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TMI Blog2019 (6) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... n the factory canteens is not entitled for credit. The definition of input service, as amended with effect from 01.04.2011, is reproduced below. "input service" means any service, - (i) used by a provider of taxable service for providing an output service; or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes services,- (A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caterer" means a caterer engaged in providing services in connection with catering at a place other than his own. With effect from 16.06.2005 the above definition has been amended as, "outdoor caterer" means a caterer engaged in providing services in connection with catering at a place other than his own but including a place provided by way of tenancy or otherwise by the person receiving such services. 2.1.3 The purpose behind such amendment has been explained in letter No. B1/6/2005 TRU Dt. 27.07.2005 as, "5.1 Service tax is already leviable on the services provided by an outdoor caterer. Prior to 16-6-2005, outdoor caterer was defined as a caterer providing catering services "at a place other than his own". Doubts were expressed about the scope of the term "at a place other than his own" where the caterer provides catering service from a premises provided by the recipient of the service, on rent. In such cases, whether the place is to be treated as the place owned by the caterer and therefore the services are not subject to service tax or the place is to be treated as not owned by the caterer and therefore subject the services to service tax. To remove the doubt, the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled for credit, if they pertain to motor vehicles which are not entitled for credit. Similarly, under clause (C) certain services are not entitled for credit, if they are "used primarily for personal use or consumption of any employee". When such service are used, not primarily for personal use, then credit would be entitled. For example, if for effective marketing, if the Director of a Company has to be a member of a club for socializing, then it is not primarily for personal consumption, though incidentally it may be for personal use. Similarly, for a company engaged in brand promotion through celebrities, beauty and healthcare and fitness services availed for such celebrities is not primarily for the personal consumption of such employees. Hence, when an assessee is mandated by the Factories Act, to compulsorily to provide a canteen facility and when such assessee avails the services of a contractor in this regard, such services are primarily for the statutory compliance of the assessee and only incidentally for the personal use of the employees. 2.1.6 However, the above view has not found favour before the Larger bench of the Tribunal in the case of M/s. Wipro Ltd. Vs Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has now gained considerable maturity and many practitioners of the subject believe that incremental approach to taxation is not suitable for providing a stable system for taxation of services that is at the threshold of getting subsumed into a comprehensive GST." 2.2.3 Based on various inputs gathered, the negative list based levy was made part of the 2012 Budget and to again quote from the Hon'ble Finance Minister's Budget speech of 2012, "159. Last year, I had initiated a public debate on the desirability of moving towards taxation of services based on a negative list. In the debate that continued for the better part of the year, we received overwhelming support for this new concept. It has been perceived both as sound economics and prudent fiscal management. 160. Thus, I propose to tax all services except those in the negative list. The list comprises 17 heads and has been carefully drawn up, keeping in view the federal nature of our polity, the best international practices and our socio-economic requirements. 167. Movement towards the negative list will result in reducing nearly 290 definitions and descriptions in the Act to 54, and the exemptions from the existing 88 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -clause shall be substituted, namely :- "(BA) service of general insurance business, servicing, repair and maintenance , in so far as they relate to a motor vehicle which is not a capital goods, except when used by - (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person ; or (b) an insurance company in respect of a motor vehicle insured or reinsured by such person; or 2.3.2 It may be noted that clause (C) definition has not been amended. It is submitted that in the absence of any definition for the term "outdoor catering" and in view of the fact that the definition of the term "outdoor caterer" is no more in vogue from 01.07.2012, the scope of the term "outdoor catering" used in the definition of "input service" has to be understood only with reference to international practices on classification of service, based on which the negative list based levy of service tax has been introduced and common parlance. 2.4.1 In this connection, reference is invited to United Nations Central Product Classification - Division 63 and the Explanatory Notes therefor, which are appended below : ***99 Non-metallic minerals and other products n.e.c. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubclass does not include: - food preparation and supply services, on an ongoing basis, cf. 63392, 63393 It may be observed from the above that catering services are event based and services provided on ongoing basis would not be considered as a catering service. 2.4.2 A Hotel, or a restaurant or a factory canteen, which is operating in a continuous basis is not at all understood as "outdoor catering" even in common parlance. Persons running such Hotels, restaurants or canteens are not identified as "outdoor caterers" by common public. "Outdoor catering" is normally understood with reference to temporary supply of food, at customers location, for an event or occasion, like meeting, wedding, etc. 2.4.3 Most of the food items are prepared in the central kitchen of the outdoor caterer and transported to the place where the food has to be served. Over a period more sophistication in the form of on the spot preparation of certain items, heating of food before serving have become certain features of outdoor catering. While upholding the levy of service tax on outdoor caterer, the Hon'ble Supreme Court in Tamil Nadu Kalyana Mandapam Assn. Vs. Union of India reported in 2006 (3) S.T.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T for various services. Explanation 1. - This item includes such supply at a canteen, mess, cafeteria or dining space of an institution such as a school, college, hospital, industrial unit, office, by such institution or by any other person based on a contractual arrangement with such institution for such supply, provided that such supply is not event based or occasional. 2.6 On the basis of the above, it is submitted by the Ld. Counsels for appellants that the services provided by the contractors to the appellant, by way of cooking and serving food to the appellant's employees, on a continuous basis is not "outdoor catering" as it is commonly understood but is in the nature of "other contract food services" and hence the exclusion in the definition of "input service" for "outdoor catering" services, would not apply to such services and the appellants are eligible for credit. 3. Ld. AR Shri. L. Nandakumar supported the findings in the impugned order. He emphasized that the issue whether Outdoor Catering Services are eligible for credit after 01.04.2011 or not is decided by the Larger Bench in the case of M/s. Wipro Ltd. (supra). 4. Heard both sides. 5.1 Ld. Counsels Shri. G. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mportant. When outdoor catering services, beauty treatment, health services, etc. used for personal use or consumption of an employee, it would not qualify as 'input service'. In the instant case, as per Factories Act, 1948, the appellants are compelled to provide food facilities inside the factory. It is more importantly used by the appellant to comply with the mandatory requirement under Factories Act. If they do not comply with such provision of the Factories Act, the appellants will definitely not be able to engage in the production/manufacture of final products. Therefore outdoor catering services are used by appellant in relation to the business of manufacture and not for any personal use or consumption of employee. 8. In view thereof following the decision laid in the appellants' own case as well as the decision of the Tribunal in Yazaki Wiring Technologies India (P) Ltd. case and Reliance Capital Asset Management case (supra), I hold that the disallowance of credit is not legal or proper. The impugned order is set aside. The appeal is allowed with consequential reliefs, if any." Thus, in the above judgement it was held that the appellants therein were compelled to provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services which are being rationalized by laying down clear definition so that the scope of inputs and input services that are eligible and those that are not, is clear. Further, we also find from the clarification issued by the Joint Secretary (TRU) explaining the intention of the Legislature for the changes brought by way of amendment in the definition of 'input service'. Further, we also note that primarily the service should be first covered under the definition of 'input service' and once the service is not covered due to exclusion clause irrespective of the fact whether the cost of service has been taken as expenditure in the books of accounts does not render the services as an admissible for Cenvat credit. We also find that the food is always mainly for personal consumption only. The canteen provided in the company is mainly for the personal consumption of the employee and it cannot be interpreted in any other way. Therefore, once such services are excluded, whether the employer or employee bears the cost partially or fully, has no bearing on the amendment. Therefore, keeping in view [the] above discussions and the various decisions cited by both the parties, we are of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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