CENVAT - Rule 2(l) of CCR, 2004 - Outdoor Catering services - merely because exclusion uses expression 'primarily for personal use or consumption of any employee' it does not mean that credit is available in respect of catering services provided to contract labourers: CESTAT
By TIOL News Service
NEW DELHI, SEPT 10, 2014: THE appellants were availing the benefit of credit of service tax paid on outdoor catering services being provided to their employees. Demands were raised against them proposing such denial for the period 10/09/04 to December 2012, by raising periodical show cause notices.
In adjudication, the Commissioner dropped the demand for the period prior to 01/04/11 by relying upon various decisions of the Tribunal as also of various High Courts. However, he confirmed the demand for the period 01/04/11 onwards to the extent of Rs.61.94 lakhs. Identical amount of penalty was also imposed upon the appellant.
Before the CESTAT the appellant submitted that from 01/04/11 the provisions of definition of input service were amended and the services provided in relation to outdoor catering services were specifically excluded. Accordingly, they stopped availing CENVAT credit of service tax paid on the outdoor catering services provided to their employees, w.e.f. 01/04/11.
However, the said services were also being provided to the contract labourers provided by the manpower supplier. Inasmuch as since such contract labourers were not their regular employees and since were required to provide catering services to such persons, they availed the credit paid on the outdoor catering services being provided to such contract labour/employees. The justification offered by the appellant was that the exclusion relates to outdoor catering, when such services are used “ primarily for personal use or consumption of any employee ”; that the use of the word "primarily" indicates that when such use is not under a statutory obligation. In as much as they are under a statutory obligation to provide such services, they would be entitled to the CENVAT credit of duty paid on the outdoor catering services.
The Revenue representative submitted that the adjudicating authority had already extended the benefit of CENVAT credit on outdoor catering services for the period prior to 01/04/2011 and the exclusion from 01/04/2011 by way of amendment to the definition in the CCR, 2004 cannot be limited by the usage of the expression “primarily” as there is nothing in the clause which suggests so.
The Bench observed -
++ If the argument advanced by the learned advocate is accepted, at this prima facie stage, we find that the appellant would become entitled to the service tax paid on the outdoor catering services even in respect of their regular employees in as much as it is also their statutory duty to provide outdoor catering services to their regular employees.
++ However, we find that the dispute only relates to such services being provided to the contract employees.
++ We further find that there is no such differentiation made in the said exclusion clause in respect of the regular employees or the contract employees. As such prima facie we do not agree with the interpretation given by the learned advocate.
Taking note of the fact that the appellant had not pleaded any financial hardship, the Bench directed the appellant to make a pre deposit of Rs.30 lakhs and report compliance for obtaining a Stay.
In passing : Perhaps, it is time for another amendment before too many cooks spoil the broth!
(See 2014-TIOL-1717-CESTAT-DEL)
