TaxTMI 
TaxTMI 
2015 (3) TMI 736
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..... 2. C.M.A.Nos.3199 and 3288 of 2010, 314 to 317 of 2011, 968 and 1006 of 2011 are filed by the assessee as against the order of the Customs, Excise and Service Tax Appellate Tribunal dismissing the appeal 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 provided in the factory premises to its employees and that was objected to by the Department stating that outdoor catering services does 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 are neither used in or in relation to the manufacture or clearance of final product nor it can 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-or....
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....g out manufacturing activities, it is necessary for the assessees to provide canteen facilities to its workers. Hence, the assessees were availing Cenvat Credit in respect of the service tax paid on outdoor catering 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 further submitted that Notification No.3 of 2011 dated 01.03.2011 clearly mentions that the said notification is with effect from 1st April, 2011, which means, the benefit of input service in respect of outdoor catering service will not be available with effect from 01.03.2011. In the present cases, the availment of cenvat credit is prior to 2011. Hence, the Notification will not apply to the facts of the present case. 9. Heard learned Standing Counsel appearing for the Revenue and the learned counsel appearing for the assessee and perused the materials placed before this Court. 10. ....
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....nput 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 service" is very wide and covers not only services, which are directly or indirectly used in or in relation to the manufacture of final products but also includes various services used in relation to the business of manufacture of final products, be it prior to the manufacture of final products or after the manufacture of final products. To put it differently, the definition of input service is not restricted to services used in or in relation to manufacture of final products, but extends to all services used in relation to the business of manufacturing the final product. 29. The expression "activities in relation to business" in the definition of "input service" postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business of the manufacture of final product, the service would not qua....
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....ntil 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 the input is used. However, the specified input would become eligible for credit only when used in or in relation to the manufacture of final product. Hydrogen gas used in the manufacture of sodium cyanide is an eligible input, since it has a significant role to play in the manufacturing process and since the final product cannot emerge without the use of gas. Similarly, Heat Transfer Oil used as a heating medium in the manufacture of LAB is an eligible input since it has a persuasive role in the manufacturing process and without its use it is impossible to manufacture the final product. Therefore, none of the categories in the inclusive part of the definition would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being "used in or in relation to the manufacture" stands complied with. In our view, one has to therefore,....
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....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 final products, the definition of 'input service' not only means services used directly or indirectly in or in relation to manufacture of final products, but also includes services used in relation to the business of manufacturing the final products. Therefore, while interpreting the words used in the definition of 'input service', the ratio laid down by the Apex Court in the context of the definition of 'input' alone would apply and not the judgment in its entirety. In other words, by applying the ratio laid down by the Apex Court in the case of Maruti Suzuki Ltd. (supra), it cannot be said that the definition of 'input service' is restricted to the services used in relation to the manufacture of final products, because the definition of 'input service' is wider than the definition of 'input'. 34. Therefore, the definition of....
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.... 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 eligible for CENVAT credit. That observation of the Division Bench is made in the context of a service which is held to be integrally connected with the business of manufacturing the final product. Therefore, the observation of the Division Bench in the case of Coca Cola India (P.) Ltd. (supra) has to be construed to mean that where the input service used is integrally connected with the business of manufacturing the final product and the cost of that input service forms part of the cost of the final product, then credit of service tax paid on such input service would be allowable. 39. The Larger Bench of CESTAT in the case of GTC Industries Ltd. (supra) has also observed that the credit of service tax would be allowable to a manufacturer even in cases where the cost of the food is borne by the worker. That part of the observation made by the Larger Bench cannot be upheld....
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....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 incumbent on a manufacturer of goods, to provide the same if he desires to run his factory. In view of the definition of "input service" which means any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products, the input service does not have to be used directly in the manufacture of final products, it may be a service which is only indirectly used in relation to the manufacture of final products. In the circumstances, canteen services which are indispensible in relation to manufacture of the final products, would certainly fall within the ambit of "input service" as defined under the Rules." 16. Following the above-said decision of the Gujarat High Court, the Allahabad High Court in the case of Commissioner of Central Excise V. M/s.HCL Technologies, reported in 2014 - TIOL - 20010HC-ALL-CX held as follows:....