2012 (12) TMI 40 - AT - Central Excise

Whether CENVAT credit of the service tax paid on certain services viz. rent-a-cab service, outdoor catering service, telephone service was admissible Held that - Credit in question is admissible to them inasmuch as all the said services were availed in relation to the business of manufacturing the final product - definition of input was not restricted to services used in or in relation to manufacture of final products but the same also extended to all services used in relation to the business of manufacture of final products - appeal is allowed in so far as rent-a-cab service and telephone service are concerned Regarding outdoor catering service Held that - Where a manufacturer avails outdoor catering service in compliance with the mandatory requirement under Section 46 of the Factories Act, it can be said to have been availed in relation to the business of manufacturing the final product. Section 46 of the Factories Act makes it obligatory for the manufacturer to maintain a canteen for their employees in the factory where the number of employees is 250 or more - cost of outdoor catering service to be included in the cost of production of the final product - admissibility of CENVAT credit on outdoor catering service shall be reexamined by the original authority - admissibility of CENVAT credit on outdoor catering service shall be reexamined by the original authority

Summary

Issues:
Admissibility of CENVAT credit on rent-a-cab service, outdoor catering service, and telephone service under Rule 2(l) of the CENVAT Credit Rules, 2004.

Analysis:
The appeal involved the question of whether the assessee was entitled to CENVAT credit on services such as rent-a-cab, outdoor catering, and telephone services for the period from April 2005 to October 2007. The appellant contended that these services were utilized in relation to the business of manufacturing the final product and therefore qualified as input services under Rule 2(l) of the CENVAT Credit Rules, 2004. However, both the original and appellate authorities had denied the benefit of CENVAT credit on these services, stating that they did not meet the criteria of input services as per the rule.

The appellant relied on a High Court decision to support their argument that the definition of input services extended to all services used in relation to the business of manufacturing final products, not just those directly involved in the manufacturing process. The appellant had availed rent-a-cab service for transporting employees, outdoor catering service for the factory canteen, and telephone service for business purposes related to manufacturing. The High Court decisions in the cases of Ultratech Cements Ltd. and Stanzen Toyotetsu India (P) Ltd. were cited to highlight the nexus between outdoor catering service and the business of manufacturing, especially in compliance with statutory obligations under the Factories Act.

The judgment emphasized that where a manufacturer avails outdoor catering service to comply with statutory requirements such as providing canteen facilities under the Factories Act, it can be considered as being in relation to the business of manufacturing the final product. The cost of such services was deemed necessary to be included in the cost of production. As a result, the appeal was allowed concerning rent-a-cab service and telephone service, with a directive for the original authority to reexamine the admissibility of CENVAT credit on outdoor catering service, considering the legal obligations and cost implications outlined in the High Court decisions. The appellant was granted the opportunity to present evidence supporting their case before the original authority for further review and consideration.

In conclusion, the judgment provided clarity on the admissibility of CENVAT credit on specific services concerning the business of manufacturing final products, highlighting the significance of statutory obligations and cost considerations in determining the eligibility of such services as input services under the CENVAT Credit Rules, 2004.