2011 (9) TMI 631 - AT - Service Tax

Cenvat Credit - Outdoor Catering Service - Held That - Once the service tax is borne by the ultimate consumer of the service namely the worker the manufacturer cannot take credit of that part of the service tax. Reliance placed on Ultratech Cement Ltd (2010 - TMI - 77914 - High Court of Bombay). Decided against assessee.

Summary

Issues:
1. Eligibility of Outdoor Catering Services for CENVAT Credit.
2. Interpretation of relevant legal precedents.
3. Applicability of decision in a similar case.

Eligibility of Outdoor Catering Services for CENVAT Credit:
The case involved a dispute regarding the eligibility of availing CENVAT Credit on Service Tax paid for Outdoor Catering services by a company. The Revenue contended that such services did not qualify as input services for manufacturing final products and thus, the credit should be denied. The original authority partially disallowed the credit, which was further appealed by the respondent. The Commissioner (Appeals) allowed the appeal based on a Tribunal decision in a similar case. The Revenue challenged this decision before the Appellate Tribunal.

Interpretation of Relevant Legal Precedents:
The Revenue argued that the expenses on outdoor catering services should not be eligible for credit if borne by the employee, citing decisions from the Bombay High Court and Tribunal cases. They claimed that the Commissioner (Appeals) erred in allowing the benefit without considering this aspect. On the other hand, the respondent relied on a Gujarat High Court decision, emphasizing that outdoor catering services indirectly related to manufacturing processes when provided in factory canteens. The respondent contended that the Commissioner (Appeals) rightfully granted the CENVAT Credit.

Applicability of Decision in a Similar Case:
The Appellate Tribunal analyzed the conflicting interpretations of legal precedents. It referenced a Bombay High Court decision stating that if the service tax is borne by the worker, the manufacturer cannot claim credit for that portion. The Tribunal also mentioned a similar decision involving Titan Industries Ltd. Following this reasoning, the Tribunal found that the Gujarat High Court decision cited by the respondent did not align with the facts of the present case. Ultimately, the Tribunal allowed the Revenue's appeal regarding the service tax, highlighting the importance of who bears the cost of the service in determining CENVAT Credit eligibility.

This detailed analysis of the judgment showcases the intricate legal arguments and the Tribunal's thorough examination of relevant precedents to arrive at a decision regarding the eligibility of CENVAT Credit for Outdoor Catering services.