2010 (12) TMI 84 - AT - Service Tax

Cenvat Credit - outdoor catering service - The outdoor caterers recovered service tax from the respondent and the latter took CENVAT credit thereof. The show-cause notice in this case merely proposed to deny the credit to the party on the ground that the above service did not qualify to be input service under Rule 2 (l) of the CENVAT credit Rules, 2004 - Held that - it was never the case of the Revenue that the food supplied by outdoor caterers to the respondent s canteen was not supplied free to their workers. The show-cause notice did not allege that the goods was supplied to their workers at subsidized price or that the entire cost of the goods was recovered from the workers. - This question stands settled in favour of the assessee in the case of Ultratech Cement Ltd. (2010 -TMI - 78203 - BOMBAY HIGH COURT) - credit allowed

Summary

Issues:
1. Entitlement to avail CENVAT credit on outdoor catering service.
2. Interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004.
3. Nexus between outdoor catering service and business of manufacturing final products.
4. Application of the judgment of Honorable Bombay High Court (Nagpur Bench) in a similar case.

Analysis:
1. The appeal filed by the Revenue questioned the entitlement of the respondent to avail CENVAT credit on outdoor catering service provided from September 2007 to June 2008. The dispute arose as the Revenue contended that the service did not qualify as an input service under Rule 2(l) of the CENVAT Credit Rules, 2004. The adjudicating authority initially ruled against the respondent, but the Commissioner (Appeals) later sided with the assessee, leading to the Revenue's appeal.

2. The key argument revolved around the interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004, which defines input service. The Revenue's case was based on the lack of nexus between the outdoor catering service and the manufacture and clearance of the final products. However, the Consultant for the respondent highlighted that the service tax paid on outdoor catering was integrally connected with the business of manufacturing final products, citing a judgment of the Honorable Bombay High Court (Nagpur Bench) in a similar case involving Ultratech Cement Ltd.

3. The Consultant emphasized that the food supplied by outdoor caterers to the respondent's canteen was free for their workers, which was never contested by the Revenue. The absence of any allegation that the goods were not supplied free or at a subsidized price to the workers reinforced the argument that the outdoor catering service qualified as an input service. Drawing parallels with the Ultratech Cement Ltd. case, where a similar argument was made by the Revenue, the Consultant underlined the integral connection between the service and the manufacturing process.

4. The Tribunal, after considering both parties' submissions and the judgment of the Honorable Bombay High Court, concluded that the outdoor catering service was indeed linked to the business of manufacturing final products. The precedent set by the High Court's judgment in a comparable case dismantled the foundation of the Revenue's argument. Consequently, the appeal by the Revenue was dismissed, affirming the respondent's entitlement to avail CENVAT credit on the outdoor catering service in question.