Cenvat credit on employee catering and transport services upheld where both had nexus with manufacturing operations and statutory factory obligations.

Cenvat credit was held admissible on service tax paid for outdoor catering and rent-a-cab services used in the factory for employees because both services had an integral nexus with manufacturing operations under the wide definition of input service in Rule 2(l) of the Cenvat Credit Rules, 2004. Canteen facilities provided to workers under the statutory obligation in Section 46 of the Factories Act, 1948 were treated as business-related, and the amendment by Notification No. 3/2011 was applied only prospectively from 1 April 2011. Rent-a-cab services used to transport employees to the factory were also treated as directly connected with production and not as a mere welfare measure.

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Issues: (i) Whether Cenvat credit was admissible on service tax paid for outdoor catering services provided in the factory for employees; and (ii) whether Cenvat credit was admissible on service tax paid for rent-a-cab services provided in the factory for employees.

Issue (i): Whether Cenvat credit was admissible on service tax paid for outdoor catering services provided in the factory for employees.

Analysis: The definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 is wide and includes services used in relation to the business of manufacturing final products. Where canteen facilities are provided to workers under the statutory obligation under Section 46 of the Factories Act, 1948, the service has an integral nexus with the manufacturing business. The amendment made by Notification No. 3/2011 was also held to operate prospectively from 1 April 2011 and not to govern the prior period in dispute.

Conclusion: Cenvat credit on outdoor catering services was admissible and the Revenue's challenge failed.

Issue (ii): Whether Cenvat credit was admissible on service tax paid for rent-a-cab services provided in the factory for employees.

Analysis: Rent-a-cab service used to transport employees to the factory has a direct bearing on the manufacturing activity and forms part of the business of manufacture. Such service is not a mere welfare measure when it is connected with ensuring the availability of the workforce for production, and therefore falls within the scope of input service under Rule 2(l) of the Cenvat Credit Rules, 2004.

Conclusion: Cenvat credit on rent-a-cab services was admissible and the Revenue's challenge failed.

Final Conclusion: The controversy was resolved in favour of the assessee on both categories of services, with the Revenue's appeals failing and the assessees' appeals succeeding.

Ratio Decidendi: Services mandated by statute or integrally connected with the business of manufacturing qualify as input services where they bear a nexus with the manufacture and operation of the factory, and a subsequent amendment excluding such services operates only prospectively unless expressly made retrospective.

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