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2015 (3) TMI 736 - HC - Service TaxAvailment of CENVAT Credit - Outdoor Catering Service - Whether the assessee can utilise the cenvat credit facilities in respect of outdoor catering services, provided in the factory for its employees, as input service - Held that - definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. In the facts of the present case, use of the outdoor catering services is integrally connected with the business of manufacturing cement and therefore, credit of service tax paid on outdoor catering services would be allowable. - Cost of any input service that forms part of value of final products would be eligible for CENVAT credit. That observation of the Division Bench is made in the context of a service which is held to be integrally connected with the business of manufacturing the final product. Therefore, the observation of the Division Bench in the case of Coca Cola India (P.) Ltd. (2009 (8) TMI 50 - BOMBAY HIGH COURT) has to be construed to mean that where the input service used is integrally connected with the business of manufacturing the final product and the cost of that input service forms part of the cost of the final product, then credit of service tax paid on such input service would be allowable. - Cenvat Credit has been properly availed in respect of outdoor catering services - Decided against Revenue.
Issues Involved:
1. Whether Cenvat credit can be availed on service tax paid for outdoor catering services provided in a factory for its employees. 2. The applicability of Notification No.3 of 2011 dated 01.03.2011 and its retrospective effect. Detailed Analysis: Issue 1: Availment of Cenvat Credit on Outdoor Catering Services: The primary issue is whether the assessees can utilize Cenvat credit for service tax paid on outdoor catering services provided in the factory for employees. The Department contended that outdoor catering services do not fall within the definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004, as they are neither used in or in relation to the manufacture or clearance of final products nor related to business activities. The Adjudicating Authority allowed the Cenvat credit, stating that the employees who are provided food through outdoor catering services are directly or indirectly involved in the manufacturing process, making such services qualify as 'input service'. The Commissioner (Appeals) upheld this decision, but the Department challenged it before the Tribunal. The Tribunal, in most cases, followed the Larger Bench decision in Commissioner of Central Excise, Mumbai V. GTC Industries Ltd., which held that Cenvat credit is admissible on outdoor catering services as they are input services related to business. However, in some cases, the Tribunal denied the credit, relying on the Supreme Court's decision in Maruti Suzuki Ltd. V. CCE. The High Court examined the issue in light of the Bombay High Court's decision in CCE V. Ultratech Cement Ltd., which held that outdoor catering services fall within the ambit of 'input service'. The definition of 'input service' is broad, covering services used directly or indirectly in the manufacture of final products and those used in relation to the business of manufacturing final products. The Court emphasized that services integrally connected with the business of manufacturing, such as mandatory canteen services under the Factories Act, qualify as 'input service'. The Karnataka High Court in CCe V. Stanzen Toyetetsu India (P) Ltd. and other cases also supported this view, stating that canteen services provided due to statutory obligations are integrally connected with the business of manufacturing and thus qualify for Cenvat credit. Issue 2: Retrospective Effect of Notification No.3 of 2011: The Revenue argued that Notification No.3 of 2011, which excludes outdoor catering services from the definition of 'input service', should apply retrospectively. However, the Court rejected this argument, noting that the Notification explicitly states it comes into effect on 1st April 2011. The amendment to Rule 2(l) of the Cenvat Credit Rules, 2004, effective from 01.03.2011, cannot be applied to periods before this date. Conclusion: The Court concluded that the assessees are entitled to avail Cenvat credit on service tax paid for outdoor catering services provided in the factory for employees, as these services are integrally connected with the business of manufacturing. The Notification No.3 of 2011 does not have retrospective effect and applies only from 1st April 2011. Judgment: 1. The appeals filed by the Revenue (C.M.A.Nos.2, 86, 158, 159, 356, 357, 359, 515, 730, 1014, 1468, 1647, 1648 of 2010 and 1482 of 2013) are dismissed, affirming the Tribunal's order allowing Cenvat credit. 2. The appeals filed by the assessees (C.M.A.Nos.3199 and 3288 of 2010, 314 to 317 of 2011, 968 and 1006 of 2011) are allowed, setting aside the Tribunal's order denying Cenvat credit. 3. No costs. Consequently, connected miscellaneous petitions are closed.
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