2011 (3) TMI 1100 - AT - Central Excise

Cenvat credit - service tax paid on the outdoor catering services - Held that - Under the provisions of Section 46 of the Factories Act, it is mandatory for the employer to provide canteen services to the staff - Thus, provision of canteen services is a statutory requirement - Provision of canteen services being indispensable, it is incumbent on a manufacturer of goods, to provide the same if he desires to run his factory - Input service which means any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products, the input service does not have to used directly in the manufacture of final products, it may be a service which is only indirectly used in relation to the manufacture of final products - In the circumstances, canteen services which are indispensable in relation to manufacture of the final products would certainly fall within the ambit of input service as defined under the Rules - Decided in favour of assessee.

Summary

Issues:
Whether the appellant is entitled to the cenvat credit of service tax paid on outdoor catering services.

Analysis:
The judgment dealt with the issue of whether the appellant could claim cenvat credit for service tax paid on outdoor catering services. The appellant relied on a Tribunal decision regarding the eligibility of outdoor caterer's service in a manufacturer's canteen as an input service. However, the appellate authority denied the benefit, stating that the appellant failed to provide evidence showing that the cost of catering contributed to the cost of production. The Tribunal examined the Larger Bench decision and found that the benefit of credit was not contingent on the cost being added to the assessable value, as it generally contributes to the final product cost.

Furthermore, the judgment referenced a case where the High Court observed that providing canteen services to staff was mandatory under the Factories Act and fell within the definition of input services. The High Court highlighted that input services need not be directly used in manufacturing final products but could be indirectly related to production. The Tribunal upheld that the service tax on outdoor catering services by a canteen in a manufacturing premises constituted an input service eligible for CENVAT credit, in line with the Rules. As the decision was consistent with the legal provisions, the appeal was dismissed without any legal infirmity.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, granting consequential relief to the appellant based on the decisions discussed. The stay petition was also disposed of in favor of the appellant.