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2015 (11) TMI 846 - MADRAS HIGH COURT

2015 (11) TMI 846 - MADRAS HIGH COURT - TMI - CENVAT Credit - whether the assessee can utilise the cenvat credit facilities in respect of outdoor catering services, provided in the factory for its employees, as input service - Held that:- Court dealt with the issue in a batch of appeals in [2015 (3) TMI 736 - MADRAS HIGH COURT] held in favour of the assessee by following the decision of the Bombay High Court in the case of CCE V. Ultratech Cement Ltd. reported in - [2010 (10) TMI 13 - BOMBAY HIG .....

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by the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. - Therefore, the issue that the Cenvat Credit can be properly availed by the assessee in respect of outdoor catering services is clearly settled now - Decided in favour of assessee. - C.M.A. No. 1141 of 2015 - Dated:- 25-6-2015 - R. Sudhakar And K. B. K. Vasuki, JJ. For the Petitioner : Ms Karthik Sundaram For the Respondent : Mr V Sundareswaran JUDGMENT ( Judgment of the Court was .....

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" availed by the Appellant in its factory, qualified as an 'input service' under Rule 2 (1) of the CENVAT Credit Rules, 2004, as it stood then during the period October 2008 to July 2009 ? and 2. Whether the Tribunal was correct in disallowing CENVAT credit to the Appellant for 'outdoor catering service' for the period October, 2008 to July, 2009 ?" 2. The brief facts of the assessee's case are as follows: "The assessee is a manufacturer of primary form in &quo .....

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said services do not fall under the category of "Input Service". After due process of law, the Original Authority confirmed the said demand along with interest and imposed a penalty of ₹ 2,000/-. Aggrieved by the Order-in-Original, the assessee pursued the matter before the Commissioner (Appeals), who rejected the appeal in toto by holding that the assessee had not produced any clinching evidence to establish that the expenditure incurred towards the impugned services forms part .....

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l has held that, "3. So far as catering service is concerned, appellant says it is a factory. Once Factories Act, 1948 requires a canteen to be maintained by a factory, no input credit on catering service shall be admissible. 4. On the above circumstances, denial of CENVAT Credit to appellant on catering service as ordered by learned adjudicating authority is confirmed and credit in respect of other two services is allowed." Challenging this order of the Tribunal, the assessee has file .....

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010 batch and vide judgment dated 13.02.2015 held in favour of the assessee by following the decision of the Bombay High Court in the case of CCE V. Ultratech Cement Ltd. reported in - 2010-TIOL-745-HC-MUM-ST, wherein all the contentions raised by the respective parties have 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 de .....

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sent 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 setting up, modernization, renovation or repairs of a factory) as well as services rendered after the manufacture of final products (such as advertisement, sales prom .....

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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 ext .....

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he case of Maruti Suzuki Ltd. (supra) has considered the expression 'used in or in relation to the manufacture of final product' in the definition of "input" under rule 2(k) of 2004 Rules and held as follows :- "14. ... Moreover, the said expression, viz., "used in or in relation to the manufacture of the final product" in the specific/substantive part of the definition is so wide that it would cover innumerable items as "input" and to avoid such contin .....

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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 .....

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ed in or in relation to the manufacture of final product" in the substantive/specific part of the definition. In each case it has to be established that inputs mentioned in the inclusive part is "used in or in relation to the manufacture of final product". It is the functional utility of the said item which would constitute the relevant consideration. Unless and until the said input is used in or in relation to the manufacture of final product within the factory of production, the .....

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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 "use .....

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of 'input' is restricted to the inputs used in or in relation to the manufacture of final products, whereas the inclusive part of the definition of input service extends to services used prior to/during the course of/after the manufacture of the final products. The fact that the definition of 'input service' is wider than the definition of 'input' would make no difference in applying the ratio laid down in the case of Maruti Suzuki Ltd. (supra) while interpreting the sco .....

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siness 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 .....

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ervice 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 se .....

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d 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 input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the busin .....

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the definition of 'input service' as well as the inclusive part of the 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 .....

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nput 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 hold that all services used in relation to the business of manufacturing the final product are covered under the definition of 'input service' and in the present case, the outdoor catering services being integrally co .....

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text 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 allowab .....

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