2009 (5) TMI 420 - AT - Service Tax

Appeal allowed for CENVAT credit eligibility on factory canteen food cost inclusion.

Jay Hind Industries Ltd. Versus Commissioner of Central Excise

Jay Hind Industries Ltd. Versus Commissioner of Central Excise - [2010] 24 STT 404 (MUM. - CESTAT), 2009 (16) S.T.R. 463 (Tri. - Mumbai) Issues:1. Disallowance of CENVAT credit on outdoor catering service.2. Interpretation of 'input services' under CENVAT Credit Rules, 2004.3. Applicability of Tribunal's Larger Bench decision in similar cases.4. Requirement of canteen facility in factories under Factories Act, 1948.5. Admissibility of CENVAT credit based on cost of supply of food in factory canteen.Analysis:1. The judgment deals with the disallowance of CENVAT credit amounting to Rs. 65,926 on outdoor catering service availed by the appellants in their factory canteen between April 2007 to October 2007. The original authority disallowed the credit under rule 14 of the CENVAT Credit Rules, 2004, stating that the service was not used in or in relation to the manufacture of the final product in the factory.2. The issue revolved around the interpretation of 'input services' as defined in rule 2(l) of the CENVAT Credit Rules, 2004. The adjudicating authority's decision was based on this interpretation, leading to the disallowance of the credit and imposition of penalties. The Commissioner (Appeals) upheld the original authority's decision, prompting the appeal by the assessee.3. The appellants argued that the issue was covered in their favor by the Tribunal's Larger Bench decision in a previous case. The Tribunal noted that in cases where a factory had more than 250 workers, as per the Factories Act, 1948, providing a canteen facility within the factory premises was mandatory. The cost of supplying food to workers in the canteen was considered part of the manufacturer's expenditure and entered into the cost of production, affecting the assessable value of final products.4. The judgment highlighted the importance of determining whether the cost of supplying food in the factory canteen formed part of the assessable value of final products. The Tribunal directed the original authority to examine this aspect, emphasizing that if the cost of food supply was part of the assessable value, the appellants would be entitled to the CENVAT credit based on the Larger Bench decision. The matter was remanded to the original authority for further examination.5. Ultimately, the appeal was allowed by way of remand, indicating that a decision on the admissibility of CENVAT credit would depend on whether the cost of supplying food in the factory canteen was deemed to be part of the assessable value of final products. The judgment focused on ensuring a fair opportunity for the assessee to present their case and for the original authority to make a well-informed decision based on the relevant facts.