2013 (6) TMI 266 - AT - Central Excise

CENVAT credit against service tax paid on outdoor catering services provided by outdoor caterers in the factory premises - denial of claim - Held that - Credit should be allowed only to the extent where the expenses have been incurred by the appellant company and on which service tax has been paid and the cost not recovered from the employees. This aspect may be verified by the adjudicating authority and the quantum of credit restricted to such expense. The matter is remanded to the adjudicating authority for deciding the quantum of credit that will be available as per the principle in the case of Ultratech Cement Ltd (2010 (10) TMI 13 - BOMBAY HIGH COURT). Also the penalty and interest also needs to be re-adjudicated.

Summary

Issues Involved:
CENVAT credit eligibility for outdoor catering services provided in factory premises.

Analysis:
The appeal centered around the denial of CENVAT credit amounting to Rs.2,12,474/- for service tax paid on outdoor catering services in the factory premises. The dispute arose due to the contention that such services lacked a nexus with manufacturing activities and were merely a welfare measure for employees.

The appellant's counsel cited precedents from the Hon'ble Bombay High Court and Hon'ble Karnataka High Court to support their argument. They referenced cases where it was established that outdoor catering services within factory premises indeed had a direct connection to manufacturing activities, making them eligible for CENVAT credit as input services.

In opposition, the Ld. AR for Revenue highlighted a specific condition set by the Hon'ble Bombay High Court. The condition stated that if any portion of the amount paid to the caterer was recovered from employees, CENVAT credit should not extend to the tax corresponding to that recovered amount. However, due to the unavailability of this nuanced information during the initial stages of the case, further examination was deemed necessary.

Upon considering both parties' submissions, the presiding authority acknowledged the validity of the arguments presented. It was agreed that the appellant should only receive credit for expenses incurred by the company, where service tax was paid and not recovered from employees. The matter was thus remanded to the adjudicating authority for a detailed assessment of the credit quantum based on the principles established in the Ultratech Cement Ltd. case by the Hon'ble Bombay High Court. Additionally, the re-evaluation of penalties and interest was deemed necessary, leading to the disposal of the appeal by remanding it to the adjudicating authority for further proceedings.