2008 (2) TMI 61 - AT - Service Tax

Canteen facility in factory for employees - whether Inputs service Credit of the ST paid on Outdoor Catering (canteen) Services is entitled- canteen service provided for the workers is an activity in relation to business of appellants, & hence can be regarded as input service as per Rule 2(l)(ii) CCR assessee s plea that Fringe Benefit Tax have been paid on canteen expenses under IT Act, so canteen activity are covered under activities relating to business, is acceptable credit allowed

Summary

Issues Involved:
Admissibility of Cenvat credit on service tax paid for outdoor catering services.

Analysis:
1. Common Issue in Appeals: The appeals by three companies challenged the Order-in-Appeal by the Commissioner of Central Excise regarding the admissibility of Cenvat credit. The issue in all three appeals was whether the appellants were entitled to Cenvat Credit for service tax paid on Outdoor Catering Services.

2. Interpretation of Rule 2(l) of Cenvat Credit Rules, 2004: Rule 2(l) defines "input service" as any service used directly or indirectly in relation to the manufacture of final products. The rule includes various services like accounting, auditing, and quality control. The rule's inclusive meaning allows for a broader interpretation beyond the specific examples listed.

3. Judicial Precedents: The judgment cited the Supreme Court's decision in Good Year India Ltd., emphasizing that the term "such as" in the rule is illustrative, not exhaustive. The court also referenced other cases to support a wide interpretation of the term "in relation to."

4. Business Related Activities: The judgment considered activities like coaching, training, and credit rating, not directly related to manufacturing, as admissible for Cenvat credit if they are related to the business. The canteen service provided exclusively for factory workers was deemed an activity in relation to the business of the appellants, justifying it as an "input service."

5. Legal Mandates: The judgment highlighted that the provision of canteen facilities was mandatory under the Factories Act and Maharashtra Factories Rules for factories with over 250 workers. Failure to comply could result in penal action by the State Government.

6. Fringe Benefit Taxes: The appellants' payment of fringe benefit taxes on canteen-related expenses was considered a business-related expense, aligning with the activities relating to business stipulated in the inclusive definition of input service under Rule 2(l) of CCR, 2004.

7. Precedents and Circulars: The judgment cited previous cases and a CBEC Circular to support the admissibility of service tax paid on activities like mobile phones as eligible input services. It also referenced court decisions allowing expenses related to maintenance and restoration of buildings as revenue expenditures.

8. Decision and Relief: The Tribunal held that the credit of service tax paid on outdoor catering services was admissible as an input service under Rule 2(l) of the Cenvat Credit Rules, 2004. Consequently, penalties and interest demands were set aside, and the appeals were allowed with consequential relief to the appellants.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the legal reasoning behind the decision regarding the admissibility of Cenvat credit on service tax paid for outdoor catering services.