2012 (5) TMI 447 - AT - Service Tax

High Court: Service tax on canteen services is input; Tribunal dismisses Revenue's appeal

Commissioner of Central Excise, Mumbai-V Versus M/s GTC Industries Ltd.

Commissioner of Central Excise, Mumbai-V Versus M/s GTC Industries Ltd. - 2013 (30) S.T.R. 673 (Tri. - Mumbai) Issues:- Interpretation of whether service tax paid on canteen services is considered an input service in the manufacture of the final product.Analysis:The appeal in question arose from the Hon'ble High Court's order remanding the case to decide whether service tax paid on canteen services qualifies as an input service for the manufacture of the final product, in accordance with the decision in the Ultratech Cement Ltd. case. The respondents, engaged in manufacturing cigarettes, packing materials, and printing inks, availed CENVAT credit on service tax paid for outdoor caterer's services. The lower adjudicating authority disallowed the credit, leading to an appeal by the respondents. The Commissioner (Appeals) allowed the appeal, prompting the department to appeal to the Tribunal. A Larger Bench of the Tribunal ruled in favor of the respondents, which was challenged by the department in the Hon'ble Bombay High Court. The key question before the High Court was whether service tax paid on canteen services qualifies as an input service in the manufacture of the final product.The learned JDR contended that as per the Ultratech Cement Ltd. case, if the service tax is borne by the ultimate consumer, the manufacturer cannot claim credit for that portion of the tax. However, the learned Counsel argued that the cost of the canteen service being borne by the worker was not a point of contention in the case. Upon careful consideration, the Tribunal referred to the Ultratech Cement Ltd. case, emphasizing that services with a nexus to the manufacture of final products and the business of manufacturing would qualify as input services under Rule 2(1) of the Cenvat Credit Rules, 2004. The provision of canteen facilities to workers, mandated under the Factories Act, was deemed integral to the manufacturing business and thus qualified as an input service. The Tribunal found no merit in the Revenue's argument regarding the portion of the service cost borne by workers, as it was not a part of the proceedings at any stage, as evident from the High Court's question.In conclusion, the Tribunal upheld the order of the Commissioner (Appeals) and dismissed the Revenue's appeal, emphasizing the integral connection between canteen services and the business of manufacturing the final product, qualifying it as an input service under the relevant rules.