2015 (11) TMI 1647 - AT - Central Excise

CENVAT credit - Maintenance of canteen - renting of cycle stand - Held that - So far as catering is concerned, such service was availed to discharge an obligation under the Factories Act. Therefore, there shall not be denial of CENVAT credit in respect of service tax paid to avail the catering service for the factory - So far as rental of the cycle stand is concerned, that in no way establishes the nexus between output manufactured or service provided by the appellant - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Denial of CENVAT credit for service tax paid on catering for maintaining the factory canteen.
2. Denial of CENVAT credit for service tax paid on renting a cycle stand for the factory.

Analysis:
Issue 1: Denial of CENVAT credit for catering service
The appellant argued that the catering service was availed to fulfill an obligation under the Factories Act, thus justifying the CENVAT credit for the service tax paid. The Revenue acknowledged the existence of the factory and the provision of catering services for it. The Tribunal observed that the catering service was indeed utilized to meet the obligation under the Factories Act, leading to the decision that the CENVAT credit for the service tax paid on catering should not be denied. Consequently, no interest or penalty was to be levied in this regard.

Issue 2: Denial of CENVAT credit for renting a cycle stand
Regarding the rental of the cycle stand, the Revenue contended that it had no connection with the output service or manufacturing activities of the appellant. The Tribunal agreed with this argument, concluding that there was no nexus established between the rental of the cycle stand and the output or services provided by the appellant. Consequently, the appellant was not granted any relief in terms of CENVAT credit for the service tax paid on renting the cycle stand. However, no penalty was imposed in this regard.

Additional Direction:
The counsel highlighted the recovery of contributions from employees towards the catering costs. The Tribunal directed the appellant to calculate the proportionate deduction based on the recovered amount, allowing appropriate CENVAT credit accordingly.

Conclusion:
In light of the above analysis, the appeal was partly allowed. CENVAT credit was permitted for the catering service without imposing interest or penalty. However, no CENVAT credit was granted for the service tax on renting the cycle stand, although no penalty was levied in this regard. The appellant was instructed to adjust the CENVAT credit based on the recovered employee contributions towards catering costs.