2016 (4) TMI 835 - HC - Central Excise

Demand of Cenvat credit - Rule 14 of the CENVAT Credit Rules read with Section 11A - Availed credit of service tax paid on the out door catering services as input services and utilized the same towards payment of duty on the final products. Held that - in a batch of appeals, a Bench of this Court held the issues arising in this appeal in favour of the assessees on the basis of the decision of the Bombay High Court in C.C.E. Vs. Ultratech Cement Limited 2010 (10) TMI 13 - BOMBAY HIGH COURT and the decision of the Supreme Court in Maruti Suzuki Limited Vs. C.C.E. 2009 (8) TMI 14 - SUPREME COURT . Though a notification was issued in Notification No.3/2011 dated 1.3.2011 excluding the outdoor catering services, it came into effect on 1.4.2011. The period in question in this case relates to a period prior to 1.4.2011. - Decided against the revenue

Summary

Issues:
1. Correctness of the order of the Customs, Excise and Service Tax Appellate Tribunal regarding availing credit of service tax on outdoor catering services.
2. Interpretation of Rule 2(l) of CENVAT Credit Rules, 2004.
3. Applicability of outdoor catering services as input services.
4. Findings of fact regarding the use of outdoor catering services in relation to the manufacture of final products or providing output services.
5. Effect of Notification No.3/2011 dated 1.3.2011 excluding outdoor catering services.

Analysis:
The High Court of Madras addressed the appeal under Section 35G of the Central Excise Act, 1944, challenging the Tribunal's order. The case involved a manufacturer availing credit of service tax paid on outdoor catering services as input services. The Assistant Commissioner issued show cause notices, leading to a common Order in Original confirming the demand under Rule 14 of the CENVAT Credit Rules. The Tribunal later allowed the appeal, prompting the Revenue to appeal. The Revenue raised substantial questions of law, questioning the eligibility of outdoor catering services as input services under Rule 2(1) of the CENVAT Credit Rules.

The Court noted that a previous decision favored the assessees based on judgments from the Bombay High Court and the Supreme Court. The Revenue argued that the Tribunal failed to determine if outdoor catering services were used in relation to manufacturing final products or providing output services. However, the Court disagreed, pointing out that the Commissioner's Order in Original acknowledged the consumption of catering services by the employees. The Commissioner found that the services involved subsidization of food consumed by employees, akin to perquisites enjoyed by them. The Court emphasized that since the Commissioner made a clear finding, there was no need for the Tribunal to reevaluate the same.

Regarding the applicability of a notification excluding outdoor catering services, the Court highlighted that the notification came into effect after the period in question. Consequently, the Court answered the questions of law against the Revenue, dismissing the civil miscellaneous appeal and the related CMP. This judgment clarifies the interpretation of Rule 2(l) of the CENVAT Credit Rules and affirms the eligibility of outdoor catering services as input services based on factual findings and the timing of relevant notifications.