Canteen Services as Input Service: statutory factory canteen costs qualified for CENVAT credit due to indirect nexus with manufacture.

Canteen services provided in factory premises, including outdoor catering used to operate the canteen, qualified as input service under Rule 2(l) of the CENVAT Credit Rules, 2004 because the canteen facility was a statutory requirement under the Factories Act and had an indirect nexus with manufacture and business. The court held that an input service need not be used in the actual production process if it is used directly or indirectly in relation to manufacture or business, and Rule 3 did not add any further restriction beyond the statutory definition. CENVAT credit on the service tax paid was therefore admissible, and the demand and penalty could not be sustained.

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Issues: Whether canteen services provided in the factory premises, including outdoor catering services used for operating the canteen, qualify as input service for availment of CENVAT credit.

Analysis: The definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 covers services used directly or indirectly in or in relation to manufacture, and also services relating to business. Provision of canteen facility was a statutory requirement under Section 46 of the Factories Act and was indispensable for running the factory. Such service therefore had an indirect nexus with manufacture and fell within the scope of input service. Rule 3 did not impose any further restriction on the nature of input service beyond the statutory definition.

Conclusion: Canteen services and the service tax paid on outdoor catering services used for the canteen were eligible input services, and CENVAT credit was admissible; the appeal failed.

Final Conclusion: The demand and penalty could not be sustained because the disputed service was held to be covered by the CENVAT credit regime.

Ratio Decidendi: A service mandated by law and indispensable for carrying on manufacture, though not used in the actual production process, may qualify as input service if it bears an indirect nexus with manufacture or with business of the factory.

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