TMI Blog2015 (3) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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. (2009 (8) TMI 50 - BOMBAY HIGH COURT) 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. - Cenvat Credit has been properly availed in respect of outdoor catering services - Decided against Revenue. - C.M.A. Nos. 2, 86, 158,159, 356, 357, 359, 515, 730, 1014, 1468, 1647, 1648, 3199, 3288 of 2010, 314, 315, 316, 317, 968, 1006 of 2011 and 1482 of 2013 and Connected Miscellaneous Petitions C.M.A.No.2 of 2010 - - - Dated:- 13-2-2015 - R. Sudhakar And R. Karuppiah,JJ. For the Appellant : Mr. T. Chandrasekaran Standing Counsel For the Respondent : Mr. R. Parthasarathy for M/s. Lakshmi Kumaran JUDGMENT (Delivered By R. Sudhakar, J.) C.M.A.Nos.2,86, 158,159, 356, 357, 359, 515, 730, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the appeals holding that Cenvat credit is admissible on 'outdoor catering service' as the same is an input service relating to business. In some of the cases, the Tribunal followed the decision of the Supreme Court in the case of Maruti Suzuki Ltd. V. CCE reported in 2009 (240) ELT 641 (SC) dismissed the appeal, thereby upheld the contention of the Department where Cenvat credit has been denied. 5. Being aggrieved by the orders of the Tribunal, both the Revenue as well as the assessee filed appeals before this Court. 6. Learned standing counsel appearing for the Revenue submitted that the decision in the case of Maruti Suzuki Ltd. V. CCE reported in 2009 (240) ELT 641 (SC) should hold the field in respect of input service and that Notification No.3 of 2011 dated 01.03.2011, which excludes such outdoor catering services from the purview of input service, would relate back to the period in question, as the Notification is only by way of substitution and therefore it will have retrospective 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of CCE V. Ultratech Cement Ltd. reported in 2010 -TIOL - 745 - HC- MUM - ST and all the contentions raised by the Revenue has been considered in extenso including the definition of 'input service' as defined in the case of Maruti Suzuki Ltd. V. CCE reported in 2009 (240) ELT 641 (SC) . The Bombay High Court came to the conclusion that the decision of the Larger Bench of the CESTAT in the case of CCE V. GTC Industries Ltd. 2008 (12) STR 468 is a correct law, however, with a rider that where the cost of the food is borne by the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. 12. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of manufacture of final product. Mere fact that the item is a packing material whose value is included in the assessable value of final product will not entitle the manufacturer to take credit. Oils and lubricants mentioned in the definition are required for smooth running of machines, hence they are included as they are used in relation to manufacture of the final product. The intention of the Legislature is that inputs falling in the inclusive part must have nexus with the manufacture of the final product. 16. In our earlier discussion, we have referred to two considerations as irrelevant, namely, use of input in the manufacturing 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 manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpreting the scope of 'input service'. Accordingly, in the light of the judgment of the Apex Court in the case of Maruti Suzuki Ltd. (supra), we hold that the services having nexus or integral connection with the manufacture of final products as well as the business of manufacture of final product would qualify to be input service under rule 2(l) of 2004 Rules. 32. As rightly contended by Shri Shridharan, learned Counsel for the respondent - assessee, in the present case, the assessee carrying on the business of manufacturing cement by employing more than 250 workers is mandatorily required under the provisions of the Factories 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 Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he definition of 'input service' purport to cover not only services used prior to the manufacture of final products, subsequent to the manufacture of final products but also services relating to the business such as accounting, auditing ....... etc. Thus, the definition of input service seeks to cover every conceivable service used in the business of manufacturing the final products. Moreover, the categories of services enumerated after the expression 'such as' in the definition of 'input service' do not relate to any particular class or category of services, but refer to variety of services used in the business of 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 ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd pass an appropriate order in that behalf. 13. The Karnataka High Court in the case of CCe V. Stanzen Toyetetsu India (P) Ltd. reported in 2011 (23) STR 444 (Kar.) has also concurred with the above-said principle and held as follows: 12. It is in this context that when the assessee provides outdoor canteen facilities because of a statutory obligation imposed on him under Section 46 of the Factories Act, it becomes a condition of service as far as the employees are concerned. He has paid the service tax on outdoor canteen services The said expenses incurred by the assessee will also be taken into consideration before fixing the price 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. 14. 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 casae of CCE, Bangalore V. Ace Designers reported in 2011-TIOL-931-HC-Kar-CX followed the decision in the case of CCe V. Stanzen Toy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 19. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
