2018 (4) TMI 149 - AT - Central Excise

Outdoor Catering Service Ineligible for CENVAT Credit Post-2011 Amendment; Focus on Services for Personal Use.

M/s. Wipro Ltd. Versus The Commissioner of Central Excise Bangalore-III.

The Larger Bench concluded that 'outdoor catering service' is not eligible for CENVAT credit as an input service following the amendment to Rule 2(1) of ... Cenvat Credit - input services - outdoor catering services - scope of the service post 1.4.2011 - Held that: - primarily the service should be first covered under the definition of 'input service' and once the service is not covered due to exclusion clause irrespective of the fact whether the cost of service has been taken as expenditure in the books of accounts does not render the services as an admissible for CENVAT credit. The food is always mainly for personal consumption only. The canteen provided in the company is mainly for the personal consumption of the employee and it cannot be interpreted in any other way. Therefore, once such services are excluded, whether the employer or employee bears the cost partially or fully, has no bearing on the amendment. The 'outdoor catering service' is not eligible for input service credit post amendment dated 1.4.2011 vide N/N. 3/2011 dated 18.3.2011. Matter reverted to the regular Bench for deciding the respective appeals. Issues Involved:1. Availability of CENVAT Credit on 'outdoor catering services' post-amendment to Rule 2(1) of CENVAT Credit Rules, 2004.Issue-Wise Detailed Analysis:1. Divergence of Views and Referral to Larger Bench:The Single Member observed a divergence of views regarding the availability of CENVAT Credit on 'outdoor catering services' and referred the matter to the President for constituting a Larger Bench. The reference order highlighted conflicting judgments: one allowing credit for canteen services as per the Factories Act, 1948, and another denying it post-amendment to Rule 2(1) of CCR, 2004.2. Legal Submissions by Appellants:The appellants argued that CENVAT credit on canteen services is legitimate as it is an input service indirectly related to the manufacture of the final product. They emphasized the broad interpretation of terms like 'in relation to' and 'directly or indirectly' as established by the Supreme Court. They contended that the exclusion clause should be read restrictively, applying only to services primarily for personal use or consumption of employees, not to statutory requirements like canteen services mandated by the Factories Act.3. Legal Submissions by Respondents:The respondents argued that post-amendment, 'outdoor catering service' is explicitly excluded from the definition of input service. They referred to the Finance Minister's Budget Speech and clarifications issued by the Joint Secretary, which aimed to reduce litigation by clearly defining eligible and non-eligible services. They maintained that the legislative intent was to exclude services meant for personal use or consumption of employees, regardless of who bears the cost.4. Analysis of Definitions and Legislative Intent:The Larger Bench analyzed the definitions of 'input service' before and after the amendment. Post-1.4.2011, the definition explicitly excludes 'outdoor catering service' when used primarily for personal use or consumption of employees. The Bench noted that the exclusion was intended to clarify and streamline the scope of eligible services, as stated in the Budget Speech and subsequent clarifications.5. Interpretation and Conclusion:The Bench concluded that interpreting the exclusion clause to include services with direct or indirect nexus to business would defeat the legislative intent. They emphasized that the legislative intent, as clarified in the Budget Speech and Joint Secretary's letter, was to exclude certain services from CENVAT credit to reduce disputes. The Bench held that 'outdoor catering service' is not eligible for input service credit post-amendment, regardless of whether the cost is borne by the employer or employee.6. Final Judgment:The reference was answered by concluding that 'outdoor catering service' is not eligible for input service credit post-amendment dated 1.4.2011. The matter was reverted to the regular Bench for deciding the respective appeals.Order Pronouncement:The order was pronounced in open court on 09-02-2018.