2017 (1) TMI 152 - AT - Central Excise

Tribunal Upholds Decision on Canteen Facilities, Emphasizing Statutory Obligation

Commissioner of Central Excise Versus M/s. Bharat Petroleum Corporation Ltd.

The Tribunal upheld the Commissioner (A)'s decision, emphasizing the statutory obligation of providing canteen facilities to employees and the established ... CENVAT credit - canteen facility to employees - input services as defined under Rule 2(l)(ii) of CENVAT Credit Rules (CCR), 2004 - manufacturer of petroleum products - Held that: - the issue is squarely covered in favour of the assessee by the judgments in the case of CCE, Chennai-III vs. Visteon Powertrain Control Systems (P) Ltd. [2015 (3) TMI 736 - MADRAS HIGH COURT], where it was held that definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product - providing the canteen facility to employees is a statutory obligation imposed under Section 46 of the Factories Act, 1948 and it has become a condition of service as far as employees are concerned - credit allowed - appeal allowed - decided in favor of assessee. Issues:1. Eligibility of CENVAT credit on service tax for canteen expenses under Rule 2(l)(ii) of CENVAT Credit Rules, 2004.2. Nexus between the canteen service and the manufacture of petroleum products.Analysis:Issue 1:The appeal was filed by the Revenue against the Commissioner (A)'s order allowing the appeal of the assessee regarding the eligibility of CENVAT credit on service tax for canteen expenses. The assessee, a manufacturer of petroleum products, claimed CENVAT credit for service tax related to their canteen. The Revenue contended that the canteen service did not qualify as 'input services' under Rule 2(l)(ii) of CENVAT Credit Rules, 2004. The original authority confirmed the demand for recovery of the credit, interest, and imposed a penalty. However, the Commissioner (A) allowed the appeal, stating that providing the canteen facility was a statutory obligation under the Factories Act, 1948, and a condition of service for employees. The Commissioner relied on a High Court decision and ruled in favor of the assessee.Issue 2:The Revenue argued that there was no established nexus between the outdoor catering service and the manufacture of petroleum products by the assessee. They claimed that the assessee failed to provide evidence to support this connection. In response, the counsel for the respondent cited several judgments where similar issues had been settled in favor of the assessee. The Tribunal considered the arguments from both sides and concluded that the issue was already settled in favor of the assessee based on the precedents cited. Therefore, the Tribunal found no fault in the Commissioner (A)'s order and dismissed the Revenue's appeal.In conclusion, the Tribunal upheld the Commissioner (A)'s decision, emphasizing the statutory obligation of providing canteen facilities to employees and the established nexus between the canteen service and the manufacturing activities. The judgments cited by the respondent supported the assessee's position, leading to the dismissal of the Revenue's appeal.