Cenvat credit denied on employee-recovered service costs, as tax borne by the ultimate consumer is not creditable.

Cenvat credit on catering and rent-a-cab services was held inadmissible to the extent the service tax formed part of the cost recovered from employees, because that portion was borne by the ultimate consumer of the service. The Tribunal applied the Bombay High Court principle that credit cannot be claimed on tax embedded in a service cost passed on to the consumer. As no contrary factual or legal basis was shown, the denial of credit was sustained and the appeal failed.

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Issues: Whether cenvat credit of service tax was admissible on catering and rent-a-cab services to the extent the cost was recovered from employees.

Analysis: The Tribunal found the dispute to be covered by the Bombay High Court's ruling that credit is not allowable on the portion of service tax borne by the ultimate consumer of the service. Since the recovered amount represented service cost borne by employees, the manufacturer could not claim credit on that portion. No contrary factual or legal basis was shown to disturb the denial of credit.

Conclusion: The credit was not admissible to the extent it related to amounts recovered from employees, and the denial of cenvat credit was sustained.

Final Conclusion: The appeal failed and the order denying the disputed credit was upheld.

Ratio Decidendi: Cenvat credit cannot be taken for the portion of service tax embedded in the cost of a service recovered from the employee who is the ultimate consumer of that service.

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