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Position prior to 01/04/2011 – CENVAT credit of outdoor catering service provided to its employees by provider of output service is allowed.
Facts:
The appellant is a service provider under the category of “Banking and Other Financial Services” and also “Business Auxiliary Services”. Show Cause Notice was issued alleging therein that the appellant was wrongly availing CENVAT credit in respect of outdoor catering service. The adjudicating authority held that the appellant had incurred expenditure by providing “canteen facility services” for its employees. As the appellant was not in a business which required “24 x 7 operations” like BPO service, the claim was not allowable as input service. At best, the “outdoor catering service” was in the nature of fringe benefits to the employees and had no relationship with the output services rendered. Accordingly, demand was confirmed. Before the Tribunal, assessee relied upon ruling of the Hon’ble Bombay High Court in the case of CCE vs. Ultratech Cement Ltd. [2010] 29 STT 244. The revenue relying upon the decision of IFB Industries Ltd. vs. CCE 45 taxmann.com 28 (Bang. – CESTAT) distinguished the judgment of Bombay High Court, emphasising that it was rendered having regard to mandatory requirements under the Factories Act, 1948.
Held:
Relying upon Ultratech Cement (supra), the Tribunal held that, legislation (i.e. the Factories Act) appreciates the need of canteen service for the workers at the place of work. Only to avoid the hardship for an essential need, the legislation has provided, that factories having employees more than 250, should provide a canteen service. That did not mean that the service was not required for any industrial service or organisation having less than 250 workers. Even the employees of a smaller organisation having less than 250 workers would be hungry and required to be provided with canteen facility. Therefore, the ruling in the case of IFB Industries Ltd. (supra) is per incuriam, as the provisions of the Factories Act have been wrongly interpreted, with respect to the provisions of input service. Accordingly CENVAT credit was allowed.
