CENVAT - Post 01.04.2011 what is excluded under clause (C) of Rule 2(l) is only services 'primarily for personal use or consumption of any employee' - ST to extent of cost of Catering Services borne by company & not recovered from employees is admissible as credit: CESTAT
By TIOL News Service
MUMBAI, DEC 06, 2014: CENVAT credit on outdoor catering services was denied to the Appellant by the lower authorities. The period involved is December 2011 to December 2012.
Before the CESTAT, the Appellant submitted that the only ground on which the lower authorities have rejected the credit is that, as per the definition of input service amended w.e.f. 1st April 2011 any input service used for personal use or consumption by any employee is not eligible for credit.
It is further emphasized that the above exclusion would apply only where the service is used for personal use or consumption by any employee, whereas in the instant case outdoor catering service is used by the Appellant in relation to carrying out the business of manufacturing excisable goods; that the credit is claimed only to the extent the cost of such expenses is borne by the Company , and not recovered from the employees; and, therefore, the credit availed is legal and proper.
Reliance is placed on the TRU letter D.O.F. No.334/3/2011-TRU dated 28 February 2011 issued at the time of introduction of the said amendment, wherein it is stated:
"1.9 On the same lines, a service meant primarily for the personal use or consumption of employees will not constitute an input service. A list of specific services has also been given by way of example in the definition. Most of these services constitute a part of the cost-to-company package of the employee and are provided either free of charge or on concessional basis to company employees."
The appellant also adverted to the Circular No. 943/4/2011-CX ., dated 29 April 2011 which clarified:
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S.No.
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Issue
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Clarification
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2.
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Is the credit of only specified goods and services listed in the definition of inputs and input services not allowed such as goods used in a club, outdoor catering etc. or is the list only illustrative?
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The list is only illustrative. The principle is that cenvat credit is not allowed when any goods and services are used primarily for personal use or consumption of employees.
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It is further submitted that both the above letter/Circular clarify that outdoor catering service is per se not ineligible input service but it is not eligible for credit only when it is used for personal use or consumption of any employee or a sub-group of employees. It is also submitted that deletion of the word 'activities relating to business' from the definition of input service and adding specific clauses of inclusion and exclusion is only to make it explicit what was already implicit. Moreover, the Revenue has not produced any evidence to counter the submissions of the Appellant that they have indeed used the services during their normal business operations and not for personal use or consumption or any of their employees, and that they have claimed credit only to the extent of cost borne by the company.
In support, the appellant also relies on the decisions in ACE Designers Ltd. 2011 TIOL- 931 -HC-KAR- CX ,Stanzen Toyotetsu (I) Pvt. Ltd. 2011-TIOL-866-HC-KAR-ST , Coca Cola (I) Put. Ltd. 2009-TIOL-449-HC-MUM-ST.
The AR reiterated the findings of the lower authorities and submitted that since there is a specific exclusion provided in the definition of input service, outdoor catering service which is used or consumed by any employee should not be held to be eligible for credit.
The Single Member Bench observed -
"4.1 I find considerable force in the submissions made by the Ld. Counsel for the Appellant, that what is excluded is only the services 'primarily for personal use or consumption of any employee' under clause (C) of Rule 2(1) of the definition of input service. When the Government has specifically used the words such as "used primarily for personal use or consumption of any employee", the same has to be given due effect to. In the present case the outdoor catering service is used in relation to business activities of the Appellant and the service is used by all employees in general. Also, the Revenue has not rebutted the contention of the Appellant, that the costs of these input services form part of the cost of final product. I also find that the services covered in clause (B) of the definition are excluded from the ambit of cenvat credit without any such qualification of use of service for personal or official purpose.
4.2 I further find that even the Government while issuing the budget clarification or subsequent circular has clarified that what is not eligible is that service which is meant for personal use or consumption by an employee or the cost of which is included as part of salary of the employee as a cost to company basis. In the present case, the cost of such services, are admittedly borne by the company and not by the employee. Therefore, I hold that the Appellant has correctly claimed the cenvat credit on outdoor catering services…."
In fine, the orders of the Commissioner (Appeals) were set aside and the appeals allowed with consequential relief.
In passing : Another foodie battle begins…
(See 2014-TIOL-2460-CESTAT-MUM)
