By TIOL News Services

MUMBAI, AUG 26, 2014: IN the words of the CESTAT, the learned Commissioner of Central Excise, Mumbai-II has confirmed a service tax demand of Rs.12,92,408/- & imposed interest and equivalent penalty against the appellant on the ground that theyare not eligible to take CENVAT credit of the service tax paid on Outdoor catering service.Inasmuch as it is the view of the adjudicating authority that the benefit of ‘input service tax' credit on outdoor catering services would be available only in respect of factories governed by Factories Act, 1948 and not to other establishments.

The period of demand is 2004-05 and 2008-09.

The cellular company is before the CESTAT.

It is submitted that Outdoor Catering service is an input service in terms of rule 2(l) of the CCR, 2004 and the same view has been confirmed by the Bombay High Court in the case of Ultratech Cement Ltd.2010-TIOL-745-HC-MUM-CX but the adjudicating authority has taken a narrow view in the matter.It is also submitted that there is no provision either in CCR or elsewhere putting such a restriction in respect of outdoor catering services.Inasmuch as whether the establishment is a factory or otherwise, catering provided to employees is a benefit accorded to the employees and has an integral connection with the provision of output service rendered and, therefore, stay be granted against the impugned demand.

The Revenue representative supported the order of the adjudicating authority and reiterated the finding that only in respect of factories governed by the Factories Act, 1948 outdoor catering services would be considered as an eligible input service.

The Bench observed –

++ In the Ultratech Cement case the High Court never stated that catering service has to be rendered to factories governed by the Factories Act, 1948 so as to be eligible for the benefit of CENVAT credit.

++ The High Court in that case only observed that there was also a statutory requirement of providing catering services to the employees under the Factories Act.This does not mean that in respect of other establishments which do not come under the purview of Factories Act, 1948, CENVAT credit can be denied.

++ During the impugned period, there is no restriction placed in the CENVAT Credit Rules for availment of CENVAT credit in respect of outdoor catering services.So long as the cost incurred is not recovered from the employees, the benefit of CENVAT credit has to be extended.

Holding that there is no merit in the view taken by the adjudicating authority, the Bench observed that the appellant had made out a strong case for grant of stay.Accordingly, pre-deposit was waived and the recovery of the adjudged dues was stayed.

(See 2014-TIOL-1609-CESTAT-MUM)