2016 (3) TMI 441 - HC - Service Tax

Service Tax Credit Eligibility for Outdoor Catering Upheld in Appeal

The Commissioner of Central Excise Versus M/s. Bharath Heavy Electricals Ltd., The Customs, Excise & Service Tax Appellate Tribunal

The Court upheld the Tribunal's decision in an appeal under Section 35G of the Central Excise Act, 1944, regarding availing service tax credit on outdoor ... Cenvat Credit - input service - Outdoor catering services provided to the employees of the factory - Held that:- the Commissioner did not dispute the fact that the outdoor catering services were rendered to persons engaged by the assessee in or in relation to their business activities. On the contrary, the Commissioner, in his Order in Original, recorded a finding that the services of outdoor catering involved mere subsidisation of food consumed in the canteen by the employees and therefore, it was in the nature of perquisites enjoyed by the employees. Hence, when there is a clear finding of the Commissioner in his Order in Original that these services were actually consumed by the employees of the assessee, the question of the Tribunal recording a finding does not arise. Also a notification issued in Notification No.3/2011 dated 1.3.2011 excluding the outdoor catering services came into effect on 1.4.2011 but here the period relates to a period prior to 1.4.2011. Therefore, the Tribunal's order is correct. - Decided against the revenue Issues:1. Appeal under Section 35G of the Central Excise Act, 1944 challenging the order of the Customs, Excise and Service Tax Appellate Tribunal.2. Availing credit of service tax paid on outdoor catering services as input services for payment of duty on final products.3. Show cause notices issued regarding the availed credit and subsequent penalties imposed.4. Tribunal's decision allowing the appeal against the Commissioner's order confirming the demand and imposing penalties.5. Substantial questions of law raised by the Revenue for consideration by the Court.6. Interpretation of Rule 2(1) of CENVAT Credit Rules, 2004 regarding the eligibility of outdoor catering services as input services.7. Previous rulings favoring the assessees based on decisions of other High Courts and the Supreme Court.8. Dispute over whether outdoor catering services were actually used in or in relation to the manufacture of final products or in providing output services.9. Finding of fact regarding the consumption of outdoor catering services by the employees.10. Effect of a notification excluding outdoor catering services issued after the relevant period.11. Conclusion and dismissal of the civil miscellaneous appeal against the Revenue.Analysis:The judgment involves an appeal challenging the Customs, Excise and Service Tax Appellate Tribunal's order concerning the availing of service tax credit on outdoor catering services as input services for duty payment on final products. The Commissioner's order confirming the demand and imposing penalties was overturned by the Tribunal, leading to the Revenue's appeal raising substantial legal questions. The main contention was the eligibility of outdoor catering services as input services under Rule 2(1) of CENVAT Credit Rules, 2004. The Court noted previous rulings favoring assessees based on decisions of other High Courts and the Supreme Court.The dispute centered on whether the outdoor catering services were actually utilized in the manufacturing process or providing output services. The Commissioner's finding that the services were consumed by the employees was crucial, leading the Court to reject the Revenue's argument of lack of a factual finding. Additionally, the effect of a notification excluding outdoor catering services issued after the relevant period was considered. Despite the Revenue's contentions, the Court upheld the Tribunal's decision, answering the legal questions against the Revenue and ultimately dismissing the civil miscellaneous appeal.In conclusion, the judgment provides a detailed analysis of the issues surrounding the availing of service tax credit on outdoor catering services, emphasizing the importance of factual findings and legal interpretations under the CENVAT Credit Rules. The Court's decision, based on previous rulings and the Commissioner's findings, highlights the significance of factual evidence in such cases and the application of relevant legal provisions.