2016 (5) TMI 661 - AT - Service Tax

Denial of Cenvat credit - CHA Services and Outdoor Catering Services - No evidence to show that cost of said services was borne by the appellant - Appellant argued that when the place of removal for the purpose of export is a Port of Export in terms of Circular No. 999/6/2015-CX dated 28.2.2015 then the credit of CHA services needs to be allowed. Also their factory is covered by the Section 92 of the Factories Act, 1948 and hence it is mandatory for them to provide canteen services. Held that - in view of the circular dated, 28.2.2015, the issue stand settled in favour of the appellant in so far as credit of CHA services is concerned. In view of the decision of Larger Bench of this Tribunal in the case of CCE, Mumbai-V Vs GTC Industries Ltd. 2008 (9) TMI 56 - CESTAT MUMBAI , the credit of Outdoor Catering Services in the proportion in which the expenditure is borne by the appellant would be admissible to them. However, proportion of Service Tax in respect of the cost of such catering services borne by the employees of the appellant would not be admissible. - Decided partly in favour of appellant

Summary

Issues:
1. Denial of credit of Service Tax paid on Outdoor Catering Services
2. Denial of credit of CHA services by original adjudicating authority

Analysis:
1. The first appellate authority allowed the credit of CHA services based on CBE&C Circular No. 137/85/2007-CX-4 for clearance of goods for export. However, the credit of Service Tax paid on Outdoor Catering Services was denied as the cost was borne by employees, not the appellant. M/s Apar Industries Ltd. argued that Circular No. 999/6/2015-CX clarified the place of removal for export, supporting the allowance of CHA services credit. They also cited legal precedents to support their case. The Tribunal upheld the credit of CHA services as per the circular but allowed the credit of Outdoor Catering Services only for the proportion borne by M/s Apar Industries Ltd., not the employees.

2. The Tribunal referred to a Larger Bench decision in the case of GTC Industries Ltd., stating that the cost of food in canteen services is part of production cost, and under the Factories Act, it is mandatory for factories with over 250 workers to provide canteen facilities. Therefore, the employment of an outdoor caterer for canteen services qualifies as an input service, allowing Cenvat credit. The Tribunal ruled in favor of M/s Apar Industries Ltd. for the credit of Outdoor Catering Services in proportion to the cost borne by the company, in compliance with the Factories Act. The appeal of M/s Apar Industries Ltd. was partly allowed based on these considerations.