CENVAT credit on canteen and guest-house services requires proven nexus with manufacturing; unsupported claims fail eligibility.

CENVAT credit on outdoor catering service used in a factory canteen was held inadmissible because the assessee employed fewer than 250 workers and had no statutory obligation to maintain a canteen, so the required nexus with manufacturing was not established. Credit on repair and maintenance of the guest house was also denied because the claimed business use was unsupported by evidence and the service was not shown to relate to manufacturing or business operations. The article states that both services fell outside the scope of eligible input services under Rule 2(l) of the CENVAT Credit Rules, 2004, and the demand was sustained.

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Issues: (i) Whether CENVAT credit was admissible on outdoor catering service used in the factory canteen for supplying food to workers; (ii) Whether CENVAT credit was admissible on repair and maintenance of the guest house.

Issue (i): Whether CENVAT credit was admissible on outdoor catering service used in the factory canteen for supplying food to workers.

Analysis: CENVAT credit on outdoor catering service is available only where a nexus with the manufacturing activity is established under Rule 2(l) of the CENVAT Credit Rules, 2004. The relevant case law recognised such nexus where the canteen service was rendered in discharge of the statutory obligation under Section 46 of the Factories Act, 1948, and the cost formed part of the cost of production. In the present case, the assessee admittedly employed less than 250 workers and had no statutory obligation to maintain a canteen. The earlier order allowing credit was held not to be a good precedent because the worker-strength aspect had not been properly examined.

Conclusion: CENVAT credit on outdoor catering service was not admissible and the finding was against the assessee.

Issue (ii): Whether CENVAT credit was admissible on repair and maintenance of the guest house.

Analysis: The claim that the guest house was used for accommodating business guests and for business meetings was unsupported by evidence. A guest house is ordinarily meant for lodging guests, and business meetings are ordinarily held in a conference room. In the absence of positive material establishing a connection with manufacturing or business operations, the service could not be treated as an input service under Rule 2(l) of the CENVAT Credit Rules, 2004.

Conclusion: CENVAT credit on repair and maintenance of the guest house was not admissible and the finding was against the assessee.

Final Conclusion: Both disputed services were held to be outside the scope of eligible input services, so the demand was sustained and the appeal failed.

Ratio Decidendi: CENVAT credit on an ancillary service is allowable only when a real nexus with the manufacturing activity is shown; where canteen service is not rendered pursuant to a statutory obligation and guest-house use is not proved by evidence, the service does not qualify as an input service.

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