2011 (4) TMI 1071 - HC - Service Tax

Cenvat credit - outdoor catering services Held that - merely because these services are not expressly mentioned in the definition of input service it cannot be said that they do not constitute input service and the assessee is not entitled to the benefit of CENVAT credit, under the scheme of the Cenvat Credit Rules, 2004, the service tax paid on all those services which the assessee has utilized directly or indirectly in or in relation to the final product is entitled to claim the credit, decision against the revenue and in favour of the assessee, appeal is dismissed

Summary

Issues: Entitlement to Cenvat credit for service tax paid on outdoor catering service.

Analysis:
The judgment involves an appeal by the revenue against the Tribunal's decision allowing the assessee to avail Cenvat credit for service tax paid on outdoor catering services. The assessee, a manufacturer of CNC lathes and components, had availed Cenvat credit on service tax paid for outdoor catering services during a specific period. A show cause notice was issued, leading to a confirmation of demand, interest, and penalty by the Assessing Authority. The Appellate Authority later set aside this order, allowing the appeal. The revenue, aggrieved by this decision, appealed to the Tribunal, which relied on a previous Larger Bench decision to rule in favor of the assessee, stating that outdoor catering services for maintaining a canteen qualified as an input service eligible for Cenvat credit. The High Court was tasked with determining whether the assessee was entitled to such credit.

The High Court referred to a similar case before a Division Bench, where it was established that any service used directly or indirectly in manufacturing final products constitutes an input service. The definition of input service includes various services explicitly, such as transportation of inputs or capital goods. The Court emphasized that the test is whether the service utilized by the assessee is for manufacturing the final product, directly or indirectly. The Court further highlighted that services not expressly mentioned in the definition clause could still qualify as input services if used by the manufacturer in relation to the manufacture of final products or business activities. In the context of outdoor canteen facilities provided by the assessee due to statutory obligations, the Court noted that such expenses were considered in fixing the final product's price and were not considered charity but a legal obligation.

The judgment concluded that the Tribunal's decision was legal and valid, in accordance with the law, and did not have any legal infirmity warranting interference. The Court upheld the assessee's entitlement to Cenvat credit for service tax paid on outdoor catering services, dismissing the revenue's appeal based on the precedent set by the Division Bench's prior judgment. The appeal was thus dismissed, affirming the assessee's right to claim Cenvat credit for the service tax paid on outdoor catering services.