2014 (10) TMI 248 - AT - Service Tax

CENVAT credit - outdoor catering service - establishments which do not come under the purview of Factories Act, 1948 - Held that - In the Ultratech Cement case (2010 (10) TMI 13 - BOMBAY HIGH COURT), relied upon by the Commissioner, the High Court never stated that catering service has to be rendered to factories governed by the Factories Act, 1948 so as to be eligible for the benefit of CENVAT credit. The High Court in that case only observed that there was also a statutory requirement of providing catering services to the employees under the Factories Act. This does not mean that in respect of other establishments which do not come under the purview of Factories Act, 1948, CENVAT credit can be denied. During the impugned period, there is no restriction placed in the CENVAT Credit Rules for availmentof CENVAT credit in respect of outdoor catering services. So long as the cost incurred is not recovered from the employees, the benefit of CENVAT credit has to be extended. In this view of the matter, I do not find any merit in the view taken by the adjudicating authority. Thus the appellant has made out a strong case for grant of stay - Stay granted.

Summary

Issues:
1. Confirmation of service tax demand on outdoor catering services.
2. Eligibility of outdoor catering services as input service under CENVAT Credit Rules.
3. Interpretation of the requirement for catering services under Factories Act, 1948.

Analysis:
1. The appeal challenged the Order-in-Original confirming a service tax demand against the appellant for not being eligible to take CENVAT credit on outdoor catering services. The demand covered the period prior to 2004-05 and 2008-09, with a penalty imposed under section 78 of the Finance Act, 1994. The appellant contended that outdoor catering services should be considered an input service, citing Rule 2(l) of the CENVAT Credit Rules, 2004 and precedents like Ultratech Cement Ltd. case from the Bombay High Court.

2. The appellant argued that the adjudicating authority's narrow interpretation, limiting the benefit of CENVAT credit on outdoor catering services to factories governed by the Factories Act, 1948, lacked legal basis. The appellant emphasized that catering services provided to employees, irrespective of the establishment type, were integral to the output service rendered. The absence of any specific restriction in the CENVAT Credit Rules supported the appellant's claim for extending the CENVAT credit benefit to outdoor catering services universally.

3. The Tribunal analyzed the Ultratech Cement case cited by the Commissioner and noted that the High Court did not mandate catering services only for factories under the Factories Act, 1948 to qualify for CENVAT credit. Highlighting that the statutory requirement under the Factories Act did not imply a restriction on other establishments, the Tribunal found no legal basis for the adjudicating authority's stance. As long as the catering costs were not recovered from employees, the Tribunal held that the CENVAT credit benefit should apply universally. Consequently, the Tribunal granted a waiver from pre-deposit and stayed the recovery of dues during the appeal period, finding merit in the appellant's argument for a broader interpretation of CENVAT credit eligibility for outdoor catering services.