Outdoor catering service tax credit is unavailable for worker-borne food costs, and penalty was set aside.

Service tax credit on outdoor catering services was unavailable to the extent the cost of food was borne by workers, so the credit claim required fresh quantification on that basis. The matter was remanded for re-adjudication of the quantified input credit dispute. On penalty, the facts were found insufficient to justify its imposition, and the penalty was set aside.

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Issues: (i) Whether service tax credit on outdoor catering services was allowable where part of the food cost was borne by the workers; (ii) whether penalty was sustainable.

Issue (i): Whether service tax credit on outdoor catering services was allowable where part of the food cost was borne by the workers.

Analysis: The settled position recognized that credit of service tax on outdoor catering services was not available to a manufacturer to the extent the cost of food was borne by the workers. Since the assessee accepted that some part of the food cost was borne by the workers, the entitlement to credit depended on re-quantification of the amount attributable to that portion.

Conclusion: Credit was not allowable to the extent the food cost was borne by the workers, and the demand required fresh quantification.

Issue (ii): Whether penalty was sustainable.

Analysis: In the facts and circumstances, the imposition of penalty was not warranted.

Conclusion: Penalty was set aside.

Final Conclusion: The matter was sent back for fresh adjudication on the quantified tax credit dispute, while the penalty stood deleted.

Ratio Decidendi: Service tax credit on outdoor catering services is unavailable to the extent the cost of food is borne by workers, and penalty is unwarranted where the facts do not justify it.

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