2014 (1) TMI 557 - AT - Service Tax

Availment of CENVAT Credit - Outdoor catering service - Held that - Service Tax proposal is for denial of Service Tax credit on food and hospitality services rendered by hotel - The credit has been denied on the ground that Service Tax has been charged on the buffet dinner, mineral water also and such Service Tax credit cannot be allowed in Cenvat Credit Rules, 2004 - outdoor caterer service has a nexus or integral connection with the manufacture of final product. The view taken is that for benefit of cenvat credit in respect of input services, such services should be relatable to the manufacturing activity. It cannot be said that providing lunch/dinner to customers is not part of the business promotion and is not part of sale of manufactured goods. Without promoting the sale of the product, the manufacture also cannot take place. Therefore the activity can be definitely said to be relatable to the manufacture of the goods. Under these circumstances on merits I find that the appellant is eligible for the benefit of Cenvat credit - Following decision of Ultratech Cement Ltd. 2010 (10) TMI 13 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues:
Denial of Cenvat credit for Service Tax on food and hospitality services.

Analysis:
The appellate tribunal reviewed the case where the appellant had claimed Cenvat credit for Service Tax on bills from a hotel for food and hospitality services. The authorities initiated proceedings to deny the credit, demand the amount with interest, and impose a penalty equal to the denied credit. The tribunal found the issue straightforward and decided to waive the pre-deposit requirement, proceeding to make a final decision on the appeal without delay.

The tribunal considered arguments from both sides. The appellant contended that the Service Tax was paid for a buyers' delegation and conference, and the credit was taken for services like lunch and dinner provided to customers. The denial of credit was based on the inclusion of Service Tax on items like buffet dinner and mineral water, deemed inadmissible under the Cenvat Credit Rules, 2004. Referring to a case involving Ultratech Cement Ltd., the tribunal noted that the High Court of Bombay had allowed credit for outdoor catering services, emphasizing the nexus between such services and the manufacturing process. It was established that activities like providing meals to customers contribute to business promotion and the sale of manufactured goods, making them integral to the manufacturing process. Therefore, the tribunal concluded that the appellant was eligible for Cenvat credit, allowing the appeal and providing consequential relief.

In conclusion, the tribunal ruled in favor of the appellant, recognizing the eligibility for Cenvat credit on Service Tax related to food and hospitality services, highlighting the connection between such services and the manufacturing activity. The decision was based on the understanding that activities promoting the sale of goods are essential components of the manufacturing process, warranting the allowance of Cenvat credit in this case.