2011 (10) TMI 316 - AT - Service Tax

Availaibility of Cenvat Credit on of service tax paid on catering service in respect of canteen in the factory - Held That - It is mandatory for the appellants to provide canteen facility for the workers and canteen facility helps in manufacturing activities Service have a nexus or incurred in connection with manufacture of final product as well as in business of manufacture of final product is qualify as input service under the provisions of Section 46 of the Factories Act 1948 (Ultra Cement (2010 - TMI - 78203 - BOMBAY HIGH COURT))

Summary

Issues:
1. Eligibility for cenvat credit of service tax paid on catering service in the factory.
2. Interpretation of the decision in the case of GTC Industries Limited.
3. Impact of the decision of the Hon'ble High Court of Bombay on cenvat credit eligibility.

Issue 1: Eligibility for cenvat credit of service tax paid on catering service in the factory.

The respondent, engaged in manufacturing cigarettes, claimed cenvat credit for service tax paid on catering services for the factory canteen. The original adjudicating authority allowed the benefit, which was challenged by the Revenue. The Tribunal rejected the Revenue's appeal, citing that the canteen facility was essential for manufacturing activities, aligning with the decision in the case of Ultra Cement Limited. The Hon'ble High Court of Mumbai emphasized the connection between services provided and the manufacture of the final product, supporting the eligibility for cenvat credit under the Factories Act, 1948.

Issue 2: Interpretation of the decision in the case of GTC Industries Limited.

The appeals filed by the Revenue were based on the Commissioner's reliance on the Larger Bench decision of the Tribunal in the case of GTC Industries Limited. The Revenue contended that the decision was challenged, and the matter was remanded to the Tribunal following the Hon'ble Supreme Court's ruling in the case of Ultra Cement Limited. The Tribunal, in line with the High Court's directive, granted cenvat credit to the appellant, emphasizing the necessity of canteen facilities for workers in manufacturing activities.

Issue 3: Impact of the decision of the Hon'ble High Court of Bombay on cenvat credit eligibility.

The Tribunal's decision to allow cenvat credit to the appellant was influenced by the Hon'ble High Court of Bombay's ruling regarding the nexus between services provided, such as canteen facilities, and the manufacturing process. The High Court's interpretation of the Factories Act, 1948, emphasized the essential role of such services in the business of manufacturing final products, thereby justifying the eligibility for cenvat credit. Consequently, the Revenue's appeals were deemed meritless and rejected by the Tribunal.

This comprehensive analysis of the judgment highlights the key legal issues surrounding the eligibility for cenvat credit and the interpretation of relevant legal precedents and decisions, ultimately leading to the Tribunal's decision in favor of the appellant.