2011 (3) TMI 1342 - AT - Service Tax

Cenvat credit - services of outdoor catering services used for providing food to the employees - Respondent (assessee) has engaged a contractor for providing outdoor catering services in the factory premises - The respondent provides infrastructure and subsidy - In view of the subsidized rates the caterer is raising a bill to the respondent company and on such bills service tax is paid. The Respondent has taken credit of such tax paid - Accordingly the appeal of the department is rejected

Summary

Issues:
- Allowance of Cenvat credit for tax paid on outdoor catering services used in the factory premises.

Analysis:
The case involved a dispute where the Revenue challenged the Commissioner (Appeals) order allowing Cenvat credit for tax paid on outdoor catering services utilized in the factory. The Revenue contended that the credit should not be allowed as the catering services were not directly related to the manufacturing activity of the company. The Revenue relied on specific case laws to support its argument, including Maruti Suzuki Ltd. Vs. CCE and CCE Vs. Manikgarh Cement. On the other hand, the respondent's counsel argued that the issue was settled by the decision in CCE Vs. Ultratech Cement Ltd., where it was held that service tax paid on outdoor catering services should be allowed as credit.

Upon considering the arguments from both sides, the Tribunal referred to the decision in the case of Ultratech Cement Ltd., which had clarified that service tax paid on outdoor catering should indeed be allowed as credit. The Tribunal highlighted a specific aspect from the decision, stating that if any charges are recovered from the employees, the assessee would not be eligible to claim credit for the service tax paid. However, in the present case, the Tribunal found that the situation differed as the respondent had engaged a contractor for catering services, where the service tax was paid on the bills raised to the respondent company. Since the respondent had taken credit for the tax paid on the subsidized rates provided by the caterer, the aspect emphasized in the Ultratech Cement Ltd. judgment did not apply. Consequently, the Tribunal rejected the department's appeal and granted consequential relief to the respondent.

In conclusion, the Tribunal upheld the allowance of Cenvat credit for tax paid on outdoor catering services availed by the respondent in their factory premises, based on the specific circumstances and the precedent set by the Ultratech Cement Ltd. case. The decision emphasized the importance of the nature of the services provided and the manner in which the service tax was paid in determining the eligibility for claiming such credits.