Revenue cannot digest the fact that the Commissioner (A) has allowed CENVAT credit in respect of outdoor catering service to the respondent service tax assessee.

Even employees of smaller organization having less than 250 workers will be hungry and be required to be provided with canteen facility - Outdoor catering service is an Input service - Revenue appeal

dismissed: CESTAT

MUMBAI, MAR 10, 2015 : THIS is an appeal filed by the CST, Mumbai-I.

Revenue cannot digest the fact that the Commissioner (A) has allowed CENVAT credit in respect of outdoor catering service to the respondent service tax assessee. The amount involved is Rs.15.57 lakhs and the period is 2006-07 to 2010-11.

The adjudicating authority held that the appellants have incurred expenditure by providing "canteeen facility services" for their employees and since the appellant is not in a business which requires ‘24 x 7 operations' like BPO service, therefore, the claim was not allowable as input service; that “outdoor catering service” is in the nature of fringe benefits to the employees and had no relationship with the output services rendered.

The Commissioner (A) relied on the decisions in Ultratech Cement Ltd. - 2010-TIOL-745-HC-MUM-ST and Hindustan Coca Cola Beverages Pvt. Ltd. - 2014-TIOL-2460-CESTAT-MUM &allowed the appeal.

Before the Tribunal, the AR submitted that the reliance placed on the ruling in Ultratech Cement Ltd. is misplaced inasmuch as in that case the High Court had taken into consideration the fact that there are more than 250 workers and it was a mandatory requirement under the provisions of the Factories Act, 1948 to provide canteen facilities to the said workers. Reliance is placed on the Single Member decision in IFB Industries where it is held that since the assessee had employed less than 250 workers the ST paid in respect of outdoor catering services is not admissible. Support is also sought to be derived from the decision in Gujarat Heavy Chemicals Ltd. - 2011-TIOL-383-HC-AHM-ST.

The respondent assessee submitted that the canteen facilities-services is provided to its employees to have a meal and/or refreshments since employees are unable to carry the mid-day meal with them; that outdoor catering service is an essential service without which output services cannot be provided by hungry employees. Reliance is placed on the decisions in Heartlan Bangalore Transcription Ser. (P) Ltd. - 2010-TIOL-1764-CESTAT-BANG, CCE vs. GTC Industries Ltd. - 2008-TIOL-1634-CESTAT-MUM-LB & M/s Hindustan Coca Cola Beverages Ltd. - 2014-TIOL-2460-CESTAT-MUM in support.

The Single Member Bench while holding that the Single Member decision in IFB Industries relied upon by the Revenue is per incuriam since it has wrongly interpreted the provisions of the Factories Act, 1948 observed -

++ I find that it has not been held by the Bombay High Court in the case of Ultra Tech Cement Ltd. that outdoor catering service is allowable only in the case of more than 250 workers, as it was mandatorily required under the provisions of the Factories Act, 1948 for providing canteen services.

++ It shows that the legislation appreciates the need of canteen service for the workers at the place of work. Only to avoid the hardship for an essential need, the legislation have provided, that atleast in factories having employees more than 250, should provide, that does not mean that the service was not required for any industrial service or organization having less than 250 workers.

++ Even the employees of a smaller organization having less than 250 workers will also be hungry and required to be provided with canteen facility for the employees.

Holding that the Respondent-assessee is entitled to Cenvat Credit in respect of Outdoor Catering service, the Revenue appeal was dismissed.