2012 (6) TMI 551 - AT - Service Tax

Cenvat credit service tax paid on outdoor catering service - for supply of food in the factory canteen to the factory workers/ employees Held that - matter remanded to the original authority for proper verification of the relevant facts. Direction to original authority to grant the benefit of CENVAT credit if they produce evidence of (a) strength of the factory workers being above 250 in each factory and (b) no recovery from workers towards cost of service.

Summary

Issues: Admissibility of CENVAT credit on outdoor catering service for factory workers under CENVAT Credit Rules, 2004.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Bangalore revolves around the admissibility of CENVAT credit on outdoor catering services provided to factory workers by the respondent. The main issue is whether the Service Tax paid on such services is allowable under Rule 2(l) read with Rule 3 of the CENVAT Credit Rules, 2004 for the disputed period of November 2008. The Commissioner (Appeals) had granted the benefit to the respondent based on a precedent set by the Tribunal's Larger Bench decision in CCE, Mumbai Vs. GTC Industries Ltd.

The Tribunal considered the requirement for the respondent to claim CENVAT credit on the outdoor catering service, which included employing more than 250 workers in each factory and not recovering any amount from the workers for the service. This requirement was supported by a judgment from the Hon'ble High Court in CCE, Nagpur Vs. Ultratech Cement Ltd., where it was established that the use of outdoor catering service for supplying food to factory workers was integral to the business of manufacturing excisable goods. The High Court also recognized the mandatory provision under the Factories Act, 1948 for providing canteen facilities to workers employing more than 250 workers.

The Tribunal acknowledged the High Court's stance that the credit of Service Tax would be permissible even if the cost of food was borne by the workers, provided that the proportionate credit embedded in the cost of food recovered from workers was reversed. The learned DR suggested remanding the matter to the original authority for verifying the relevant facts, a proposal to which the respondent's representative had no objection. Consequently, the Tribunal upheld the Commissioner's decision in principle and directed the original authority to grant CENVAT credit on outdoor catering service to the respondent for November 2008, subject to the production of evidence regarding the factory workers' strength and the absence of cost recovery from workers.

In conclusion, the Tribunal emphasized providing the party with a reasonable opportunity to present the necessary evidence and be heard, ensuring a fair and thorough consideration of the case before granting the CENVAT credit on the outdoor catering service to the respondent.