2014 (12) TMI 596 - AT - Service Tax

Tribunal grants cenvat credit for outdoor catering services, finding them used for business activities.

The Tribunal allowed the appeal, granting the Appellant cenvat credit on outdoor catering services. The Tribunal held that the services were used for ... Cenvat credit - input service - personal use or consumption by employee - outdoor catering services - cost-to-company packageCenvat credit - input service - personal use or consumption by employee - outdoor catering services - Whether cenvat credit on outdoor catering services is admissible where such services are used in relation to business activities and the cost is borne by the company, notwithstanding the exclusion of services 'used primarily for personal use or consumption of any employee' from the definition of input service. - HELD THAT: - The Tribunal examined the amendment to the definition of 'input service' which excludes services 'used primarily for personal use or consumption of any employee.' The exclusion is limited to services primarily for employees' personal use or consumption; it does not operate as a blanket prohibition on outdoor catering services. The appellant established that outdoor catering was used in the course of its business activities and was provided generally to employees as part of operations, with the cost borne by the company and not treated as part of employees' salary or cost-to-company. Revenue did not rebut these factual contentions before the lower authorities. The Tribunal also noted contemporaneous clarifications (including the Ministry/TRU and departmental circular) which explain that the list of examples is illustrative and that only services meant primarily for personal use or those included in an employee's cost-to-company are excluded. Clause (B) of the definition, which excludes certain services without qualification, is distinguishable from clause (C) which contains the 'personal use or consumption' qualification. Applying these principles, the Tribunal concluded that outdoor catering in the facts of this case falls within eligible input services and that cenvat credit was correctly claimed to the extent of cost borne by the company. [Paras 4]Impugned orders denying cenvat credit on outdoor catering services set aside; appeals allowed and credit upheld with consequential relief, if any.Final Conclusion: The Tribunal held that cenvat credit on outdoor catering services is admissible where the service is used in relation to business activity and the cost is borne by the company (and not included as employee remuneration); the orders denying credit for December 2011 to December 2012 were set aside and the appeals allowed. Issues involved:- Denial of cenvat credit on outdoor catering services- Interpretation of the definition of input service- Application of circulars clarifying eligibility of input services- Precedents supporting the claim for creditAnalysis:Denial of cenvat credit on outdoor catering services:The appeals were filed against Orders-in-Appeal upholding Orders-in-Original denying cenvat credit on outdoor catering services for the period December 2011 to December 2012. The lower authorities rejected the credit citing the amended definition of input service disallowing services used for personal use or consumption by employees.Interpretation of the definition of input service:The Appellant argued that outdoor catering services were used in relation to business activities, not for personal use or consumption by employees. They relied on TRU circular and Circular No. 943/4/2011-CX to support their claim that such services are eligible unless used for personal purposes. The Counsel emphasized that the cost of the services was borne by the company, not the employees, aligning with the pre-amendment eligibility criteria.Application of circulars clarifying eligibility of input services:The circulars highlighted by the Appellant clarified that outdoor catering services are not inherently ineligible for credit but become so only when used for personal consumption by employees. The lack of evidence from the Revenue to counter the Appellant's claims further strengthened the argument in favor of allowing the cenvat credit.Precedents supporting the claim for credit:The Counsel referenced decisions from the Hon'ble Karnataka High Court and the Hon'ble Bombay High Court, emphasizing that input services forming part of the cost of manufacturing are entitled to credit. These precedents supported the Appellant's contention that outdoor catering services, when used for business activities and not personal consumption, should be eligible for cenvat credit.In the judgment, the Tribunal sided with the Appellant, holding that the outdoor catering services were utilized for business activities, not personal use by employees. The Tribunal emphasized the specific language of the definition of input service and the absence of evidence to refute the Appellant's claims. Consequently, the impugned orders were set aside, and the appeals were allowed, granting the Appellant the cenvat credit on outdoor catering services.