2014 (6) TMI 22 - AT - Central Excise

Availability of credit of service tax paid on the outdoor catering service - Held that - Though it is a fact that number of workers was one of the criteria for the Larger Bench to hold the services as input services but to make a distinction on the basis of reasoning adopted by the Larger Bench cannot be appreciated inasmuch as it is the ratio of the law declared by the Larger Bench which is applicable and not the reasoning. Apart from above, I also find that the Larger Bench held that the outdoor catering service is an input service irrespective of the fact that a subsidised food is provided or not or whether the cost of the food is given by the worker or by the factory catering service availed - Following decision of Paramount Communication Ltd. Vs. CCE 2013 (3) TMI 38 - CESTAT NEW DELHI - Decided in favour of assessee.

Summary

Issues: Availability of credit of service tax paid on outdoor catering service for providing food to employees.

Analysis:
1. The dispute in the present appeal revolves around the availability of credit for service tax paid on outdoor catering services used in the factory canteen to provide food to employees. The impugned orders were passed in de novo proceedings after the matter was remanded by the Tribunal.

2. The Commissioner (Appeals) did not follow the Larger Bench decision in the case of CCE Vs. GTC Industries Ltd. The Commissioner noted that the earlier decision considered outdoor catering services as input services due to the statutory obligation of providing canteen services for entities with over 250 workers. However, in the current case, as the number of employees was less than 250, the Commissioner held that there was no legal obligation for the appellant to provide canteen services.

3. The presiding judge reviewed the Larger Bench decision and emphasized that the number of workers was just one criterion for considering services as input services. The judge highlighted that the reasoning behind the decision should not be the basis for making distinctions, as it is the ratio of the law declared by the Larger Bench that holds significance. Additionally, the Larger Bench had clarified that outdoor catering services qualify as input services regardless of factors like subsidized food or the source of payment for the food.

4. The issue was also addressed by the Hon'ble Karnataka High Court in previous cases involving CCE, Bangalore Vs. Stanzen Toyotetsu India (P) Ltd. and CCE Vs. ACE Designers Ltd., providing further legal context to the matter.

5. Notably, in a previous case involving the same appellant, the Tribunal had ruled in favor of the assessee based on the decisions mentioned above. Following the precedent set by these judgments, the presiding judge set aside the impugned order and allowed the appeal, granting consequential relief to the appellant. The stay petition and appeal were disposed of accordingly.