2019 (7) TMI 164 - AT - Central Excise

CENVAT Credit - input services - outdoor catering services - services availed after 01.04.2011 - whether the appellants are eligible for credit of the service tax paid on outdoor catering services w.e.f. 01.04.2011? - penalties - HELD THAT - The exclusion part (C) of the definition categorically states that when outdoor catering services are availed for personal use and consumption of an employee, the same does not qualify as input service‟ and therefore not eligible for credit. The Larger Bench of the Tribunal in the case of M/S. WIPRO LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE BANGALORE-III. 2018 (4) TMI 149 - CESTAT BANGALORE had analyzed the point as to whether credit is eligible on outdoor catering services, if availed by the manufacturer in compliance of the Factories Act, 1946. The Larger Bench of the Tribunal answered the reference in favour of Revenue. The decision of Larger Bench of the Tribunal in Wipro Ltd. has answered the specific issue as to whether credit is eligible on outdoor catering services for post-01.04.2011 and held that it is not eligible even if availed in compliance with statutory requirement - By judicial discipline, respectfully following the Tribunal‟s Larger Bench in Wipro Ltd., which is on the specific point, the credit is not eligible - demand along with interest in respect of outdoor catering services post-01.04.2011 is therefore upheld. Penalties - HELD THAT - Being an interpretational issue, the penalty imposed prior to 01.04.2011 as well as post-01.04.2011 is unwarranted and requires to be set aside. The impugned orders are set aside to the extent of setting aside the penalties imposed entirely without disturbing the demand along with interest for the period after-01.04.2011 - appeal allowed in part.

Summary

Issues Involved:
1. Eligibility for credit on outdoor catering services availed prior to 01.04.2011.
2. Eligibility for credit on outdoor catering services availed after 01.04.2011.
3. Imposition of penalties for the period prior to and after 01.04.2011.

Issue-wise Detailed Analysis:

1. Eligibility for Credit on Outdoor Catering Services Availed Prior to 01.04.2011:
The appellant contested the penalty imposed for the period prior to 01.04.2011, having already reversed the credit for employees' contribution. The Tribunal acknowledged that the credit in respect of the employer’s contribution for the period prior to 01.04.2011 is eligible. As the appellant had reversed the credit availed in respect of employees’ contribution and did not contest this reversal, the Tribunal did not disturb this aspect.

2. Eligibility for Credit on Outdoor Catering Services Availed After 01.04.2011:
The primary issue was whether the appellants were eligible for credit of the service tax paid on outdoor catering services post-01.04.2011. The definition of "input service" after this date explicitly excludes services used primarily for personal use or consumption of any employee, including outdoor catering services. The appellant argued that outdoor catering services provided in compliance with the Factories Act, 1946, should not be considered for personal use and thus should be eligible for credit. They cited several judicial precedents, including decisions from the High Courts and the Tribunal, to support their claim. However, the Tribunal referred to the Larger Bench decision in Wipro Ltd. vs. CCE Bangalore, which held that credit on outdoor catering services is not eligible post-01.04.2011, even if availed in compliance with statutory requirements. The Tribunal, adhering to judicial discipline, upheld the demand and interest for the period after 01.04.2011, following the Larger Bench decision.

3. Imposition of Penalties for the Period Prior to and After 01.04.2011:
The appellant argued that the issue was interpretational and that they had availed credit based on a bona fide belief in its eligibility, with no intention to evade tax. The Tribunal agreed, noting that the issue was indeed interpretational. Consequently, it found the imposition of penalties for both periods (prior to and after 01.04.2011) unwarranted and set them aside.

Conclusion:
The Tribunal concluded by setting aside the penalties imposed entirely, without disturbing the demand and interest for the period after 01.04.2011. The appeals were partly allowed on these terms.