2017 (8) TMI 1467 - HC - Central Excise

Industrial canteen catering services eligible for CENVAT credit | Assessee wins appeal

The High Court dismissed the Civil Miscellaneous Appeal, affirming the CESTAT's decision that the CENVAT Credit on catering services for operating an ... CENVAT Credit - input service - Manpower Recruitment or Supply Agency - Held that:- Though several grounds have been raised in the instant Civil Miscellaneous Appeal and reliance made on Maruti Suzuki Ltd., v. CCE, Delhi [2009 (8) TMI 14 - SUPREME COURT], Bombay High Court in the case of CCE, Nagpur vs. Ultratech Cement Ltd [2010 (10) TMI 13 - BOMBAY HIGH COURT] had discussed Maruti Suzuki's case thoroughly and distinguished the said decision. It has also held that for a service, to qualify as ‘Input Service’, the said service should be integrally connected with the business of the manufacture of final product. Though it is stated that Ultratech's case is under appeal before the Hon'ble Supreme Court, there are no averments, as to whether, the decision of the Bombay High Court has been stayed or set aside. It is settled law that mere filing of an appeal does not amount to stay. Till a final decision is taken on the said appeal, and when there is no stay against the same, the decision rendered in Ultratech's case is valid. The cenvat credit availed by the assessee on catering services is admissible and therefore, no interference is called for - appeal dismissed - decided against Revenue. Issues Involved1. Eligibility of CENVAT Credit on 'Manpower Recruitment or Supply Agency' services for operating an industrial canteen.2. Interpretation of 'Input Service' under Rule 2(l) of the CENVAT Credit Rules, 2004.3. Applicability of the Bombay High Court's decision in Ultratech Cement Ltd. case.4. Pending appeal in the Supreme Court regarding the eligibility of outdoor catering services for CENVAT Credit.Detailed Analysis1. Eligibility of CENVAT Credit on 'Manpower Recruitment or Supply Agency' services for operating an industrial canteen:The Commissioner of Central Excise, Coimbatore, challenged the eligibility of CENVAT Credit availed by the assessee on service tax paid for 'Manpower Recruitment or Supply Agency' services used for operating an industrial canteen. The adjudicating authority initially allowed the credit, stating that the service was used in relation to the business activity of the assessee. However, the Customs department appealed, and the Commissioner (Appeals) partially modified the order, allowing credit only to the extent of the service tax borne by the assessee and not on the service tax embedded in the value received from employees for food supplied.2. Interpretation of 'Input Service' under Rule 2(l) of the CENVAT Credit Rules, 2004:The core issue was whether the service used for operating the canteen qualifies as an 'Input Service' under Rule 2(l) of the CENVAT Credit Rules, 2004. The Tribunal upheld the Commissioner (Appeals) decision, stating that there was no need to interfere as the service was integral to the business activity of the assessee.3. Applicability of the Bombay High Court's decision in Ultratech Cement Ltd. case:The Bombay High Court in CCE, Nagpur vs. Ultratech Cement Ltd. had addressed a similar issue, concluding that services like outdoor catering, which are integrally connected to the business of manufacturing, qualify as 'Input Services.' The court held that the definition of 'Input Service' is broad and includes services used in relation to the business of manufacturing the final product. The Tribunal and the High Court in the present case relied on this judgment to affirm that the services used for operating the canteen are indeed 'Input Services.'4. Pending appeal in the Supreme Court regarding the eligibility of outdoor catering services for CENVAT Credit:Although the Ultratech Cement Ltd. case is under appeal before the Supreme Court, the High Court noted that there was no stay or reversal of the Bombay High Court's decision. Therefore, the decision remains valid and binding. The court emphasized that mere filing of an appeal does not amount to a stay, and until a final decision is made, the precedent set by the Bombay High Court stands.ConclusionThe High Court dismissed the Civil Miscellaneous Appeal filed by the Commissioner of Central Excise, Coimbatore, affirming the CESTAT's decision. The court held that the CENVAT Credit availed by the assessee on catering services is admissible, as these services are integrally connected with the business of manufacturing the final product. The appeal was answered in favor of the assessee and against the Revenue, with no costs awarded.