Mandatory canteen catering counts as input service; later exclusionary amendment applies only prospectively.

Outdoor catering used to provide mandatory canteen facilities for factory employees qualifies as input service under Rule 2(l) of the CENVAT Credit Rules, because the service is integrally connected with manufacturing business and is required by law under the Factories Act. CENVAT credit is therefore admissible for the relevant prior period. The 2011 amendment excluding outdoor catering services applies only from its stated commencement on 1 April 2011 and does not operate retrospectively in the absence of express legislative intent. The disputed credit was accordingly upheld and the Revenue's challenge failed.

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Issues: (i) Whether outdoor catering services provided in the factory for employees qualify as input service for availment of CENVAT credit. (ii) Whether the 2011 amendment excluding outdoor catering services applies retrospectively to the period in dispute.

Issue (i): Whether outdoor catering services provided in the factory for employees qualify as input service for availment of CENVAT credit.

Analysis: The definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 is wide and includes services used directly or indirectly in or in relation to manufacture as well as services relating to business. Where canteen facilities are provided because of the statutory obligation under the Factories Act, the engagement of an outdoor caterer has an integral connection with the business of manufacturing the final product. The service is therefore not a mere welfare activity divorced from manufacture.

Conclusion: Outdoor catering services used to provide mandatory canteen facilities to employees qualify as input service, and CENVAT credit is admissible.

Issue (ii): Whether the 2011 amendment excluding outdoor catering services applies retrospectively to the period in dispute.

Analysis: The amendment introduced by Notification No. 3/2011 was stated to come into force on 1 April 2011. The exclusion of outdoor catering services could not be applied to periods prior to its commencement merely because the rule was substituted. The amendment operated prospectively.

Conclusion: The 2011 exclusion of outdoor catering services does not apply retrospectively to the disputed period.

Final Conclusion: The disputed credit on outdoor catering services was held admissible for the prior period, the Revenue appeals failed, and the assessee appeals succeeded.

Ratio Decidendi: Services mandated by law and integrally connected with the business of manufacture fall within input service under Rule 2(l), and a later exclusionary amendment operates only from its stated commencement unless expressly made retrospective.

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