2015 (3) TMI 1043 - HC - Central Excise

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 - Following decision of CCE V. Ultratech Cement Ltd. reported in 2010 (10) TMI 13 - BOMBAY HIGH COURT - It is relevant to note that various High Courts have concurred with the above-said principle of the Bombay High Court and followed the above-said decision - Decided against Revenue.

Summary

Issues Involved:
1. Whether the first respondent can avail CENVAT Credit of Service Tax paid on Outdoor catering Service treating them as Input Service?
2. Whether the second respondent was correct in law in applying the ratio of the Larger Bench of the Tribunal's decision in the case of CCE, Mumbai v. GTC Industries Ltd., (2008 (12) STR, 468 (TR-LB))?

Detailed Analysis:

Issue 1: Availment of CENVAT Credit on Outdoor Catering Service as Input Service

The core issue is whether the assessee can utilize the Cenvat credit facilities for outdoor catering services provided in the factory for its employees as input service. The Department objected to this, arguing that outdoor catering services do not fall within the definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004. The Department's stance was that catering services were neither used in nor related to the manufacture or clearance of the final product and thus should not be eligible for Cenvat credit. The Adjudicating Authority supported this view and disallowed the credit. However, the Commissioner (Appeals) allowed the appeal by following the Larger Bench decision in CCE, Mumbai v. GTC Industries Ltd., which was subsequently upheld by the Tribunal.

In the present case, the High Court referred to its earlier judgment in a similar matter (C.M.A.Nos.2 of 2010 batch) and the Bombay High Court's decision in CCE v. Ultratech Cement Ltd. (2010 -TIOL - 745 - HC- MUM - ST). The definition of 'input service' was interpreted broadly to include services used directly or indirectly in relation to the manufacture of final products and services used in relation to the business of manufacturing the final products. The High Court concluded that the definition of 'input service' is extensive and covers services integral to the business of manufacturing, including mandatory canteen facilities under the Factories Act, 1948. Therefore, the Tribunal's decision to allow Cenvat credit on outdoor catering services was justified.

Issue 2: Application of Larger Bench Decision in CCE, Mumbai v. GTC Industries Ltd.

The Tribunal followed the Larger Bench decision in CCE, Mumbai v. GTC Industries Ltd., which held that Cenvat credit is admissible on outdoor catering services as they are considered input services related to business. The Bombay High Court confirmed that while the decision of the Larger Bench was correct, it added a rider that the manufacturer cannot take credit for the portion of the service tax borne by the worker. The High Court emphasized that the definition of 'input service' includes services used in relation to the business of manufacturing final products, not just those used directly in the manufacturing process.

The High Court also noted that various other High Courts have concurred with this principle, reinforcing the correctness of allowing Cenvat credit for outdoor catering services.

Conclusion:

The High Court dismissed the Revenue's appeal and affirmed the Tribunal's order, holding that the Cenvat credit availed on outdoor catering services was proper. The Court directed the Excise Authorities to verify the proportionate credit reversed by the assessee, as stated in an affidavit filed by the assessee. The issue was resolved in favor of the assessee, with no costs awarded.

Order:

i) The issue is answered in favor of the assessee and against the Revenue.
ii) The appeal is dismissed, affirming the Tribunal's order.
iii) No costs.