2014 (12) TMI 596 - AT - Service Tax

CENVAT Credit - scope of Input services - Outdoor Catering Service - input service used for personal use or consumption by any employee - Held that - What is excluded is only the services primarily for personal use or consumption of any employee under clause (C) of Rule 2(1) of the definition of input service. When the Government has specifically used the words such as used primarily for personal use or consumption of any employee , the same has to be given due effect to. In the present case the outdoor catering service is used in relation to business activities of the Appellant and the service is used by all employees in general. Also, the Revenue has not rebutted the contention of the Appellant, that the costs of these input services form part of the cost of final product. I also find that the services covered in clause (B) of the definition are excluded from the ambit of cenvat credit without any such qualification of use of service for personal or official purpose. - even the Government while issuing the budget clarification or subsequent circular has clarified that what is not eligible is that service which is meant for personal use or consumption by an employee or the cost of which is included as part of salary of the employee as a cost to company basis. In the present case, the cost of such services, are admittedly borne by the company and not by the employee. Therefore, I hold that the Appellant has correctly claimed the cenvat credit on outdoor catering services. Accordingly, the impugned orders are set aside - Decided in favour of assessee.

Summary

Issues involved:
- Denial of cenvat credit on outdoor catering services
- Interpretation of the definition of input service
- Application of circulars clarifying eligibility of input services
- Precedents supporting the claim for credit

Analysis:

Denial of cenvat credit on outdoor catering services:
The appeals were filed against Orders-in-Appeal upholding Orders-in-Original denying cenvat credit on outdoor catering services for the period December 2011 to December 2012. The lower authorities rejected the credit citing the amended definition of input service disallowing services used for personal use or consumption by employees.

Interpretation of the definition of input service:
The Appellant argued that outdoor catering services were used in relation to business activities, not for personal use or consumption by employees. They relied on TRU circular and Circular No. 943/4/2011-CX to support their claim that such services are eligible unless used for personal purposes. The Counsel emphasized that the cost of the services was borne by the company, not the employees, aligning with the pre-amendment eligibility criteria.

Application of circulars clarifying eligibility of input services:
The circulars highlighted by the Appellant clarified that outdoor catering services are not inherently ineligible for credit but become so only when used for personal consumption by employees. The lack of evidence from the Revenue to counter the Appellant's claims further strengthened the argument in favor of allowing the cenvat credit.

Precedents supporting the claim for credit:
The Counsel referenced decisions from the Hon'ble Karnataka High Court and the Hon'ble Bombay High Court, emphasizing that input services forming part of the cost of manufacturing are entitled to credit. These precedents supported the Appellant's contention that outdoor catering services, when used for business activities and not personal consumption, should be eligible for cenvat credit.

In the judgment, the Tribunal sided with the Appellant, holding that the outdoor catering services were utilized for business activities, not personal use by employees. The Tribunal emphasized the specific language of the definition of input service and the absence of evidence to refute the Appellant's claims. Consequently, the impugned orders were set aside, and the appeals were allowed, granting the Appellant the cenvat credit on outdoor catering services.