2009 (5) TMI 420 - AT - Service Tax

Outdoor catering service-Cenvat Credit the appellants had availed CENVAT credit on outdoor catering service received in their factory canteen. In adjudication of a show-cause notice the original authority disallowed this credit to the appellants under rule 14 of the CENVAT Credit Rules 2004 read with section 11A(1) of the Central Excise Act 1944 on the ground that the service was not used in or in relation to manufacture of final product in the factory. In the light of the decision of CCE v. GTC Industries Ltd. 2008 -TMI - 31592 - CESTAT MUMBAI held that- In the present case it appears neither of the lower authorities had occasion to record any finding as to whether the cost of supply of food formed part of the assessable value of the final products. Even the memo of appeal is silent on this aspect. I would direct the original authority to examine this aspect. If it is found that the cost of supply of food in the factory canteen to workers for the period of dispute formed part of the assessable value of the final products the appellants will get the benefit of the Larger Bench decision. If it is found to the contrary the CENVAT credit in question will not be admissible to them. For the purpose of a decision on this question I set aside the orders of the lower authorities and remand the matter to the original authority.

Summary

Issues:
1. Disallowance of CENVAT credit on outdoor catering service.
2. Interpretation of "input services" under CENVAT Credit Rules, 2004.
3. Applicability of Tribunal's Larger Bench decision in similar cases.
4. Requirement of canteen facility in factories under Factories Act, 1948.
5. Admissibility of CENVAT credit based on cost of supply of food in factory canteen.

Analysis:

1. The judgment deals with the disallowance of CENVAT credit amounting to Rs. 65,926 on outdoor catering service availed by the appellants in their factory canteen between April 2007 to October 2007. The original authority disallowed the credit under rule 14 of the CENVAT Credit Rules, 2004, stating that the service was not used in or in relation to the manufacture of the final product in the factory.

2. The issue revolved around the interpretation of "input services" as defined in rule 2(l) of the CENVAT Credit Rules, 2004. The adjudicating authority's decision was based on this interpretation, leading to the disallowance of the credit and imposition of penalties. The Commissioner (Appeals) upheld the original authority's decision, prompting the appeal by the assessee.

3. The appellants argued that the issue was covered in their favor by the Tribunal's Larger Bench decision in a previous case. The Tribunal noted that in cases where a factory had more than 250 workers, as per the Factories Act, 1948, providing a canteen facility within the factory premises was mandatory. The cost of supplying food to workers in the canteen was considered part of the manufacturer's expenditure and entered into the cost of production, affecting the assessable value of final products.

4. The judgment highlighted the importance of determining whether the cost of supplying food in the factory canteen formed part of the assessable value of final products. The Tribunal directed the original authority to examine this aspect, emphasizing that if the cost of food supply was part of the assessable value, the appellants would be entitled to the CENVAT credit based on the Larger Bench decision. The matter was remanded to the original authority for further examination.

5. Ultimately, the appeal was allowed by way of remand, indicating that a decision on the admissibility of CENVAT credit would depend on whether the cost of supplying food in the factory canteen was deemed to be part of the assessable value of final products. The judgment focused on ensuring a fair opportunity for the assessee to present their case and for the original authority to make a well-informed decision based on the relevant facts.