Input service coverage for canteen and staff transport services sustained Cenvat credit where business nexus and statutory obligation were shown.

Outdoor catering services provided under a statutory obligation and staff transportation services used in connection with manufacture were treated as input services under Rule 2(l) of the Cenvat Credit Rules, 2004, because they were integrally connected with business activity and their cost formed part of the cost of production. The later exclusion of such services was held inapplicable to the period in dispute, as it took effect only from 01.04.2011. On that basis, denial of Cenvat credit was unsustainable and credit was allowed with consequential relief.

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Issues: Whether cenvat credit was admissible on outdoor catering services and staff transportation services as input services under Rule 2(l) of the Cenvat Credit Rules, 2004.

Analysis: The definition of input service covers services used directly or indirectly in or in relation to manufacture and also services used in relation to activities connected with business. Outdoor canteen facilities, where provided under a statutory obligation, form part of the conditions of service and the cost is included in the cost of production. The judicial view relied upon treated canteen and allied welfare services as input services, subject to exclusion of any portion of tax borne by the workers. The later amendment excluding such services could not govern the period in dispute because it was made effective only from 01.04.2011. The same reasoning applied to staff transport services used in connection with the business of manufacture.

Conclusion: Both outdoor catering services and staff transportation services fell within the ambit of input service, and denial of cenvat credit was unsustainable.

Final Conclusion: The appeal succeeded and the order denying credit was set aside with consequential relief.

Ratio Decidendi: Services that are statutorily required or otherwise integrally connected with manufacture and business activity, and whose cost enters the cost of production, qualify as input services for cenvat credit.

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