Setting aside decision disallowing CENVAT credit on catering services, case remanded for fresh adjudication.

The Judicial Member set aside the lower authorities' decision disallowing CENVAT credit on outdoor catering services, remanding the case for fresh adjudication. The Member directed the original authority to consider a Larger Bench decision that deemed such services as part of the cost of production of excisable goods. The lack of specific details on the impact of catering services on production necessitated further examination, instructing the authority to verify relevant facts and allow the assessee a fair opportunity to present their case.

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Issues: Disallowance of CENVAT credit on outdoor catering service as 'input service' under CENVAT Credit Rules, 2004.

In this case, the original authority disallowed CENVAT credit of Rs. 3,86,250 to the assessee and imposed an equal amount of penalty, which was later reduced by the appellate authority to Rs. 35,000. The disputed credit was taken for outdoor catering service used to supply food to factory employees between January 2005 and September 2007. The lower authorities held that outdoor catering service did not qualify as an 'input service' as per rule 2(l) of the CENVAT Credit Rules, 2004, stating that canteen services did not impact the production of excisable goods. The assessee relied on a Tribunal decision where it was held that service tax paid on outdoor catering service for factory workers was admissible as an 'input service.' The SDR argued that catering service for employees had no connection with manufacturing or clearance of goods, citing a Tribunal decision where CAS-4 principles were allegedly misapplied.

Upon review, the Judicial Member found it necessary to follow a Larger Bench decision in a similar case, where outdoor catering services for factory workers were considered part of the cost of production of excisable goods. However, the Judicial Member noted the absence of details regarding the number of workers in the factory and whether the cost of food supplied in the factory-canteen affected the assessable value of excisable goods during the relevant period. Consequently, the Judicial Member set aside the lower authorities' orders and remanded the case to the original authority for a fresh adjudication, instructing them to verify the relevant facts and consider the applicability of the Larger Bench decision, while providing the assessee with a reasonable opportunity to present their case.

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