2008 (12) TMI 118 - AT - Service Tax

Service tax on canteen, employee transport and group health insurance qualifies as input-stage credit for manufacturers

CESTAT allowed the appeals, setting aside the impugned orders and granting consequential relief, holding that service tax paid on canteen services, ... Eligibility to avail the credit of Service Tax - Service tax amount paid by the service provider of Canteen Services, Rent-a-Cab Services and Group Health Insurance Services - HELD THAT:- It is undisputed that the appellant is a manufacturer and the canteen services and the transportation of the employees and group health insurance policy are all related to the employees who are working in the factory premises. We find that the question of input stage credit on the group insurance health policy for the employees/workers of the appellant would also fall under the same category as per the law decided by the Tribunal in the above two cases. Accordingly, we are of the considered view that the ratio as reproduced by us herein above of the decisions of the Tribunal will squarely cover the issue in favour of the appellant. Accordingly, the impugned orders are set aside and all the appeals are allowed with consequential relief, if any. Issues:- Eligibility of input stage credit for Service Tax paid by service providers of canteen services, transportation charges, and group health insurance services in relation to manufacturing activity.Analysis:The judgment by the Appellate Tribunal CESTAT Bangalore revolves around the eligibility of input stage credit for Service Tax paid by service providers of canteen services, transportation charges, and group health insurance services in relation to manufacturing activity. The appellant claimed that these services were related to the manufacturing activity, while the lower authorities held otherwise, leading to demands, penalties, and interest. The appellant's advocate argued that the services provided were integral to the manufacturing process, citing relevant Tribunal decisions. On the other hand, the respondent contended that these services were welfare measures for employees and not directly related to manufacturing activity, supporting the Commissioner's findings.The Tribunal analyzed the submissions and records, emphasizing that the appellant was a manufacturer and that the services in question were related to the employees working in the factory premises. Referring to a Tribunal decision, the Tribunal highlighted that Service Tax paid by outdoor catering services was eligible for input stage credit, citing the legislative intent and the context of the credit rules. The Tribunal also referenced another Tribunal decision regarding the transportation of employees, stating that such services indirectly related to manufacturing activities and were eligible for credit. The Tribunal concluded that the group insurance health policy for employees fell under the same category, ultimately ruling in favor of the appellant.In summary, the Tribunal set aside the impugned orders, allowing all appeals with consequential relief, if any. The judgment, pronounced on 31-12-2008, clarified the eligibility of input stage credit for Service Tax paid by service providers of canteen services, transportation charges, and group health insurance services in the context of manufacturing activity, aligning with relevant Tribunal decisions and legislative intent.