By TIOL News Service

MUMBAI, FEB 25, 2016: THIS is a Revenue appeal.

The issue involved is as to whether CENVATcredit is admissible on 'Outdoor Catering service'.

The AR submitted that both the lower authorities had allowed the cenvat credit relying upon the judgment of GTC Industries Ltd . – 2008-TIOL-1634-CESTAT-MUM-LB wherein the Larger Bench held that credit on outdoor catering service is admissible. However, in a subsequent judgment of the Bombay High Court in the case of CCE, Nagpur vs. Ultratech Cement Ltd. – 2010-TIOL-745-HC-MUM-ST it was held that if part of the catering cost is recovered from the employees, then cenvat credit attributed thereto is not admissible. This portion, the AR says is recoverable from the assessee.

The appellant submitted that there is no allegation in the SCN that cost of food is recovered from the employees and, therefore, the revenue cannot raise this issue in appeal stage. Inasmuch as in view of the settled law of treating ‘Outdoor Catering Service' as input service, Credit should be allowed without going into the ratio of cost of catering service borne by respondent or their employees. Reliance is placed on the following decisions in support - GKN Sinter Metals Ltd. – 2011-TIOL-332-CESTAT-MUM, Indoworth (I) Ltd. – 2011-TIOL-682-CESTAT-MUM & Cummins Generator Technologies India Ltd. –2013-TIOL-105-CESTAT-MUM.

The Bench observed –

"6. I find that it is settled that outdoor catering service is an admissible input service, however credit can be allowed only on the portion of cost which is borne by the manufacturer. The cost which is recovered from the employees, cenvat attributed to that portion cannot be allowed as held by the Hon'ble Bombay High court in the case of Ultratech Cement Ltd. (supra). The fact that whether the cost was recovered from the employees and quantum thereof, was not considered by lower authority, therefore, the matter needs to be remanded to verify this fact. As regard the judgments relied upon by the Ld. Counsel on the issue that the fact whether the cost of food recovered from the employees or otherwise was not raised in the show cause notice, same cannot be raised at this stage. I find that the issue raised in the show cause notice is admissibility of cenvat credit on the outdoor catering service. As regard the cost of food recovered from the employees, it only decides the quantum of the cenvatcredit which is admissible. Therefore, in my considered view, it is not a fresh issue as the same co-exists in the issue of admissibility of cenvat on outdoor catering service. Moreover the judgment of Ultratech Cement squarely covered the issue, accordingly I do not agree with the Ld. Counsel on the point that it is a fresh issue which was not covered in the show cause notice and raised first time at this stage. As per the above discussion, I remand the matter to the adjudicating authority to quantify the actual credit allowable to respondent as per my above observation. Looking to the nature of the issue as same involved interpretation of cenvat credit provision that whether the outdoorcatering service is an input service or otherwise, the respondent cannot be penalized…."

The matter was remanded.

(See 2016-TIOL-503-CESTAT-MUM)