2008 (9) TMI 56 - AT - Service Tax

Outdoor catering for factory canteens qualifies as input service under Rule 2(1); Cenvat credit admissible

COMMISSIONER OF CENTRAL EXCISE, MUMBAI-V Versus GTC INDUSTRIES LTD.

CESTAT held that outdoor catering services provided in a manufacturer's factory canteen constitute input services under Rule 2(1); the term 'include' may ... Definition and scope of 'input service' under Rule 2(1) - services provided by the outdoor caterers in the canteen of the manufacturer - Meaning of word 'mean and include' - HELD THAT:- The word 'include' is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to 'mean and include', and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions. It is clear from the record that cost of subsidised food is included in the cost of production. We further note that in case of a factory having more than 250 workers under Section 46 of the Factories Act, 1948, it is mandatory on the part of the factories to provide a canteen facility within the factory premises and failure to comply with the provisions of Section 46 attracts prosecution and penalty under Section 92 of the Factories Act, 1948. A service tax on outdoor catering services is paid by the manufacturer for running the canteen, irrespective of the fact that a subsidised food is provided or not. Whether the cost of food is borne by the worker or by the factory, the same will form part of expenditure incurred by the manufacturer and will have a bearing on the cost of production. In view of the same, employment of outdoor caterer for providing catering services has to be considered as an input service relating to the business and Cenvat credit in respect of the same will be admissible. We, therefore, concur with the views of the tribunal expressed in the case of Victor Gaskets India Ltd. and Others [2008 (2) TMI 61 - CESTAT MUMBAI]. The reference is answered accordingly and the matter is sent back to referral Bench for passing appropriate orders. Issues Involved:1. Definition and scope of 'input service' under Rule 2(1) of the Cenvat Credit Rules, 2004.2. Whether services provided by outdoor caterers in the canteen of a manufacturer qualify as 'input service' for credit purposes.Issue-wise Detailed Analysis:1. Definition and Scope of 'Input Service' under Rule 2(1) of the Cenvat Credit Rules, 2004:The judgment examines the definition of 'input service' as per Rule 2(1) of the Cenvat Credit Rules, 2004, which includes services used directly or indirectly in the manufacture of final products and clearance up to the place of removal. The definition is split into a main part and an inclusive part, which expands the scope to services related to setting up, modernization, renovation, or repairs of a factory, and other business-related activities.The revenue argued that the inclusive clause is exhaustive and limited to the services explicitly listed, meaning outdoor catering services are not covered. Conversely, the appellant argued that the term 'includes' is intended to enlarge the scope, not restrict it, citing the Apex Court's interpretation in Regional Director v. High Land Coffee Works, which states that 'include' generally enlarges the meaning of preceding words.The Tribunal considered various Supreme Court decisions, including Hamdard (Wakf) Laboratory v. Dy. Labour Commissioner and Reserve Bank of India v. Peerless Finance, which discussed the interpretation of inclusive definitions. It was concluded that the inclusive part of the definition should not be read restrictively.2. Whether Services Provided by Outdoor Caterers in the Canteen of a Manufacturer Qualify as 'Input Service' for Credit Purposes:The Tribunal analyzed whether outdoor catering services fall under 'activities relating to business' as per the inclusive part of the definition. The revenue's position was that only services akin to accounting, auditing, financing, recruitment, and quality control should be considered, excluding outdoor catering.The appellant countered that 'such as' is illustrative, not exhaustive, and any business-related activity should be covered. They referred to the Supreme Court's decision in Good Year India Ltd. v. Collector of Customs, which held that 'such as' is illustrative. They also highlighted the Ministry of Finance's press note and draft rules, indicating that the intent was to allow credit for all services forming part of the assessable value.The Tribunal noted that expenses for canteen services are part of the cost of production, as per CAS-4, which includes subsidized food as part of direct wages and salaries. Additionally, under Section 46 of the Factories Act, 1948, providing a canteen is mandatory for factories with more than 250 workers, making it a business necessity.The Tribunal concluded that employing outdoor caterers for canteen services is an input service related to business, eligible for Cenvat credit. They concurred with the Tribunal's views in Victor Gaskets India Ltd. and Others, allowing credit for outdoor catering services.Conclusion:The Tribunal ruled that outdoor catering services provided in the canteen of a manufacturer qualify as 'input service' under Rule 2(1) of the Cenvat Credit Rules, 2004, and are eligible for Cenvat credit. The matter was sent back to the referral Bench for appropriate orders.