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TMI Blog2023 (3) TMI 1435X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the CENVAT credit on the Outdoor Catering services, for the period prior to 01.04.2011. 2.1 The appellant is inter alia, engaged in manufacturing of bars and rods of steel and finished rings & gears. The head office of the Appellant is located at Raigad. 2.2 During the dispute period appellant has entered into an agreement with an outdoor caterer for supplying food, beverages etc at the canteen facility to the employees and workers of the appellant within the factory premises. The service providers raised invoices on the appellant for the service charges along with service tax thereon. The appellant, on the strength of the invoices of service provider, availed cenvat credit of service tax paid on input service. 2.3 Revenue was of the view that disputed service did not qualify as "input service" within the meaning of Rule 2(1) of the Cenvat Credit 2004, as the same was not used in or in relation to manufacture of finished goods. Therefore, cenvat credit of service amounting to Rs. 39,57,179/- was denied. 2.4 Two show cause notices dated 21.03.2011 and 18.01.2012 were issued to the appellant seeking to deny the credit availed by the appellant on the outdoor catering services. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the input stage goods and services is established. Conceptually as well as a matter of policy, any input service that forms a part of the value of the final product should be eligible for the benefit of Cenvat Credit. xx xx xx 38. Service tax therefore, paid on expenditure incurred by the assessee on advertisements sales promotion, market research will have to be allowed as input stage credit more particularly if the same forms a part of the price of final product of the assessee on which excise duty is paid. In other words, credit of input service must be allowed on expenditure incurred by the assessee which form a part of the assessable value of the final product. If the above is not done, as sought to be done by the department in the present case, it will defeat the very basis and genesis Cenvat i.e. value added tax. 39. The definition of input service which has been reproduced earlier, can be effectively divided into the following five categories, in so far as a manufacturer is concerned : (i) Any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products (ii) Any service used by the manufacturer whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took the view that the definition of 'input service' in Rule 2(l) of the 2004 Rules consists of three categories of services, and Cenvat credit of service tax paid on all such services would be available to an assessee. The relevant portion of the judgment of the Bombay High Court is reproduced below : "27. The definition of "input service" as per rule 2(l) of 2004 Rules (insofar as it relates to the manufacture of final product is concerned), consists of three categories of services. The first category, covers services which are directly or indirectly used in or in relation to the manufacture of final products. The second category, covers the services which are used for clearance of the final products up to the place of removal. The third category, includes services namely : (a) Services used in relation to setting up, modernization,renovation or repairs of a factory, (b) Services used in an office relating to such factory, (c) Services like advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, (d) Activities relating to business such as, accounting, auditing, financing, recruitment and quality control, coaching and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in relation to setting up, modernization, 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, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;" 10. As is clear from the definition any service used by the manufacturer whether directly or indirectly in or in relation to the manufacture of final products constitutes input service. Various services are set out in the definition expressly, as constituting input service. It also includes transportation of inputs or capital goods and outward transportation upto the place of removal. Therefore the test is whether the service utilized by the assessee is for the manufacture of final product. Such service may be utilized directly or indirectly. Such service may be in the nature of transportation of inputs or ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Rent-A-Cab Service/Transportation : ..... Insurance/Health Policy : .... 15. Therefore, merely because these services are not expressly mentioned in the definition of input service it cannot be said that they do not constitute input service and the assessee is not entitled to the benefit of CENVAT credit. In fact, Rule 3 of the Cenvat [Credit] Rules, 2004, specifically provides that the manufacturer of final products shall be allowed to take credit, the service tax leviable under Section 66 of the Finance Act and paid on any input service received by the manufacturer of a final product. Therefore under the scheme of the Cenvat Credit Rules, 2004, the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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