2010 (12) TMI 980 - AT - Service Tax

Pre-deposit - appellants availed outdoor catering service - CENVAT Credit denied - Held that - As in the case of Ultratech Cements Ltd. (2010 (10) TMI 13 - BOMBAY HIGH COURT) it was held that the assessee is entitled to CENVAT credit of the service tax paid on outdoor catering service if they have borne the entire burden of the tax without passing on any part of it to the ultimate consumers of food (employees of the factory). If, on verification, it is found that any part of the service tax paid on outdoor catering service was passed on to the employees of the factory, the entitlement of the manufacturer to CENVAT credit would stand restricted accordingly - set aside the orders of the lower authorities and allow these appeals by way of remand with a direction to the original authority to pass fresh orders in view of the Hon ble High Court s judgment.

Summary

Issues:
- Recognition of 'outdoor catering service' as an 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004.

Analysis:
The judgment revolves around the issue of whether 'outdoor catering service' qualifies as an 'input service' for availing CENVAT credit. The appellants had availed outdoor catering service to provide food to their employees and claimed CENVAT credit on the service tax paid. However, the lower authorities rejected this claim, leading to demands of duty on the appellants.

The counsel for the appellants referred to a case decided by the Hon'ble Bombay High Court, which held that outdoor catering service was integrally connected with the business of manufacturing the final product. The High Court's decision emphasized that the manufacturer could claim CENVAT credit if they bore the entire burden of the service tax without passing it on to the employees who consumed the food. The counsel argued that the appellants did not pass on the burden of the service tax to the employees, and this needed verification by the original authority.

In light of the High Court's decision and the need for verification in the present case, the Appellate Tribunal set aside the orders of the lower authorities. The appeals were allowed by way of remand with a direction for the original authority to reconsider the matter in accordance with the High Court's judgment. The parties were granted a reasonable opportunity to present evidence and be heard during the fresh proceedings.

This judgment underscores the importance of correctly interpreting the definition of 'input service' under the CENVAT Credit Rules and ensuring that the burden of service tax is not passed on to the ultimate consumers. It highlights the need for thorough verification and adherence to legal precedents in determining the eligibility for CENVAT credit in cases involving services like outdoor catering provided to employees.