2010 (12) TMI 981 - AT - Central Excise

Outdoor catering service - disallowance of the availment of CENVAT credit of the service tax paid on the catering service wherein amount recovered from the employees against the subsidized food - Held that - As decided in the case of CCE v. Ultratech Cement Ltd. 2010 (10) TMI 13 - BOMBAY HIGH COURT the assessee is entitled to avail input service credit on outdoor catering service as the same are being used by them in their business of manufacturing but it was also held in the decision that if any amount recovered by the assessee from the employees providing subsidized food the assessee is not entitled to avail input service credit on this portion. Both the matters are remanded back to the original adjudicating authority to quantify the amount of reversal of input service credit.

Summary

Issues:
1. Input service credit on outdoor catering service
2. Availment of CENVAT credit on service tax paid for catering service with recovered amount from employees

Analysis:

Issue 1: Input service credit on outdoor catering service
The Appellate Tribunal, Mumbai, addressed the appeal filed by the revenue against the impugned order allowing input service credit on outdoor catering service to the respondent. The Tribunal noted that the issue had been settled by the Hon'ble High Court of Bombay in the case of CCE v. Ultratech Cement Ltd. The High Court held that the assessee is entitled to avail input service credit on outdoor catering service as it is used in their manufacturing business. However, if any amount is recovered from employees for subsidized food, the assessee is not entitled to avail input service credit on this portion. Consequently, the Tribunal remanded both matters back to the original adjudicating authority to quantify the amount of reversal of input service credit in accordance with the High Court's decision. It was emphasized that since the issue pertains to the interpretation of the statute, no penalty was warranted against the assessee.

Issue 2: Availment of CENVAT credit on service tax paid for catering service with recovered amount from employees
In the second appeal, the assessee challenged the impugned order disallowing the availment of CENVAT credit on the service tax paid for catering service, specifically where the amount was recovered from employees for subsidized food. The Tribunal, in line with the decision on the first issue, remanded the matter back to the original adjudicating authority to quantify the amount of inadmissible input service credit after providing a reasonable opportunity for the appellant to present their case. The appeals were disposed of with this direction, ensuring a fair assessment of the input service credit in light of the legal precedent established by the High Court.

In conclusion, the Appellate Tribunal's judgment provided clarity on the entitlement to input service credit on outdoor catering services, subject to certain conditions, and emphasized the importance of adhering to legal interpretations in determining the admissibility of such credits.