CENVAT credit on outdoor catering is unavailable for the service tax portion recovered from employees.

CENVAT credit on outdoor catering service is available only to the extent the service tax is borne by the manufacturer, not on the portion recovered from employees. The stated principle is that credit cannot be claimed where the catering cost is passed on to the worker as the ultimate consumer of that service. A Bombay High Court view is followed, while the Gujarat High Court decision relied on by the assessee is distinguished because it did not clearly show that the tax burden had been shifted to employees. The article notes that credit is therefore inadmissible on the recovered portion.

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Issues: Whether CENVAT credit of service tax paid on outdoor catering service is admissible to the manufacturer to the extent the cost of food is recovered from employees.

Analysis: The catering service was treated as an input service only to the extent it was incurred by the assessee. Following the Bombay High Court, credit cannot be claimed on that portion of service tax which is ultimately borne by the worker as the consumer of the service. The Gujarat High Court decision cited by the respondent was distinguished on facts, as it did not clearly show that the service tax burden had been passed on to employees.

Conclusion: CENVAT credit is not admissible on the portion of service tax embedded in the catering cost recovered from employees, and the Revenue's challenge succeeds to that extent.

Final Conclusion: The order granting full credit was modified, and the Revenue appeal was allowed in relation to the service tax component.

Ratio Decidendi: Where the cost of outdoor catering service is recovered from employees, the manufacturer cannot take CENVAT credit of the corresponding service tax because that portion is borne by the ultimate consumer of the service.

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