TaxTMI 
TaxTMI 
2010 (6) TMI 165
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.... Excisable Goods 01. E/87/2009 and E/CO/16/2009 Outdoor catering Brake lining, clutch facing, disc brake 02. E/88/2009 Outdoor catering Motor vehicle parts 03. E/41/2009 Outdoor catering Piston rings 04. E/42/2009 Outdoor catering Motor vehicle parts 05. E/56/2009 Outdoor catering Bulk drug and derivatives 06. E/57/2009 Outdoor catering Flywheel, magnet assembly, regulatory assembly 07. E/89/2009 Outdoor catering Tyrecord fabrics 08. E/90/2009 Outdoor catering Brake fluids 09. E/305/2009 Outdoor catering Paper and paper boards 10. E/306/2009 Outdoor catering Paper and paper boards 11. E/308/2009 Outdoor catering Gelatine 12. E/327/2009 Outdoor catering Cement 13. E/646/2009 Outdoor catering Ignition coil, solenoid switch 2. In all these cases the original authorities have denied the credit of service tax paid on outdoor catering service utilized by the respondents mainly on the ground that the same was not used in or in relation to the manufacture of the finished excisable goods in the factories of the respondents. In a typic....
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....e, the lower appellate authorities have allowed such credit in favour of the respondents mainly applying the decision of the Larger Bench in the case of CCE, Mumbai v. M/s. GTC Industries Ltd. - 2008 (12) S.T.R. 468 leading to these appeals by different Commissioners of Central Excise as well as Commissioner of Central Excise, LTU. Submission by the Department 4. Shri T.H. Rao, learned SDR arguing for the Department contends as follows :- (i) The impugned orders passed by the lower appellate authorities are not correct and legal nor do these orders take into account the fact that supply of food by the caterers to the workers and staff is neither directly nor indirectly related to the manufacturing of the finished excisable goods. (ii) The decision of the Tribunal in the case of GTC Industries (supra) relied upon by the lower appellate authority has not been accepted by the Department and the appeal against the same is pending in the Hon'ble Bombay High Court. (iii) No nexus has been established by the respondents between the impugned outdoor catering service and the manufacture of the finished excisable goods by the respondents. Such a requirement is clearly necessar....
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.... finished excisable goods. 5. As an alternative argument, the learned SDR cites the decision of the Mumbai Bench of the Tribunal in the cases of Mahindra Sona Ltd. v. CCE, Nasik- 2009 (15) S.T.R. 474 and Kirloskar Oil Engines Ltd. v. CCE, Aurangabad - 2009 (16) S.T.R. 321 under which such cases have been remanded to the original authority for verifying whether the cost of catering service has been included under the CAS and whether the number of workers in the factory meet the criterion requiring canteen services to be provided. He states that such a remand is necessary even if the decision in GTC Industries (supra) is required to be followed. The learned SDR also states that the provision of food to the employees and staff is in the nature of a welfare activity and is not integrally connected to the manufacturing process. Submission by the assessees 6. Shri K.S. Venkatagiri, learned counsel for some of the respondents states that the Larger Bench decision of the Tribunal in the case of GTC Industries (supra) has been rightly followed by the lower appellate authority. Since the value of the catering service is part of the cost of production, the same has to be considered a....
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....seen that the Central Govt. has the power to make rules to provide for credit of (i) duty paid on goods and (ii) service tax paid on taxable services used in, or in relation to, the manufacture of excisable goods. 10. Since the Legislature has used the expression 'used in, or in relation to, the manufacture of excisable goods' for the purpose of making rules for grant of credit of duty and service tax, it follows that the rule making power has to be exercised by the Central Govt. within this mandate of the statute. In other words, the rules cannot provide for credit of duty or service tax in respect of goods and services which are not used in or in relation to the manufacture of excisable goods. 11. In this background, the provisions of Cenvat Credit Rules, 2004, which have been framed invoking the abovecited statutory rule making powers require to be interpreted. As stated earlier, the said rules define the expression 'input service' under Rule 2(l) which is extracted in paragraph 2 above. Findings :- 12. It is seen that in the case of GTC Industries (supra), the Larger Bench has held as follows :- "Expenses towards the canteen and provision of subsidized canteen fo....
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....ubsidised food is provided or not. Whether the cost of food is borne by the worker or by the factory, the same will form part of expenditure incurred by the manufacturer and will have a bearing on the cost of production. In view of the same, employment of outdoor caterer for providing catering services has to be considered as an input service relating to the business and CENVAT credit in respect of the same will be admissible." 13. It appears from the above that CAS-4 requires cost of fringe benefits such as medial benefits, subsidized food etc. to be included under Direct Wages and Salaries towards cost of production. Interpreting the same, the Larger Bench has proceeded to hold that irrespective of whether subsidized food is provided or not and whether the cost of food is borne by the worker or by the factory, the service tax on outdoor catering service will form part of the expenditure incurred by the manufacturer and will have a bearing on the cost of production. The Larger Bench has concluded that in view of the same, employment of outdoor caterer for providing catering service has to be considered as an input service relating to business and CENVAT credit in respect of the....
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....y relied on by another Larger Bench of the Tribunal in the case of Vandana Global (supra) in paragraph 48 thereof. In the said case, an argument was advanced on behalf of the assessees that since the value of cement and steel items used for laying foundation and building structural support contributes to the value of the final product, the credit of duty paid on the same should be allowed. Such a contention was rejected by the Larger Bench in its order dated 30-4-2010 following the Hon'ble Supreme Court's decision in the case of Maruti Suzuki (supra). 16. In view of the subsequent decision of the Hon'ble Supreme Court rendered in the case of Maruti Suzuki (supra) overruling the very basis of the decision of the Larger Bench in the case of GTC Industries (supra) and the said ruling of the Hon'ble Supreme Court having been followed by another Larger Bench of the Tribunal in the case of Vandana Global (supra), there is no option but to respectfully follow the ratio of the decision of the Hon'ble Supreme Court in the case of Maruti Suzuki (supra) in preference to the decision of the Larger Bench in the case of GTC Industries (supra). 17. In view of the foregoing, the fact t....
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....al way but only with reference to the particular finished excisable goods and the manufacturing process involved. 19. It has been held by the Tribunal in the case of KBACE Tech Pvt. Ltd. v. Commissioner of Central Excise & Service Tax, Bangalore - 2010 (18) S.T.R. 281 in the context of interpreting the Cenvat Credit Rules, 2004 that the rule making authority can frame rules covering lesser area than what it is empowered to do under the statute but cannot go beyond limits provided under the statute and make rules covering a greater area. Hence, the scope of Rule 2(l) defining 'input service' including its inclusive part that covers "services relating to activities relating to business" has to be interpreted with reference to Section 37(2)(xviaa) of the Act extracted in para 9 above. When the specific Cenvat Credit Rules are examined in the context of the rule making powers under the Act and in the context of the guidelines laid down by the Hon'ble Supreme Court in its decisions such as in the case of Maruti Suzuki (supra), one comes to a clear conclusion that outdoor catering service cannot be considered to be an eligible input service for grant of credit in respect of the finish....