2011 (10) TMI 149 - AT - Service Tax

CESTAT rules canteen services eligible for Cenvat credit under Factories Act, 1948, remands for further verification.

Commissioner of Central Excise Ahmedabad Versus M/s. Nova Petrochemicals Limited

The Appellate Tribunal CESTAT, AHMEDABAD, rejected the Revenue's appeal regarding the allowance of Cenvat credit for service tax paid on catering ... Input services - services upto the place of removal - canteen services - held that:- there is no doubt that credit is admissible. - the matter is required to be remanded to the original adjudicating authority for the purpose of verification as to whether the respondents have recovered any amount from the employees for providing such facilities and if any amount is recovered, the credit may not be allowed up to that extent. Issues:- Allowance of Cenvat credit for service tax paid on catering services- Interpretation of the definition of input services under the Factories Act, 1948Analysis:1. The main issue in this case revolves around the allowance of Cenvat credit for service tax paid on catering services. The Revenue appealed against the decision to allow the credit, arguing that only services directly related to the manufacture of final products should be considered as input services. The respondents, on the other hand, cited the Factories Act, 1948, and previous judgments from the Hon'ble High Courts of Gujarat and Bombay to support their position that canteen services are indeed eligible for the credit.2. The presiding judge, Mr. B.S.V. Murthy, examined the submissions from both parties and noted that the issue had already been settled by previous decisions of the Hon'ble High Courts of Gujarat and Bombay. The judge agreed with the respondents that canteen facilities, mandated by the Factories Act, 1948, are directly related to manufacturing activities. Therefore, the judge concluded that the credit for service tax paid on catering services is admissible. However, the matter was remanded to the original adjudicating authority for verification regarding any amount collected from employees for providing canteen services, with a directive that credit should not be allowed for such recovered amounts.3. In the final decision, the appeal filed by the Revenue was rejected due to lack of merit, and the case was remanded solely for the purpose of verifying whether the respondents had collected any amounts from employees for canteen services. The cross objections filed by the respondents were also disposed of as a result of the judgment.This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, the judge's reasoning, and the final decision rendered by the Appellate Tribunal CESTAT, AHMEDABAD.