Cenvat credit on employee welfare services is admissible where catering, transport, and health insurance support manufacturing activity.

Cenvat credit is treated as admissible on outdoor catering, employee transportation by rent-a-cab, and group health insurance where these services are used directly or indirectly in relation to manufacture or as business-related activities under Rule 2(1) of the Cenvat Credit Rules, 2004. Outdoor catering for factory employees is regarded as part of the cost of production and, where applicable, a statutory canteen facility under the Factories Act, 1948. Employee transportation is linked to the manufacturing activity, and group health insurance is treated as a welfare measure connected with the business and workforce engaged in manufacture. On this approach, denial of credit is not sustainable.

---

---

Issues: Whether Cenvat credit was admissible on service tax paid for outdoor catering, employee transportation by rent-a-cab, and group health insurance as input services.

Analysis: The definition of input service under Rule 2(1) of the Cenvat Credit Rules, 2004 is wide and includes services used directly or indirectly in or in relation to manufacture as well as activities relating to business. Outdoor catering for factory employees was treated as part of the cost of production and, in appropriate cases, a statutory canteen facility under the Factories Act, 1948. Employee transportation was held to facilitate the manufacturing activity and fall within business-related input services. Group health insurance for employees was also treated on the same footing as a welfare measure connected with the business and workforce engaged in manufacturing.

Conclusion: Cenvat credit was admissible on all the disputed services and the denial of credit was not sustainable.

---