TMI Blog2022 (12) TMI 1363X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of cost borne by the appellant. In this regard we find that the authorized representative of the appellant during the course of personal hearing had submitted that they will not take input tax credit to the extent applicable on the amount of canteen charges recovered from their employees and will reverse the credit to that extent. Further vide their dated 12.09.2022 they submitted that they have been discharging GST on the canteen charges recovered from contract employees and they have requested to allow the ITC on GST charged by the service provider on canteen facility provided to employees working their factory to the extent of cost suffered by the appellant. Reliance placed upon the judgment of Hon'ble High Court of Bombay in the case of Commissioner of Central Excise, Nagpur Versus Ultratech Cement Ltd., [ 2010 (10) TMI 13 - BOMBAY HIGH COURT ] wherein it was held that Once the service tax is borne by the ultimate consumer of the service, namely the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. The judgement was in context as to whether manufacturer can avail credit of Service Tax in cases where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase dated 10.07.2017, it was clarified that supply by employer to employee in terms of contractual agreement of employment (part of salary/CTC) is not subjected to GST and once employee ceases to be in employment with appellant, he/she is not authorized to use the canteen facility; in other words, employer-employee relationship is must to avail this facility. The appellant further submitted that they are not in the business of providing canteen service and hence recovery of nominal amount will not fall in definition of supply and relied upon ruling of Maharashtra AAR in case of Jotun India P Ltd [2019 TIOL 312 AAR GST]. 6. The Gujarat Authority for Advance Ruling (herein after referred to as 'the GAAR'), vide Advance Ruling No. GUJ/GAAR/R/39/2021 dated 30.07.2021, inter-alia observed that colons and semicolons are two types of punctuation; colons are used in sentences to show that something is following like quotation, example or list and semicolons are used to join two independent clauses/sub clauses that could stand alone as complete sentences. The GAAR held that Section 17(5)(b)(i) sub-clause [for blocking of ITC on food and beverages, outdoor catering, beauty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession and if proviso below Section 17(5)(b)(iii) is interpreted to be applicable only to sub-clause (iii) of Section 17(5)(b), it will become otiose for following reasons: (i) Proviso deals with admissibility of ITC on both goods and services with Section 17(5)(b)(ii) and 17(5)(b)(iii) deals with only services. (ii) The legislation never intend to waste any word and hence usage of word goods' in second proviso which otherwise can be made applicable only to Section 17(5)(b)(i) is apparent on record. Hence, it will be applicable to entire section 17(5) of the Act and not only to 17(5)(b)(iii). (iii) Proviso is applicable only where it is obligatory for an employer to provide the goods or services to its employees under any law for the time being in force, however, travel benefits, dealt in sub-clause (iii), is not obligatory on employer under any law for time being in force. (iv) Canteen and insurance facility are amongst those which are mandatory or obligatory on the part of employer and both exists in Section 17(5)(b)(i) alone and therefore, for no reason to discard this provision for allowing ITC and extending the benefit of second proviso to 17(5)(b)(iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 92 of Factories Act, 1948. In view of statutory requirement to provide canteen facility, payment made to the canteen service providers clearly gets covered under the second proviso to Section 17(5)(b) of the CGST Act. 8. During the course of personal hearing held on 08.09.2022, the authorized representative for the appellant reiterated the submissions made in the appeal dated 01.09.2021. He further submitted that the CBIC vide its Circular No. 172/04/2022-GST dated 06.07.2022 while giving clarifications on various issues pertaining to GST had at Sl.No.3 of Para 2clarified the following: S.No. Issue Clarification 1. Whether the proviso at the end of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the entire clause (b) or the said proviso is applicable only to sub-clause (iii) of clause (b)? 1. Vide the Central Goods and Service Tax (Amendment Act) 2018, clause (b) of sub-section (5) of section 17 of the CGST Act was substituted with effect from 01.02.2019. After the said substitution, the proviso after sub-clause (iii) of claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy of consolidated annual return for the year ended 31.12.2021 filed with the Deputy Labour Commissioner, Ahmedabad. In the said return they had declared total 2299 direct workers employed at their factory. Further they had also declared 3 canteen facilities provided at their factory premises. 8.2 The appellant also submitted a declaration dated 09.10.2022 wherein they stated as under: In terms of provisions of Section 46 of the Factories Act, 1948 , we have canteens in our Sanand Plant for our employees. In these canteens, the meal is served to employees in specified timings according to the shifts in which employees are working. Apart from general rules about the timings, to maintain discipline and not to waste the food etc. there are no specific exclusive rules for employees for using these canteens. FINDINGS :- 9. We have carefully gone through and considered the appeal and written submissions filed by the appellant, the submissions made at the time of personal hearing, Advance Ruling given by the GAAR and other material available on record. 10. The issue to be decided here is, whether input tax credit (ITC) is available to the appellant on GST char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled with the office of the Deputy Labour Commissioner, Ahmedabad wherein they had declared total of 2299 direct workers employed in their factory and total of 3 canteen facilities provided to their employees. They have also submitted a declaration stating that they have canteens at their plant for their employees in terms of provisions of Section 46 of the Factories Act, 1948. 13. On the basis of placement of punctuation viz. colon(:) and semicolon (;) in above referred section, the GAAR in its ruling observed and held that Section 17(5)(b)(i) sub-clause ending with colon and followed by a proviso which ends with semicolon is to be read as independent sub-clause, independent of sub-clause 17(5)(b)(iii) and its proviso and therefore, proviso to Section 17(5)(b)(iii) is not connected to Section 17(5)(b)(i) and cannot be read into it. 13.1 To above observation of GAAR, appellant submitted if such interpretation of GAAR is accepted then it will make the proviso to Section 17(5)(b)(iii) redundant as Section 17(5)(b)(iii) restricts ITC on travel benefits extended to employees on vacation such as leave or home travel concession which is only service whereas second proviso to Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Council, dated 21.07.2018. It had been clarified that scope of input tax credit is being widened, and it would now be made available in respect of Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force. 3. Accordingly, it is clarified that the proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the whole of clause (b) of sub-section (5) of section 17 of the CGST Act. 15. In view of above legal position clarified by CBIC, as second proviso to Section 17(5)(b) inserted vide CGST Amendment Act, 2018 effective from 1.2.2019, is applicable to the whole of clause (b) of sub-section (5) of Section 17 of the CGST Act, Input Tax Credit will be available to the appellant in respect of food beverages as canteen facility, is obligatorily to be provided under the Factories Act, 1948, to its employees working in the factory. Input Tax Credit will be available in respect of such services provided by canteen facility to its direct employees but not in respect of other type of employees including contract employees/workers, visitors etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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