Outdoor catering services not eligible for CENVAT credit as input services post-April 2011 amendment

CESTAT Mumbai ruled that outdoor catering services are not eligible for CENVAT credit as input services post-amendment dated 01.04.2011. The Tribunal held that extended period of limitation cannot be invoked as the department was aware of the assessee's activities and had been defending the case. Following precedents in Wipro Ltd. and other cases, the demand for CENVAT credit was sustainable only for the normal period. Interest and penalty for extended period were set aside. Matter remanded to original authority for re-quantification of demand for normal period only. Appeal partly allowed by way of remand.

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Issues Involved:
1. Admissibility of CENVAT Credit for outdoor catering services.
2. Invocation of extended period for demand of service tax.
3. Imposition of interest and penalty for irregular availment of CENVAT Credit.

Summary:

1. Admissibility of CENVAT Credit for Outdoor Catering Services:
The appellants, M/s Hawkins Cookers Limited, contested the denial of CENVAT Credit on outdoor catering services provided to employees. The Department argued that Rule 2(l) of the CENVAT Credit Rules, 2004, excludes outdoor catering services from the definition of input service. The Tribunal upheld the Department's stance, referencing the Larger Bench decision in Wipro Ltd. Vs. CCE, Bangalore-III, which confirmed that post-01.04.2011, outdoor catering services are ineligible for input service credit due to the exclusion clause.

2. Invocation of Extended Period for Demand of Service Tax:
The appellants contended that the extended period for demand and imposition of penalty was unjustified, citing prior Tribunal decisions and the Department's awareness of their CENVAT Credit practices. The Tribunal agreed, noting that the issue was previously adjudicated in the appellants' favor and the Department was aware of the credit being taken. The Tribunal referenced the Supreme Court rulings in Pushpam Pharmaceuticals and Anand Nishikawa Co. Ltd., emphasizing that suppression of facts requires deliberate omission, which was not evident in this case.

3. Imposition of Interest and Penalty:
The Tribunal found that the imposition of interest and penalty was not sustainable due to the interpretational nature of the issue and the lack of clarity during the disputed period. The Tribunal noted that the finality of the issue was only achieved with the Supreme Court decision in Toyota Kirloskar Motor Pvt. Ltd. on 18.11.2021, which clarified the exclusion of outdoor catering services from the definition of input service. Consequently, the Tribunal set aside the interest and penalty but upheld the demand for the normal period.

Conclusion:
The Tribunal remanded the case back to the original authority for re-quantification of the CENVAT Credit demand for the normal period, excluding the extended period. The appeal was partly allowed, with the interest and penalty being set aside.

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