2011 (4) TMI 1121 - HC - Service Tax

Cenvat credit - catering services Held that - merely because these services are not expressly mentioned in the definition of input service it cannot be said that they do not constitute input service and the assessee is not entitled to the benefit of CENVAT credit under the scheme of the Cenvat Credit Rules 2004 the service tax paid on all those services which the assessee has utilized directly or indirectly in or in relation to the final product is entitled to claim the credit decision against the revenue and in favour of the assessee appeal is dismissed

Summary

Issues: Entitlement to cenvat credit for service tax paid on catering services.

In this case, the High Court of Karnataka heard an appeal by the revenue challenging the Tribunal's decision allowing the assessee to avail cenvat credit for service tax paid on catering services. The assessee, engaged in manufacturing excisable goods, had availed credit of service tax paid on catering services. The revenue issued a show cause notice demanding recovery of the irregularly availed credit. The Assessing Authority confirmed the demand, interest, and penalty, which was upheld by the Appellate Authority. The Tribunal, relying on a Larger Bench decision, allowed the appeal, stating that the assessee is entitled to cenvat credit for the service tax paid on catering services. The revenue appealed this decision.

The primary issue before the Court was whether the assessee is entitled to avail cenvat credit for service tax paid on outdoor catering services. The Court referred to a Division Bench decision in a similar case and emphasized that any service used directly or indirectly in or in relation to the manufacture of final products constitutes input service. The Court highlighted that the definition of input service is inclusive and not exhaustive. It stated that services utilized by the manufacturer, even if not expressly mentioned in the definition, can still be considered input services if they are used in relation to the manufacture of final products or business activities. The Court specifically addressed the case of canteen services provided by the assessee, noting that such services, even though not expressly mentioned, can still constitute input services if they are utilized in relation to the final product.

The Court further explained that under the Cenvat Credit Rules, 2004, manufacturers of final products are allowed to take credit for service tax paid on services utilized directly or indirectly in relation to the final product. Therefore, the service tax paid on services like outdoor canteen facilities, which are utilized in the manufacturing process or in relation to business activities, is eligible for cenvat credit. The Court upheld the Tribunal's decision, stating that it was legal, valid, and in accordance with the law. The Court dismissed the appeal, affirming the entitlement of the assessee to avail cenvat credit for service tax paid on catering services based on the legal provisions and precedents cited.