High Court rules outdoor catering services qualify as 'input services' under CENVAT Credit Rules

The High Court ruled in favor of the assessee, determining that outdoor catering services availed by the appellant qualified as 'input services' under the CENVAT Credit Rules. The Tribunal's decision to disallow CENVAT credit for catering services was overturned, emphasizing that services mandated by law, such as outdoor catering under the Factories Act, are integrally connected with the business of manufacturing. The Court directed the Excise Authorities to verify the CENVAT credit reversed by the assessee for compliance.

---

---

Issues Involved:
1. Whether "Outdoor catering Services" availed by the Appellant in its factory qualified as an 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004, during the period October 2008 to July 2009.
2. Whether the Tribunal was correct in disallowing CENVAT credit to the Appellant for 'outdoor catering service' for the period October 2008 to July 2009.

Issue-Wise Detailed Analysis:

1. Qualification of "Outdoor Catering Services" as 'Input Service':

The core issue is whether the assessee can utilize the Cenvat credit facilities for outdoor catering services provided in the factory for its employees as an input service. The assessee is a manufacturer of "Wiring Harness & Parts" and availed Cenvat Credit on services including "Outdoor Catering," "Rent-a-Cab," and "Pest Control and Water Treatment" totaling Rs. 3,93,232/- during October 2008 to July 2009. A Show Cause Notice was issued disallowing the credit on the ground that these services do not fall under "Input Service." The Original Authority confirmed the demand along with interest and imposed a penalty. The Commissioner (Appeals) upheld the decision, stating that the assessee did not provide evidence that the expenditure on these services formed part of the cost of production.

The Tribunal allowed Cenvat Credit for "Transport Service" and "Pest Control Service" but disallowed it for "Catering Service," reasoning that under the Factories Act, 1948, a canteen is mandatory, and no input credit on catering service shall be admissible.

The High Court referred to a similar case in C.M.A.Nos.2 of 2010 and the judgment dated 13.02.2015, which followed the Bombay High Court's decision in CCE v. Ultratech Cement Ltd. (2010-TIOL-745-HC-MUM-ST). The Bombay High Court concluded that the definition of 'input service' is broad and includes services used in relation to the business of manufacturing final products. The Court held that services integrally connected with the business of manufacturing, such as outdoor catering mandated by the Factories Act, 1948, qualify as input services.

2. Tribunal's Disallowance of CENVAT Credit:

The Tribunal's decision to disallow CENVAT credit for outdoor catering services was challenged by the assessee. The High Court noted that the Bombay High Court's decision in Ultratech Cement Ltd. established that services integrally connected with the business of manufacturing final products qualify as input services. The High Court emphasized that the definition of 'input service' is inclusive and covers services used in relation to the business of manufacturing, not just those directly involved in the manufacturing process.

The High Court cited the Supreme Court's interpretation in Maruti Suzuki Ltd. v. CCE, which highlighted that the definition of 'input service' includes services with a nexus to the manufacturing process. The Court agreed with the Bombay High Court's reasoning that services mandated by law, such as outdoor catering under the Factories Act, are integrally connected with the business of manufacturing and thus qualify for CENVAT credit.

Conclusion:

The High Court concluded that the issue of availing CENVAT credit for outdoor catering services is settled in favor of the assessee. The Tribunal's order disallowing the credit was set aside, and the appeal was allowed. The Court directed that the Excise Authorities verify the CENVAT credit reversed by the assessee to ensure compliance.

Order:
i) The issue is answered in favor of the assessee and against the Revenue.
ii) The appeal is allowed, setting aside the Tribunal's order regarding "Outdoor catering services."
iii) No costs.

---