By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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Definition of “input service” wide enough to cover business related activities like outdoor catering service, group medical insurance etc. If cost of service forms part of assessable value – Decision valid for period prior to 31/03/2011.
Facts:
Revenue denied CENVAT credit on the following input services:
a) Group medical insurance to employees and family members,
b) Insurance of directors and officers when they are on foreign tour,
c) Outdoor catering services i.e. canteen facility provided to employees within factory premises as required under Factories Act, 1948
Held:
The definition of input service is very wide as observed by the Mumbai High Court in case of Coca Cola India (P) Ltd. vs. Commissioner (2009) (242 ELT 168). The High Court in this case had provided a test for establishing whether the activity relates to business or not. If the cost of such services forms part of the assessable value on which excise duty is paid, CENVAT credit is allowed. Therefore, the matter was remanded back to the original authority with a comment to follow the above judgment. CENVAT credit on outdoor catering services stands allowed since the issue is decided earlier by the Tribunal for respondent itself.
Comment:
The definition of “input service” in the CENVAT Credit Rules, 2004 has been amended whereby its scope is restricted with effect from 01/04/2011. Therefore, the above interpretation will hold good only till 31/03/2011.
