2009 (4) TMI 349 - AT - Service Tax

Cenvat Credit- outdoor catering service- The credit had been taken by the assessee on outdoor catering service which was used for supply of food to factory employees during the period January 2005 to September 2007. The lower authorities have held that outdoor catering service cannot be said to be an input service within the ambit of this term defined under rule 2(l) of the CENVAT Credit Rules 2004.In the light of the decision of CCE v. GTC Industries Ltd. 2008 -TMI - 31592 - CESTAT MUMBAI held that- It is for the original authority to verify the relevant facts so as to find out whether the Larger Bench decision in GTC Industries Ltd. s case (supra) is applicable. In this view of the matter I set aside the orders of the lower authorities and allow this appeal by way of remand directing the original authority to adjudicate the case afresh.

Summary

Issues: Disallowance of CENVAT credit on outdoor catering service as 'input service' under CENVAT Credit Rules, 2004.

In this case, the original authority disallowed CENVAT credit of Rs. 3,86,250 to the assessee and imposed an equal amount of penalty, which was later reduced by the appellate authority to Rs. 35,000. The disputed credit was taken for outdoor catering service used to supply food to factory employees between January 2005 and September 2007. The lower authorities held that outdoor catering service did not qualify as an 'input service' as per rule 2(l) of the CENVAT Credit Rules, 2004, stating that canteen services did not impact the production of excisable goods. The assessee relied on a Tribunal decision where it was held that service tax paid on outdoor catering service for factory workers was admissible as an 'input service.' The SDR argued that catering service for employees had no connection with manufacturing or clearance of goods, citing a Tribunal decision where CAS-4 principles were allegedly misapplied.

Upon review, the Judicial Member found it necessary to follow a Larger Bench decision in a similar case, where outdoor catering services for factory workers were considered part of the cost of production of excisable goods. However, the Judicial Member noted the absence of details regarding the number of workers in the factory and whether the cost of food supplied in the factory-canteen affected the assessable value of excisable goods during the relevant period. Consequently, the Judicial Member set aside the lower authorities' orders and remanded the case to the original authority for a fresh adjudication, instructing them to verify the relevant facts and consider the applicability of the Larger Bench decision, while providing the assessee with a reasonable opportunity to present their case.