TaxTMI 
TaxTMI 
2019 (6) TMI 1203
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....he service of preparation and supply of food in the factory canteens is not entitled for credit. The definition of input service, as amended with effect from 01.04.2011, is reproduced below. "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 products upto the place of removal, and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes services,- (A) specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh)....
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....caterer" was originally defined under Section 65 (76a) of the Act, at the time of introduction of the levy in 2004 as "outdoor caterer" means a caterer engaged in providing services in connection with catering at a place other than his own. With effect from 16.06.2005 the above definition has been amended as, "outdoor caterer" means a caterer engaged in providing services in connection with catering at a place other than his own but including a place provided by way of tenancy or otherwise by the person receiving such services. 2.1.3 The purpose behind such amendment has been explained in letter No. B1/6/2005 TRU Dt. 27.07.2005 as, "5.1 Service tax is already leviable on the services provided by an outdoor caterer. Prior to 16-6-2005, outdoor caterer was defined as a caterer providing catering services "at a place other than his own". Doubts were expressed about the scope of the term "at a place other than his own" where the caterer provides catering service from a premises provided by the recipient of the service, on rent. In such cases, whether the place is to be treated as the place owned by the caterer and therefore the services are not subject ....
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....n specific purposes. For example, under Clause (A) certain services are not entitled for credit, if they are used for construction of a building. Under Clause (B), certain services are not entitled for credit, if they pertain to motor vehicles which are not entitled for credit. Similarly, under clause (C) certain services are not entitled for credit, if they are "used primarily for personal use or consumption of any employee". When such service are used, not primarily for personal use, then credit would be entitled. For example, if for effective marketing, if the Director of a Company has to be a member of a club for socializing, then it is not primarily for personal consumption, though incidentally it may be for personal use. Similarly, for a company engaged in brand promotion through celebrities, beauty and healthcare and fitness services availed for such celebrities is not primarily for the personal consumption of such employees. Hence, when an assessee is mandated by the Factories Act, to compulsorily to provide a canteen facility and when such assessee avails the services of a contractor in this regard, such services are primarily for the statutory compliance of the assessee a....
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.... served well in the past in acclimatizing both the tax payers and tax administrators to the new levy. However, with considerable expansion of the list, the administrative challenge has multiplied manifold. Service tax has now gained considerable maturity and many practitioners of the subject believe that incremental approach to taxation is not suitable for providing a stable system for taxation of services that is at the threshold of getting subsumed into a comprehensive GST." 2.2.3 Based on various inputs gathered, the negative list based levy was made part of the 2012 Budget and to again quote from the Hon'ble Finance Minister's Budget speech of 2012, "159. Last year, I had initiated a public debate on the desirability of moving towards taxation of services based on a negative list. In the debate that continued for the better part of the year, we received overwhelming support for this new concept. It has been perceived both as sound economics and prudent fiscal management. 160. Thus, I propose to tax all services except those in the negative list. The list comprises 17 heads and has been carefully drawn up, keeping in view the federal nature of our polity, th....
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...."; (iv) in sub-clause (B), for the words, brackets, letters and figures "specified in sub-clauses (o) and (zzzzj) of clause (105) of section 65 of the Finance Act", the words "services provided by way of renting of a motor vehicle" shall be substituted; (v) for sub-clause (BA), the following sub-clause shall be substituted, namely :- "(BA) service of general insurance business, servicing, repair and maintenance , in so far as they relate to a motor vehicle which is not a capital goods, except when used by - (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person ; or (b) an insurance company in respect of a motor vehicle insured or reinsured by such person; or 2.3.2 It may be noted that clause (C) definition has not been amended. It is submitted that in the absence of any definition for the term "outdoor catering" and in view of the fact that the definition of the term "outdoor caterer" is no more in vogue from 01.07.2012, the scope of the term "outdoor catering" used in the definition of "input service" has to be understood only with reference to international practices on classification of ser....
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....ng services 63399 5610 634 Beverage serving services 6340 63400 Beverage serving services 63400 5630 6339 Event catering and other food serving services 63391 Event catering services This subclass includes: - food preparation and supply services based on contractual arrangements with the customer, at institutional, governmental, commercial, industrial or residential premises or location/s specified by the customer, for a specific event This subclass does not include: - food preparation and supply services, on an ongoing basis, cf. 63392, 63393 It may be observed from the above that catering services are event based and services provided on ongoing basis would not be considered as a catering service. 2.4.2 A Hotel, or a restaurant or a factory canteen, which is operating in a continuous basis is not at all understood as "outdoor catering" even in common parlance. Persons running such Hotels, restaurants or canteens are not identified as "outdoor caterers" by common public. "Outdoor catering" is normally understood with reference....
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.... in exhibition halls, events, marriage halls and other outdoor/indoor functions 85 996335 Catering services in trains, flights and the like 86 996336 Preparation or supply services of food, edible preparations, alcoholic and non-alcoholic beverages to airlines and other transportation operators 87 996337 Other contract food services 88 996339 Other food, edible preparations, alcoholic and non-alcoholic beverages serving services nowhere else classified 2.5 The intention is also made clear from the following Explanation under Notification 11/2017 Central Taxes (Rate), prescribing rate of GST for various services. Explanation 1. - This item includes such supply at a canteen, mess, cafeteria or dining space of an institution such as a school, college, hospital, industrial unit, office, by such institution or by any other person based on a contractual arrangement with such institution for such supply, provided that such supply is not event based or occasional. 2.6 On the basis of the above, it is submitted by the Ld. Counsels for appellants that the services provided by the contractors to the app....
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....st of these services constitute a part of the cost-to-company package of the employee and are provided either free of charge or on concessional basis to company employees. 7. The appellants contend that canteen/outdoor catering services is provided within the factory premises in compliance to the provisions of the Factories Act, 1948. It is also submitted that such services are not used primarily for personal use or consumption of employee. In P. Ramanathan Aiyar's Advanced Law Lexicon 3rd edition, the word primarily is defined as "that which is first in order, rank or importance, anything from which something else arises or is derived." The word means something which is more proximate or more important. When outdoor catering services, beauty treatment, health services, etc. used for personal use or consumption of an employee, it would not qualify as 'input service'. In the instant case, as per Factories Act, 1948, the appellants are compelled to provide food facilities inside the factory. It is more importantly used by the appellant to comply with the mandatory requirement under Factories Act. If they do not comply with such provision of the Factories Act, the appellants ....
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....-2011, when such services are otherwise covered by the main definition clause of the 'input service'. To interpret, the said input clause, in such manner so as to hold that such services have direct or indirect nexus with the assessee's business and thus would be covered by the definition, would amount to defeat the legislative intent. 7.2 It is well settled that the legislative intent cannot be defeated by adopting interpretation which is clearly against such intent. Further, we find that from the Budget Speech of the Finance Minister dated 28-2-2011 wherein the Hon7ble Minister has categorically stated that due to complexities there has been many legal issues on the availability of credit on a number of inputs or input services which are being rationalized by laying down clear definition so that the scope of inputs and input services that are eligible and those that are not, is clear. Further, we also find from the clarification issued by the Joint Secretary (TRU) explaining the intention of the Legislature for the changes brought by way of amendment in the definition of 'input service'. Further, we also note that primarily the service should be first covered under the d....