Cenvat credit on outdoor catering services denied after 2011 amendment, while penalty was deleted for lack of suppression.

Outdoor Catering Services were treated as ineligible input service for Cenvat credit after the 01.04.2011 amendment to Rule 2(l) of the Cenvat Credit Rules, 2004, and the fact that the canteen was maintained under the Factories Act did not change that credit position. On penalty, the text states that where the record showed no suppression or mala fide intent to evade duty, penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 15(1) was not warranted. The credit demand was sustained, while the penal consequence was deleted, resulting in partial relief.

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Issues: (i) Whether Outdoor Catering Services qualified as input service for Cenvat credit after the amendment dated 01.04.2011. (ii) Whether penalty was imposable in the absence of suppression or mala fide intent.

Issue (i): Whether Outdoor Catering Services qualified as input service for Cenvat credit after the amendment dated 01.04.2011.

Analysis: The definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004, as amended by Notification No. 03/2011 dated 01.03.2011, was applied in light of the settled position that Outdoor Catering Services do not fall within the eligible category after 01.04.2011. The fact that the canteen arrangement was maintained with reference to the Factories Act did not alter the credit position under the Cenvat scheme.

Conclusion: The assessee was not entitled to Cenvat credit on Outdoor Catering Services after 01.04.2011.

Issue (ii): Whether penalty was imposable in the absence of suppression or mala fide intent.

Analysis: The dispute turned on interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004, and the record did not disclose suppression with intent to evade duty. In such circumstances, penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 15(1) of the Cenvat Credit Rules, 2004 was not warranted.

Conclusion: Penalty was not imposable and was set aside.

Final Conclusion: The credit demand was sustained, but the penal consequence was deleted, resulting in a partial allowance of the appeal.

Ratio Decidendi: Where the dispute concerns a bona fide interpretational issue under the Cenvat Credit Rules and there is no allegation of suppression with intent to evade duty, penalty is not exigible even if the credit claim fails on merits.

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