Admissibility of Cenvat Credit on Catering Services: Manufacturer's Portion Eligible for Credit

The case involved the admissibility of cenvat credit on outdoor catering services. The Member (Judicial) found that while outdoor catering service is an admissible input service, cenvat credit can only be allowed on the portion of the cost borne by the manufacturer, excluding the portion recovered from employees. The matter was remanded to determine the amount recovered from employees and to quantify the allowable credit. Emphasizing the intertwined nature of the issues, the Member highlighted the need for a fair opportunity for the respondent in the adjudication process and disposed of the appeal through remand for further proceedings.

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Issues involved:
1. Admissibility of cenvat credit on outdoor catering service.

Analysis:
The appeal was directed against an Order-in-Appeal where the Ld. Commissioner rejected the appeal filed by the revenue, upholding the Order-in-Original. The main issue in this case was whether cenvat credit is admissible on the input service of 'outdoor catering service.' The Ld. A.C. (AR) for the revenue argued that the cenvat credit should not be allowed if the cost of catering charges is recovered from employees, citing judgments by the Larger Bench and the Hon'ble Bombay High Court. On the other hand, the Ld. Counsel for the respondent contended that there was no allegation in the show cause notice regarding the cost of food recovered from employees, and therefore, the revenue could not raise this issue at this stage. He argued that cenvat credit should be allowed on outdoor catering service without delving into who bears the cost, referencing various judgments in support of his argument.

After considering both sides' submissions, the Member (Judicial) found that outdoor catering service is an admissible input service, but credit can only be allowed on the portion of the cost borne by the manufacturer. The portion of the cost recovered from employees cannot be considered for cenvat credit, as per the judgment of the Hon'ble Bombay High Court. The matter was remanded to verify whether the cost was recovered from employees and the quantum thereof, as this aspect was not considered by the lower authority. The Member emphasized that the issue of the cost recovered from employees was not a fresh issue but intertwined with the admissibility of cenvat on outdoor catering service. The matter was remanded to the adjudicating authority to quantify the actual credit allowable to the respondent. The Member highlighted that penalizing the respondent for an interpretation issue related to cenvat credit would be unjust, and the respondent should be given a fair opportunity for a denovo adjudication. The appeal was disposed of through remand for further proceedings.

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