2016 (5) TMI 1077 - AT - Service Tax

Appeal allowed: Outdoor Catering & Staff Transportation Services qualify as input services under Cenvat Credit Rules

The Tribunal allowed the appeal, ruling that Outdoor Catering Services and Staff Transportation Services qualified as input services under the Cenvat ... Definition of input service - cenvat credit on Outdoor Catering Services - cenvat credit on Staff Transport Services - services 'used... in or in relation to the manufacture' doctrine - statutory obligation under the Factories Act as determinative of input service - prospective operation of amendment to Cenvat Credit RulesDefinition of input service - cenvat credit on Outdoor Catering Services - cenvat credit on Staff Transport Services - services 'used... in or in relation to the manufacture' doctrine - statutory obligation under the Factories Act as determinative of input service - Entitlement to cenvat credit on Outdoor Catering Services and Staff Transport Services as input services - HELD THAT: - The Tribunal applied the definition of 'input service' under the Cenvat Credit Rules, 2004 and relied on binding and persuasive High Court decisions which held that services which are used 'in or in relation to' manufacture fall within the scope of input service. Outdoor catering provided pursuant to statutory obligations under the Factories Act and staff transport which are indispensable to running the factory were treated as services that enter into the cost of production and are indirectly used in relation to manufacture. The Tribunal noted prior decisions of various High Courts and Benches of the Tribunal adopting the same principle and observed that where employees bear part of the cost (e.g., food borne by worker) that portion should be excluded; the appellant had already reversed such portion. In view of these authorities and the statutory definition, the impugned denial of credit on both Outdoor Catering and Staff Transport was held to be erroneous and was set aside. [Paras 4, 13, 14, 15, 16]Both Outdoor Catering Services and Staff Transport Services qualify as input services and the denial of cenvat credit is set aside with consequential relief.Prospective operation of amendment to Cenvat Credit Rules - Effect of Notification No. 3 of 2011 (amendment) on the period in dispute - HELD THAT: - The Tribunal rejected Revenue's contention that the amendment by Notification No. 3 of 2011 should apply to the disputed earlier period. It observed that Rule 1B of the Cenvat Credit Rules prescribes the date on which the amendment comes into force (1st April 2011) and therefore the amendment does not apply retrospectively to the period in dispute. [Paras 17, 18]The amendment effected by Notification No. 3 of 2011 does not apply to the period in dispute and cannot be given retrospective effect.Final Conclusion: The appeal is allowed: the cenvat credit denied on Outdoor Catering and Staff Transport Services is restored in view of the definition and judicial precedents treating such services as input services, and the 2011 amendment does not apply to the disputed period; consequential relief to the appellant is granted. Issues:Denial of cenvat credit on Outdoor Catering Services and Staff Transportation Services.Analysis:1. Background: The appeal was filed against the Commissioner (Appeal)'s order denying cenvat credit on Outdoor Catering Services and Staff Transportation Services, which was upheld by the order-in-original. The appellant, a manufacturer of 'Rotogravure Printing Cylinders,' availed cenvat credit on various services, including catering and staff bus transport.2. Contentions: The appellant argued that both Outdoor Catering Services and Staff Bus Services qualify as input services under the Cenvat Credit Rules 2004. They cited multiple judgments from different benches of the Tribunal and High Courts supporting their claim. The appellant emphasized that the services were directly related to their business activities and should be eligible for cenvat credit.3. Legal Analysis: The definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules 2004 was crucial in determining the eligibility of the services for cenvat credit. The Bombay High Court and the Karnataka High Court had previously addressed similar issues and concluded that services like Outdoor Catering and Staff Transport could be considered input services under certain conditions.4. Judicial Precedents: Various High Courts, including Karnataka, Gujarat, and Allahabad, had ruled in favor of considering Outdoor Catering Services and Staff Transport Services as input services based on statutory obligations and business necessities. The judgments highlighted that these services were essential for the manufacturing process and, therefore, fell within the ambit of 'input service.'5. Decision: Considering the precedents and the definition of 'input service,' the Tribunal concluded that both Outdoor Catering Service and Staff Transport Service qualified as input services. The denial of cenvat credit by the respondent was deemed incorrect, and the impugned order was set aside, allowing the appeal of the appellant with any consequential relief.In conclusion, the Tribunal's judgment clarified the eligibility of Outdoor Catering Services and Staff Transportation Services for cenvat credit, emphasizing their importance in the manufacturing process and aligning with previous legal interpretations.