By TIOL News Service

MUMBAI, FEB 13, 2017: PROCEEDINGS were initiated against appellant for availing CENVAT credit of Rs.62,169/- for the period from 2005-06 to 2007-08 on the tax paid towards supply of canteen services.

The ground for denial of this credit was that the appellant had recovered Rs.10,35,352/- from the employees and hence the said service could not be treated as an input service.

The appellant is before the CESTAT and pleaded that the matter be decided on merit.

The Bench observed -

"4. The amount on which CENVAT credit has been denied is the token recovery of Re 1 per employee per day as an administrative cost and is not intended to defray the cost of food served to the employees. A canteen is a statutory requirement under labour legislation and the objective of efficient production is well served when standard fare is provided by the employer at the workplace. It cannot be denied that such a contribution to efficiency is not in the course of manufacture of goods. The amount recovered can hardly be deemed to be consideration for the serving of food. The entire expenditure is remitted to the service provider by the appellant and the employees do not engage commercially with the service provider. Consequently, the service is availed by the appellant in furtherance of its manufacturing activity."

Holding that there is no justifiable reason to deny or restrict the credit, the impugned order was set aside and the appeal was allowed.

In passing: … manufacturer cannot take credit of that part of the service tax which is borne by the consumer – [para 39] Ultratech Cement Ltd - 2010-TIOL-745-HC-MUM-ST.

(See 2017-TIOL-405-CESTAT-MUM )