2008 (9) TMI 56 - AT - Service Tax

Whether the services provided by the outdoor caterers in the canteen of the manufacturer is input service, in respect of which credit can be taken by the manufacturer Whether the cost of food is borne by the worker or by the factory, the same will form part of expenditure incurred by the manufacturer and will have a bearing on the cost of production - hence, employment of outdoor caterer has to be considered as an input service relating to the business and Cenvat credit is admissible

Issues Involved:
1. Definition and scope of "input service" under Rule 2(1) of the Cenvat Credit Rules, 2004.
2. Whether services provided by outdoor caterers in the canteen of a manufacturer qualify as "input service" for credit purposes.

Issue-wise Detailed Analysis:

1. Definition and Scope of "Input Service" under Rule 2(1) of the Cenvat Credit Rules, 2004:

The judgment examines the definition of "input service" as per Rule 2(1) of the Cenvat Credit Rules, 2004, which includes services used directly or indirectly in the manufacture of final products and clearance up to the place of removal. The definition is split into a main part and an inclusive part, which expands the scope to services related to setting up, modernization, renovation, or repairs of a factory, and other business-related activities.

The revenue argued that the inclusive clause is exhaustive and limited to the services explicitly listed, meaning outdoor catering services are not covered. Conversely, the appellant argued that the term "includes" is intended to enlarge the scope, not restrict it, citing the Apex Court's interpretation in Regional Director v. High Land Coffee Works, which states that "include" generally enlarges the meaning of preceding words.

The Tribunal considered various Supreme Court decisions, including Hamdard (Wakf) Laboratory v. Dy. Labour Commissioner and Reserve Bank of India v. Peerless Finance, which discussed the interpretation of inclusive definitions. It was concluded that the inclusive part of the definition should not be read restrictively.

2. Whether Services Provided by Outdoor Caterers in the Canteen of a Manufacturer Qualify as "Input Service" for Credit Purposes:

The Tribunal analyzed whether outdoor catering services fall under "activities relating to business" as per the inclusive part of the definition. The revenue's position was that only services akin to accounting, auditing, financing, recruitment, and quality control should be considered, excluding outdoor catering.

The appellant countered that "such as" is illustrative, not exhaustive, and any business-related activity should be covered. They referred to the Supreme Court's decision in Good Year India Ltd. v. Collector of Customs, which held that "such as" is illustrative. They also highlighted the Ministry of Finance's press note and draft rules, indicating that the intent was to allow credit for all services forming part of the assessable value.

The Tribunal noted that expenses for canteen services are part of the cost of production, as per CAS-4, which includes subsidized food as part of direct wages and salaries. Additionally, under Section 46 of the Factories Act, 1948, providing a canteen is mandatory for factories with more than 250 workers, making it a business necessity.

The Tribunal concluded that employing outdoor caterers for canteen services is an input service related to business, eligible for Cenvat credit. They concurred with the Tribunal's views in Victor Gaskets India Ltd. and Others, allowing credit for outdoor catering services.

Conclusion:

The Tribunal ruled that outdoor catering services provided in the canteen of a manufacturer qualify as "input service" under Rule 2(1) of the Cenvat Credit Rules, 2004, and are eligible for Cenvat credit. The matter was sent back to the referral Bench for appropriate orders.

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