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2010 (12) TMI 378 - AT - Service TaxCenvat credit - Input services - The appellants are engaged in the manufacture of electronic and electrical goods such as computer monitor, air conditioner, refrigerator and colour television sets - The appellants have utilised cafeteria/catering services by entering into contract with Outdoor Catering Services for the purpose of providing food and beverages to their workers. The appellants have more than 250 workers on their pay roll and as per Section 46 of the Factories Act, 1948, they are required to provide and maintain a canteen for the use of the workers - This is a mandatory requirement and failure to maintain such canteen facility attracts penal action - In the present case, it is not merely a case of inclusion of value of the services for the purpose of costing of the final products but it is to be noted that the services are required to be utilised mandatorily and the failure of which attracts penal action. Held that the outdoor catering services utilised by the appellants have to be treated as input services - Therefore, the appellants are eligible for the credit.
Issues:
1. Whether outdoor catering services utilized by the appellants can be considered as 'input services' under the Central Excise and Tariff Act, 1985. Analysis: The appeal before the Appellate Tribunal CESTAT, New Delhi involved a dispute regarding the eligibility of the appellants to claim credit on service tax amounting to Rs. 6,97,948/- for the outdoor catering services utilized by them. The appellants, engaged in the manufacture of electronic and electrical goods, argued that the catering services were essential for providing food and beverages to their workers as mandated by the Factories Act, 1948. They contended that the cost of such services formed part of the cost of their final products. The advocate for the appellants relied on a previous decision of the Larger Bench of the Tribunal to support their claim that employing an outdoor caterer for catering services should be considered as 'input services' related to their business activity. On the other hand, the Departmental Representative argued that for services to be categorized as 'input services,' there must be a direct nexus with the manufacturing process of final goods. Relying on precedents, the DR contended that no credit could be allowed unless the services were integrally connected to the manufacture of excisable goods. The DR emphasized the importance of establishing a clear nexus between the services and the manufacturing process, citing relevant case law and decisions by the Hon'ble Supreme Court and the Tribunal. In response to the arguments presented, the advocate for the appellants highlighted the liberal interpretation of the term 'input services' and pointed out that a decision cited by the DR was stayed by the High Court. After considering the submissions from both sides and perusing the records, the Tribunal analyzed the definition of 'inputs' and 'input services' under the Cenvat Credit Rules. The Tribunal noted that the definition of input services encompassed a wide range of services from factory setup to the dispatch of final products, including services related to market research, procurement of inputs, and storage. Based on the inclusive definition of input services and the mandatory nature of providing catering services under the Factories Act, the Tribunal concluded that the outdoor catering services utilized by the appellants were integrally connected to the manufacture of their final products. The Tribunal held that the appellants were eligible for the credit on the catering services, overturning the decisions of the lower authorities. Consequently, the appeal was allowed, providing relief to the appellants in accordance with the law. In conclusion, the judgment by the Appellate Tribunal CESTAT, New Delhi clarified the criteria for considering services as 'input services' in the context of excisable goods manufacturing, emphasizing the importance of establishing a nexus between the services utilized and the production process to determine eligibility for credit under the Cenvat Credit Rules.
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