Input service credit for factory canteen catering allowed in principle, but employee contribution must be excluded from eligible credit.

Service tax credit on outdoor catering used to operate a factory canteen was treated as admissible because the canteen was maintained within the factory in compliance with the statutory requirement under the Factories Act and the then-wide definition of input services covered business-related activities. Credit attributable to amounts recovered from employees was not admissible, and the eligible credit had to be re-quantified after excluding that portion. The matter was remanded for that limited recalculation.

---

---

Issues: Whether service tax credit was admissible on outdoor catering services used for providing canteen facilities to employees, and whether credit had to be excluded to the extent of employee contribution.

Analysis: The canteen facility was provided within the factory premises in compliance with the statutory requirement under Section 46 of the Factories Act, 1948. For the relevant period, the definition of input services had a wide ambit and covered services connected with business activities. Outdoor catering services used to run the canteen were therefore treated as eligible input services. At the same time, the amount recovered from employees towards the canteen facility could not form part of admissible credit, and the eligible credit required re-quantification after excluding that portion.

Conclusion: Service tax credit on outdoor catering services was held admissible in principle, but the portion attributable to employee contribution was not eligible and the matter was remanded for limited re-quantification.

---