TaxTMI 
TaxTMI 
2015 (3) TMI 632
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....ismissing the appeals filed by the assessees denying the benefit of Cenvat credit on the service tax paid on outdoor catering services provided in the factory for employees of the factory. 3. The brief facts, which are common in all the above Civil Miscellaneous Appeals, are as follows: The assessee in each one of the case availed Cenvat Credit facility on outdoor catering services (C.M.A.Nos.157, 358, 2363, 2568 and 2864 of 2010) and rent-a-cab service (C.M.A.Nos.516 to 518 of 2010) provided in the factory premises to its employees and that was objected to by the Department stating that outdoor catering services and rent-a-cab services do not fall within the ambit of definition 'input service', specified under Rule 2(l) of the Cenvat Credit Rules, 2004. The Department was of the view that catering/canteen services and rent-a-cab services were neither used in or in relation to the manufacture or clearance of final product nor it could be said to be an activity relating to business. Almost on an identical issue, in all above these cases, the Department proceeded to disallow the cenvat credit. The Adjudicating Authority vide order-in-original, allowed cenvat credit hold....
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....ve effect. 7. Learned counsels appearing for the assessee submitted that under Rule 3 of the Cenvat Credit Rules, a manufacturer of final products is entitled to take credit of the service tax leviable under Section 66 of the Finance Act paid on any input service received by the manufacturer of final product. It is not in dispute that canteen services and rent-a-cab services were being provided by the assessees to its employees, in view of the statutory requirement under Section 46 of the Factories Act. Hence, for the purpose of carrying out manufacturing activities, it is necessary for the assessees to provide canteen facilities and rent-a-cab service to its workers. Hence, the assessees were availing Cenvat Credit in respect of the service tax paid on outdoor catering services and rent-a-cab services. 8. In support of their contention, they relied upon the decision of the the Bombay High Court in the case of CCE V. Ultratech Cement Ltd. reported in 2010 -TIOL - 745 - HC- MUM - ST, wherein the Bombay High elaborately dealt with the issue and held in favour of the assessee holding that outdoor catering services fall within the ambit of 'input service'. They furt....
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....y the consumer. 14. For better clarity, the relevant portion of the decision of the Bombay High Court in the case of CCE V. Ultratech Cement Ltd. reported in 2010 -TIOL - 745 - HC- MUM - ST reads as follows: "28. In the present case, the question is, whether outdoor catering services are covered under the inclusive part of the definition of "input service". The services covered under the inclusive part of the definition of input service are services which are rendered prior to the commencement of manufacturing activity (such as services for setting up, modernization, renovation or repairs of a factory) as well as services rendered after the manufacture of final products (such as advertisement, sales promotion, market research etc.) and includes services rendered in relation to business such as auditing, financing ... etc. Thus, the substantive part of the definition "input service" covers services used directly or indirectly in or in relation to the manufacture of final products, whereas the inclusive part of the definition of "input service" covers various services used in relation to the business of manufacturing the final products. In other words, the definition of "input ....
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....process, be it direct or indirect as also absence of the input in the final product on account of the use of the expression "used in or in relation to the manufacture of final product". Similarly, we are of the view that consideration such as input being used as packing material, input used as fuel, input used for generation of electricity or steam, input used as an accessory and input used as paint are per se also not relevant. All these considerations become relevant only when they are read with the expression "used in or in relation to the manufacture of final product" in the substantive/specific part of the definition. In each case it has to be established that inputs mentioned in the inclusive part is "used in or in relation to the manufacture of final product". It is the functional utility of the said item which would constitute the relevant consideration. Unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the said item would not become an eligible input. The said expression "used in or in relation to the manufacture" have many shades and would cover various situations based on the purpose for which ....
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....ries Act, 1948 to provide canteen facilities to the workers. Failure to do so entails penal consequences under the Factories Act, 1948. To comply with the above statutory provision, the assessee had engaged the services of a outdoor caterer. Thus, in the facts of the present case, use of the services of an outdoor caterer has nexus or integral connection with the business of manufacturing the final product namely, cement. Hence, in our opinion, the Tribunal was justified in following the Larger Bench decision of the Tribunal in the case of GTC Industries Ltd. (supra) and holding that the assessee is entitled to the credit of service tax paid on outdoor catering service. 33. It is argued on behalf of the revenue that not only the ratio but the decision of the Apex Court in the case of Maruti Suzuki Ltd. (supra) must be applied ipso facto to hold that the credit of service tax paid on outdoor catering services is allowable only if the said services are used in relation to the manufacture of final products. That argument cannot be accepted because unlike the definition of input, which is restricted to the inputs used directly or indirectly in or in relation to the manufacture of fi....
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....manufacturing the final products. There is nothing in the definition of 'input service' to suggest that the Legislature intended to define that expression restrictively. Therefore, in the absence of any intention of the Legislature to restrict the definition of 'input service' to any particular class or category of services used in the business, it would be reasonable to construe that the expression 'such as' in the inclusive part of the definition of input service is only illustrative and not exhaustive. Accordingly, we hold that all services used in relation to the business of manufacturing the final product are covered under the definition of 'input service' and in the present case, the outdoor catering services being integrally connected with the business of the manufacture of cement, credit of service tax paid out on catering services has been rightly allowed by the Tribunal. 36........... 37........... 38. We concur with the above decision of this Court in the case of Coca Cola India (P.) Ltd. (supra). However, in that case, this Court has also held that the cost of any input service that forms part of value of final products would be ....
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....rice of the final product. It may be a welfare measure but certainly it is not a charity provided by the employer to the employees. It is an onerous legal obligation imposed on him. The cost incurred in rendering such service will be included in the cost of production. 16. Again the Karnataka High Court in the case of Resil Chemicals Pvt. Ltd. Vs. CCE, Bangalore - I reported in 2014 (36) STR 1260 (Kar.) and in the case of CCE, Bangalore V. Ace Designers reported in 2011-TIOL-931-HC-Kar-CX followed the decision in the case of CCe V. Stanzen Toyetetsu India (P) Ltd. reported in 2011 (23) STR 444 (Kar.) held in favour of the assessee. 17. The Gujarat High Court, in an identical circumstance, has taken a similar view in the case of Commissioner of Central Excise, Ahmedabad I V. Ferromatik Milacron India Ltd. reported in (2010) 36 VST 376, wherein, the Gujarat High Court held as follows: "6. As noted herein above, under the provisions of section 46 of the Factories Act, it is mandatory for the employer to provide canteen services to the staff. Thus, the provision of canteen services is a statutory requirement. Provision of canteen services being indispensable, it is incum....
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....ity. At any rate it is an activity relating to business." 20. The only other argument raised by the Revenue is that Notification No.3 of 2011 dated 01.03.2011, which excluded the services in the question by amendment dated 01.03.2011, is by way of substitution and therefore, it should take into effect in respect of the period in dispute also. 21. Such a plea, at the threshold, has to be rejected, since Rule 1b of the Rules clearly states that the said amendment shall come into force on 1st day of April 2011. The said amendment reads as follows: "1.(a) These rules may be called the CENVAT Credit (Amendment) Rules, 2011. (b) Save as otherwise provided in these Rules, they shall come into force on the 1st day of April, 2011." 22. Rule 2(l), as amended with effect from 01.03.2011 vide Notification No.3/2011 dated 01.03.2011, reads as follows: (v) for clause (l), the following shall be substituted, namely:- (l) input service means any service, - (i) used by a provider of taxable service for providing an output service; or (ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final....