Case Note & Summary
The Commissioner of Central Excise, Nagpur, appealed against the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) which allowed M/s. Ultratech Cement Ltd. to avail CENVAT credit on service tax paid for outdoor catering services provided to employees in the factory. The Revenue contended that outdoor catering services do not fall within the definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004, as they are neither used in or in relation to the manufacture or clearance of final products nor can be said to be an activity relating to business. The assessee argued that under the Factories Act, 1948, it was statutorily obliged to provide canteen facilities to its employees, and therefore, the outdoor catering service was used in relation to the manufacture of cement and was an activity relating to business. The High Court held that the definition of 'input service' under Rule 2(l) is broad and includes services used in relation to business. Since the assessee was required by law to provide canteen facilities, the outdoor catering service was integrally connected with the manufacturing process and business activity. Consequently, the court dismissed the Revenue's appeal, affirming the CESTAT's order and allowing the CENVAT credit.
Headnote
A) Central Excise - CENVAT Credit - Input Service - Outdoor Catering - Rule 2(l) of Cenvat Credit Rules, 2004 - The issue was whether outdoor catering services provided to factory employees qualify as 'input service' for CENVAT credit. The court held that since the assessee was statutorily obliged to provide canteen facilities under the Factories Act, 1948, the outdoor catering service was used in or in relation to the manufacture of final products and was an activity relating to business, thus falling within the definition of 'input service'. (Paras 1-10)
B) Central Excise - CENVAT Credit - Input Service - Business Activity - Rule 2(l) of Cenvat Credit Rules, 2004 - The court reasoned that the definition of 'input service' includes services used in relation to business, and providing canteen facilities to employees is integrally connected with the business of manufacturing. Therefore, the service tax paid on outdoor catering services is eligible for CENVAT credit. (Paras 6-10)
Issue of Consideration
Whether outdoor catering services provided to employees in the factory qualify as 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004, entitling the assessee to CENVAT credit.
Final Decision
The appeal is dismissed. The order of CESTAT allowing CENVAT credit on outdoor catering services is upheld.
Law Points
- CENVAT credit on outdoor catering services
- input service definition
- Rule 2(l) of Cenvat Credit Rules
- 2004
- business activity
- statutory obligation under Factories Act
- 1948
Case Details
2010 LawText (BOM) (10) 164
Central Excise Appeal No. 7 of 2010
J.P. Devadhar, A.B. Chaudhari
Mr. S. K. Mishra, Assistant Solicitor General for appellant; Mr. V. Shridharan, Advocate for respondent no.1
The Commissioner Central Excise, Nagpur
M/s. Ultratech Cement Ltd. and The Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Mumbai
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Nature of Litigation
Appeal by Revenue against CESTAT order allowing CENVAT credit on outdoor catering services.
Remedy Sought
Revenue sought to disallow CENVAT credit availed by assessee on service tax paid for outdoor catering services.
Filing Reason
Revenue challenged the CESTAT's decision that outdoor catering services qualify as 'input service' under Rule 2(l) of Cenvat Credit Rules, 2004.
Previous Decisions
CESTAT allowed the assessee's claim for CENVAT credit on outdoor catering services.
Issues
Whether outdoor catering services provided to employees in the factory qualify as 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004.
Submissions/Arguments
Revenue argued that outdoor catering services are not used in or in relation to manufacture or clearance of final products and are not an activity relating to business.
Assessee contended that under the Factories Act, 1948, it was statutorily obliged to provide canteen facilities, and therefore the service was used in relation to manufacture and business.
Ratio Decidendi
The definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004 includes services used in relation to business. Providing canteen facilities to employees, being a statutory obligation under the Factories Act, 1948, is integrally connected with the business of manufacturing and thus qualifies as input service.
Judgment Excerpts
The substantial question of law raised by the Revenue in this appeal reads thus: 'Whether the Hon'ble CESTAT was correct in holding that the respondent is entitled to avail the CENVAT Credit on outdoor 'catering services' provided in the factory for employees of the factory as a input service credit despite the fact that outdoor catering service does not fall under the ambit of the definition of “Input service” specified under Rule 2(l) of Cenvat Credit Rules, 2004...'
The facts relevant for the present appeal are that the Respondent-assessee is engaged in the manufacture of cement which is excisable under Chapter 25 of the Central Excise Tariff Act, 1985.
Procedural History
The Assistant Commissioner disallowed CENVAT credit on outdoor catering services. The assessee appealed to CESTAT, which allowed the credit. The Revenue then appealed to the High Court.
Acts & Sections
- Cenvat Credit Rules, 2004: Rule 2(l)
- Central Excise Tariff Act, 1985: Chapter 25
- Factories Act, 1948:
