By TIOL News Service

NEW DELHI, APR 24, 2014: AGAINST the order passed by the Commissioner(A) in remand proceedings ordered by the Tribunal, the appellant is again before the CESTAT.

The dispute relates to the admissibility of credit of service tax paid on the outdoor catering service availed by the appellant in their factory canteen for the purpose of providing food to their employees.

The Commissioner(A) while denying the CENVAT credit has chosen not to follow the Larger Bench decision in the case of CCE Vs GTC Industries Ltd.- 2008-TIOL-1634-CESTAT-MUM-LB.He has observed that the reasons for holding the outdoor catering services as input service in the said LB decision was that the assessee in that case, was having more than 250 workersand was under a statutory obligation under the Factories Act, 1948 to provide canteen services.Inasmuch as in the case of the present appellant, the number of employees is less than 250 and, therefore, the appellant was under no legal obligation to provide canteen services.

The Bench was not amused with this inference and observed -

"3.I have also seen the said Larger Bench decision, though it is a fact that number of workers was one of the criteria for the Larger Bench to hold the services as input services but to make a distinction on the basis of reasoning adopted by the Larger Bench cannot be appreciated inasmuch as it is the ratio of the law declared by the Larger Bench which is applicable and not the reasoning.Apart from above, I also find that the Larger Bench held that the outdoor catering service is an input service irrespective of the fact that a subsidised food is provided or not or whether the cost of the food is given by the worker or by the factory."

Holding that the issue is also decided by the Karnataka High Court in the case of CCE, Bangalore Vs Stanzen Toyotetsu India (P) Ltd.2011-TIOL-866-HC-KAR-ST and CCE Vs ACE Designers Ltd.2011-TIOL-931-HC-KAR-CX by extending the benefit of CENVAT credit in respect of service tax paid by an outdoor caterer, the Bench set aside the order-in-appeal and allowed the appeal with consequential relief.

(See 2014-TIOL-630-CESTAT-DEL)