2013 (1) TMI 503 - AT - Central Excise

Tribunal upholds denial of CENVAT credit on catering & guest house services, emphasizing evidentiary requirements.

M/s IFB Industries Ltd. Versus The Commissioner of Central Excise. Bangalore.

The Tribunal upheld the denial of CENVAT credit on Outdoor Catering Service and Repair/Maintenance of Guest House for the disputed period, amounting to ... CENVAT credit on Outdoor Catering Service - denial as these were not input services defined under Section 2(l) of the CCR 2004 - Held that:- As decided in CCE, MUMBAI-V Versus GTC INDUSTRIES LTD.[2008 (9) TMI 56 - CESTAT MUMBAI] upheld by in the case of Commissioner vs. Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] that nexus between outdoor catering service and the manufacturing activity of the assessee is found as the cost of subsidised food supplied by them to workers in the factory canteen by the use of outdoor catering service was included in the cost of production of excisable goods in the factory. Also that it was mandatory for a factory having more than 250 workers to provide canteen facility within the factory premises under Section 46 of the Factories Act, 1948 as decided in Stanzen Toyotetsu India (P.) Ltd. case [2011 (4) TMI 201 - KARNATAKA HIGH COURT]. In the instant case, admittedly, the appellant did not have any statutory obligation to provide canteen service during the period of dispute inasmuch as they employed less than 250 workers during that period. Had the appellant employed more than 250 workers in their factory during the said period, they would have contended to that effect in their reply to the show-cause notice. Therefore, the submission of consultant that the number of workers was not mentioned in the show-cause notice and, hence, the status of input service cannot be denied to outdoor catering service on the basis of the number of workers cannot be accepted - the impugned order denying CENVAT credit to the assessee on outdoor catering service cannot be interfered with - against assessee. CENVAT credit on guest house maintenance service - Held that:- The claim of the appellant that guest house was used for accommodating business guests and conducting business meetings is an ipse dixit with no evidentiary support. Some positive evidence is required to substantiate the appellant's claim that their guest house was used for conducting business meetings and accommodating business guests. Therefore, the activity of repairing/maintaining the guest house cannot be held to have any nexus with the manufacturing activity of the assessee. See HINDUSTAN ZINC LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II (2011 (3) TMI 498 - CESTAT, NEW DELHI) - against assessee. Issues:1. Denial of CENVAT credit on Outdoor Catering Service and Repair/Maintenance of Guest House.2. Entitlement to CENVAT credit on Outdoor Catering Service.3. Consideration of Repair/Maintenance of Guest House as an input service.4. Nexus between the services provided and the manufacturing activities.Analysis:1. The appeal challenged the demand of service tax and education cess amounting to Rs. 88,123 for the period from January to August 2009. The denial of CENVAT credit on Outdoor Catering Service and Repair/Maintenance of Guest House was based on the argument that these did not qualify as input services under Section 2(l) of the CENVAT Credit Rules, 2004. The authorities also demanded interest on the CENVAT credit amount.2. The appellant contended that they were eligible for CENVAT credit on outdoor catering service used in their factory canteen for providing food to workers. They relied on previous decisions where CENVAT credit was allowed on similar services. The consultant argued that the maintenance/repairs of the guest house, used for business activities, should be considered an input service based on precedents.3. The respondent argued that the appellant did not have a statutory obligation to maintain a canteen for workers as they did not employ 250 or more workers during the dispute period. They contended that there was no nexus between the services and the manufacturing activities, citing relevant case laws.4. The Tribunal analyzed the nexus between outdoor catering service and manufacturing activity. It was established that providing canteen service was a statutory obligation for factories with more than 250 workers. Since the appellant did not meet this criterion during the dispute period, the claim for CENVAT credit on outdoor catering service was denied. The Tribunal emphasized the importance of factual evidence to substantiate claims regarding the use of guest houses for business purposes.5. The Tribunal concluded that the appellant was not entitled to CENVAT credit on outdoor catering service and repair/maintenance of the guest house for the disputed period. The impugned order denying the credit was upheld, and the appeal was dismissed.