Cenvat credit on factory canteen catering services allowed as statutory canteen facilities form an indispensable incident of manufacture.

Service tax paid on outdoor catering services used in a factory canteen was treated as eligible input service for Cenvat credit. The analysis applied the Larger Bench ruling in GTC Industries and the Gujarat High Court's view that canteen under the Factories Act is a statutory and indispensable incident of manufacture. On that basis, outdoor catering services for the factory canteen fell within the scope of input service, and no separate showing that the catering cost formed part of the assessable value or cost of production was required. Credit was therefore available to the assessee.

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Issues: Whether service tax paid on outdoor catering services used in a factory canteen qualifies as input service for availing Cenvat credit.

Analysis: The challenge turned on whether credit on canteen-related outdoor catering services was available only if the assessee proved that the catering cost was included in the assessable value or cost of production. The decision of the Larger Bench in GTC Industries was treated as covering the issue, and the later Gujarat High Court ruling on canteen services under Section 46 of the Factories Act was relied upon to hold that providing canteen facilities is a statutory and indispensable incident of manufacture. In that setting, outdoor catering services used in the factory canteen were held to fall within the scope of input service, and the rule permitting credit on service tax paid on input services was applied without importing any additional requirement to prove cost inclusion.

Conclusion: The service tax paid on outdoor catering services in the factory canteen was held eligible for Cenvat credit, and the assessee succeeded.

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