Factory canteen catering as input service expands Cenvat credit where canteen costs form part of production expense.

Outdoor catering services used to run a factory canteen were treated as input service for Cenvat credit because the definition, read in its statutory context, was given a broad inclusive scope covering activities relating to business. The canteen obligation in factories employing the requisite number of workers strengthened the nexus between catering services and business operations, and subsidised canteen food was recognised as part of production cost. On that reasoning, catering charges paid for the canteen were considered business-related expenditure integral to factory operations, and Cenvat credit was held admissible.

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Issues: Whether outdoor catering services used for operating a factory canteen qualify as input service for Cenvat credit under Rule 2(1) of the Cenvat Credit Rules, 2004.

Analysis: The definition of input service was construed in its statutory context and in the light of the object of the credit rules. The inclusive part of the definition was treated as enlarging the scope of credit, and the expression "activities relating to business" was read broadly. The cost of subsidised canteen food was recognised as part of the cost of production, and the statutory obligation to maintain a canteen in factories employing the requisite number of workers reinforced the nexus between canteen services and business operations. Outdoor catering charges paid for running the canteen were therefore treated as business-related expenditure forming part of production cost.

Conclusion: Outdoor catering services used in the factory canteen constitute input service, and Cenvat credit is admissible in favour of the assessee.

Ratio Decidendi: Where canteen services are integrally connected with factory operations and form part of the cost of production, they fall within the inclusive ambit of input service as activities relating to business.

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