2019 (1) TMI 559 - AT - Central Excise

CENVAT Credit - input services - canteen services provided to employees - Held that - Larger Bench of the Tribunal in the case of Wipro Ltd. Vs. Commissioner of Central Excise, Bangalore 2018 (4) TMI 149 - CESTAT BANGALORE has held that outdoor catering services are excluded from the definition of input services with effect from 1.4.201 - credit cannot be allowed. Penalty - Held that - The issue is interpretational one and that the appellant have disclosed the details of the credit availed in their ST-3 returns - penalty imposed cannot sustain and the same is set aside. The impugned order is modified to the extent of setting aside the penalty imposed without disturbing the demand or interest thereon under outdoor catering service - appeal allowed in part.

Summary

Issues involved:
Disallowance of CENVAT credit on canteen services provided to employees.

Analysis:
The case involved the disallowance of CENVAT credit on canteen services provided to employees by a factory engaged in the manufacture of aerated water and beverages. The appellant accepted the objection regarding credit availed on soil filling charges but defended the disallowance of credit on canteen services. The original authority and Commissioner (Appeals) upheld the disallowance, leading to the appeal.

The appellant contended that outdoor catering services were integral to their manufacturing activity due to a statutory obligation under the Factories Act to provide canteen facilities to employees. The appellant argued that the exclusion clause in the definition of input services did not unconditionally exclude all catering services, but only those primarily used for personal consumption. The appellant cited precedents and statutory requirements to support their claim that outdoor catering services provided within factory premises for employee benefit should be eligible for credit.

The respondent supported the disallowance, citing the exclusion clause added to the definition of input services after 1.4.2011, which specifically excluded services like outdoor catering when primarily used for personal consumption of employees. The respondent relied on a Larger Bench decision to argue that the issue had attained finality.

After considering the arguments, the Tribunal analyzed the definition of input services post-2011, highlighting the exclusion clause related to services like outdoor catering used primarily for personal employee consumption. The Tribunal referenced a previous case where outdoor catering services provided as per statutory requirements were deemed eligible for credit. However, a Larger Bench decision concluded that outdoor catering services were specifically excluded, leading the Tribunal to uphold the disallowance of credit.

The Tribunal acknowledged the interpretational nature of the issue and the appellant's compliance in disclosing credit availed in their returns. Consequently, the Tribunal set aside the penalty imposed while maintaining the demand and interest related to the disallowed credit on outdoor catering services. The appeal was partly allowed in favor of the appellant.

In conclusion, the Tribunal ruled in favor of disallowing the CENVAT credit on canteen services based on the exclusion clause in the definition of input services, despite statutory obligations and arguments presented by the appellant.