2010 (11) TMI 224 - AT - Service Tax

Cenvat credit - Input services - Outdoor catering services - Denied the Cenvat credit on outdoor catering services on the ground that the appellants have not demonstrated that the outdoor catering expenses formed part of the assessable value of the final product - The contention of the appellant is that outdoor catering services is a mandatory service provided in terms of the Section 46 of the Factory Act 1948 - They contended that outdoor catering services have nexus with the manufacturing of the final product - In support of their contention they have placed reliance on Hon ble Bombay High Court s decision in the case of CCE Nagpur v. Ultratech Cement Ltd. (2010 -TMI - 78203 - BOMBAY HIGH COURT) Held that the appellants are required to show that the outdoor services are forming part of the cost of production - The appellant have produced a certificate issued by the Cost Accountant which was at no stage produced before the lower authorities the same is required to be examined - Therefore the case is remanded to the lower adjudicating authority for limited purpose of examining whether the outdoor catering services are forming part of the cost of production - Reasonable opportunity of personal hearing may be granted

Summary

Issues:
Appeal against denial of Cenvat credit on outdoor catering services.

Analysis:
The appellant, engaged in manufacturing PVC pipes, appealed against the denial of Cenvat credit on outdoor catering services by the Commissioner (Appeals). The lower adjudicating authority had denied the credit, leading to a demand of Rs. 78,715/- along with penalties. The appellant argued that outdoor catering services are mandatory under the Factory Act, 1948, and have a nexus with the manufacturing process. They cited a Bombay High Court decision supporting their claim and produced a certificate from a Cost Accountant. The department contended that there was no nexus between the services and manufacturing, and the certificate was produced for the first time before the Tribunal. They also referred to Section 37 (xvi a) rules related to excisable goods manufacturing, questioning the applicability of the High Court decision.

The Tribunal examined the case, noting that the appellant provided canteen facilities to workers through an outdoor caterer, as mandated by the Factory Act, 1948. Citing the Bombay High Court decision in a similar case, the Tribunal found a clear nexus between the catering services and the manufacturing process, allowing the credit. The Tribunal also observed that the department failed to show any challenge to the High Court decision or its modification. As the issue was settled in favor of the appellant, the Tribunal remanded the case to the lower authority to determine if outdoor catering services formed part of the cost of production. The appellant was instructed to submit the Cost Accountant's certificate for examination, with a provision for a personal hearing. The appeal was disposed of accordingly.