By TIOL News Service

MUMBAI, JAN 16, 2018: THIS is an appeal by the Revenue against the order passed by Commissioner(A) where under CENVAT credit on outdoor catering services has been allowed to the assessee.

The AR submitted that the outdoor catering services provided to the employees are neither used in or in relation to the manufacture or clearance of final products as it is a welfare measure taken by respondent for providing better amenities and better infrastructure for the employees. It is further argued that even though it is mandatory requirement under the Factories Act to provide canteen, still the catering activity cannot be deemed to be an input service in view of the amendment to the definition of Input service in rule 2(l) of CCR, 2004 by the CENVAT Credit (Amendment) Rules, 2011w.e.f 01.04.2011. The AR also submitted that the reliance placed by the lower appellate authority on the decisions in Coca Cola India Pvt. Ltd. - 2009-TIOL-449-HC-MUM-ST and Ultratech Cement - 2010-TIOL-745-HC-MUM-ST were improper since the said decisions pertained to the definition of ‘input service' as it existed prior to April 2011.

The respondent assessee supported the order by relying on the decision in their own case - 2016-TIOL-2392-CESTAT-MUM and that of Mahindra Sona Ltd. 2017-TIOL-3328-CESTAT-MUM.

The exclusion clause (C) of Rule 2(l) as substituted w.e.f 01.04.2011 reads -

The Member (Technical) inter alia observed -

+ A perusal of the definition of input service shows that it specifically excludes credit of outdoor catering service used primarily for personal use or consumption of any employee.

+ In the instant case, the outdoor catering service is used in the factory premises to maintain the canteen which is a mandatory requirement under the Factories Act, 1948. In view of the mandatory requirement under the Factories Act, it cannot be said that the said service has been used primarily for personal use or consumption of any employee.

+ Without the canteen, the factory would not be allowed to operate or would be in violation of the Factories Act, 1948. In these circumstances, the outdoor catering services availed in respect of canteen maintained on account of the factory required under the Factories Act, 1948 cannot be treated as excluded from the definition of input service.

+ It is seen that outdoor catering service used primarily for personal use or for consumption of employee is specifically included in the exclusion clause. This implies that outdoor catering services not primarily for personal use or consumption of employee would be covered under the definition.

Concluding that the respondent can avail the benefit of the said credit only to the extent that the incidence of which is borne by them, the Revenue appeal was dismissed.

(See 2018-TIOL-211-CESTAT-MUM)