2015 (12) TMI 754 - AT - Service Tax

Availment of CENVAT credit of service tax - scope of eligible input services - Rule 2(l) - outdoor catering service and insurance service - Held that - The exclusion clause was effective w.e.f. 01/04/2011 and Clause (C) of the said exclusion specifically excludes the services provided in relation to outdoor catering and health insurance or life insurance etc. Admittedly such services, prior to 01/04/2011, have been held to be covered by the definition of input services. In fact, the need for exclusion would arise only when the services are otherwise covered by the definition. Legislation, in its wisdom, has excluded certain services from the availment of CENVAT credit w.e.f. 01/04/2011, when such services are otherwise covered by the main definition clause of input service. To interpret the said exclusion clause, in such a manner, so as to hold that such services have direct or indirect nexus with the assessee s business and thus would be covered by the definition, would amount to defeat the legislative intent. It is well settled that the legislative intent cannot be defeated by adopting an interpretation which is clearly against such intent. As such, I find no justifiable reason to allow the credit in respect of the two disputed services and I uphold the confirmation of denial of CENVAT credit and demand of interest thereon. - appellants have taken the credit by reflecting the same in their statutory records and as such there can be no mala fide or suppression or mis-statement with an intent to wrongly avail the credit. In the absence of any such intent, imposition of penalty upon them is not justified. The same is accordingly set aside. - Appeal disposed of.

Summary

Issues:
- Availment of CENVAT credit on outdoor catering service and insurance service post-April 2011.

Analysis:
The dispute in the present appeal revolves around the denial of CENVAT credit for service tax paid on outdoor catering service and insurance service post-April 2011. The lower authorities refused the credit, leading to the imposition of penalty and interest. The period in question is from March 2011 to January 2012. While previous decisions by High Courts considered outdoor catering and insurance services as input services, an amendment in Rule 2(l) of the CENVAT Credit Rules, 2004 post-April 2011 excluded these services from the definition of input services.

The amended Rule explicitly excludes outdoor catering and insurance services from the definition of input services. The exclusion clause, particularly sub-para (C), specifies that services like outdoor catering and insurance are excluded when primarily used for personal consumption by employees. The appellant's argument that the exclusion does not apply when the company bears the cost and is legally obligated to provide these services lacked specific circumstances to support this interpretation. The Revenue contended that after the amendment, these services are meant for personal employee use, aligning with the legislative intent.

Considering the submissions, it is evident that the amendment effective from 01/04/2011 excluded outdoor catering and insurance services from CENVAT credit eligibility. The legislative intent behind the exclusion clause was to prevent services primarily for personal employee use from availing CENVAT credit. Interpreting the exclusion clause to include these services would contradict the legislative purpose. Thus, the denial of credit for the disputed services post-April 2011 was upheld, as these services were specifically excluded from the definition of input services.

Regarding the penalty, since the appellants recorded the credit in their statutory records without any malicious intent or suppression, the imposition of a penalty was deemed unjustified and subsequently set aside. The appeal was disposed of accordingly, with the decision pronounced and dictated in open court.