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2017 (12) TMI 1300 - AT - Central ExciseCENVAT credit - outdoor catering service - stock transfer - presumptive levy of 8% on exempt goods - Held that - allegation of mala fide on the part of the assessee in availing CENVAT credit to warrant invoking the ingredients of section 11AC is not tenable - imposition of penalty u/r 15(2) of CCR 2004 is not appropriate - penalty set aside - appeal allowed in part.
Issues: Denial of CENVAT credit on outdoor catering service.
The judgment deals with an appeal against the denial of CENVAT credit on 'outdoor catering service' by M/s John Deere India Pvt Ltd for the period from January 2009 to March 2009. The Commissioner of Central Excise (Appeals - III), Pune, had upheld the denial of credit to the extent of &8377; 70,104 on the grounds that the recovery of some cost from the canteen users disentitles the service as relevant to the manufacture of goods. The first appellate authority held that operating a canteen, with or without an outdoor catering service provider, is a mandatory requirement under section 46 of the Factories Act, 1948, making it an admissible input service for manufacturing final products. The authority also noted that the recovery of &8377; 12,04,479 from employees during the relevant period does not amount to procurement of service by the appellant, leading to the disallowance of the credit. It was emphasized that since the cost of the service was not entirely borne by the appellant, they were ineligible for CENVAT credit. The authority further stated that the recovered amounts were not included in the cost of goods for which duty liability was discharged, thus not meeting the scheme's requirements. The appellant relied on decisions by the Hon'ble Supreme Court and the Hon'ble High Court of Bombay regarding the imposition of penalties in similar cases. The judgment referenced a decision by the Larger Bench of CESTAT in the case of GTC Industries Ltd., which clarified that a manufacturer can claim service tax credit even if the cost of food is borne by the worker. However, it was noted that the manufacturer cannot claim credit for the portion of service tax borne by the consumer. The judgment concluded that the allegation of mala fide intentions on the part of the assessee in availing CENVAT credit did not warrant the imposition of penalties under rule 15(2) of the CENVAT Credit Rules, 2004. Therefore, the penalty was set aside, and the appeal was disposed of accordingly.
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