 of 2010 batch) where it was held that outdoor catering services are covered under the inclusive part of the definition of "input service." The Bombay High Court in CCE V. Ultratech Cement Ltd. concluded that the definition of "input service" is broad, covering services used directly or indirectly in or in relation to the manufacture of final products, as well as services used in relation to the business of manufacturing the final products. The Court noted that the definition includes services integrally connected with the business, such as mandatory canteen facilities under the Factories Act, 1948. The Court emphasized that the definition of "input service" is not restricted and includes all services used in relation to the business of manufacturing the final product. The Tribunal's decision to allow Cenvat credit on outdoor catering services was upheld, provided the cost of the food borne by the worker is not included. Issue 2: Eligibility of Cenvat Credit on Outward Transportation Services The second issue concerns whether services availed for outward transportation of final products beyond the place of removal qualify as an input service under Rule 2 (1) of the CENVAT Credit Rules, 2004. The Tribunal's decision was based on the Larger Bench decision in ABB Ltd. v. CCE, which held that outward transportation services up to the place of removal are eligible for Cenvat credit. The Karnataka High Court in CCE V. ABB Ltd. clarified that the definition of "input service" includes services used directly or indirectly in or in relation to the manufacture of final products and clearance from the place of removal. The Court noted that the definition is extensive and includes transportation charges from the place of removal to the customer, as long as it is integrally connected with the business of manufacturing the final product. However, the Court also emphasized that the definition should not be expanded to include transportation beyond the place of removal unless explicitly stated. The amendment effective from 01.04.2008, which substituted "from" with "up to" in the phrase "clearance of final products from the place of removal," clarified the legislative intent. Conclusion: The Court concluded that the issues are settled in favor of the assessee based on the precedents and legislative amendments. The appeal was dismissed, affirming the Tribunal's order, with no costs.
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