Cenvat Credit not allowed if on amount of Service charges recovered from employees

By | October 28, 2015

No cenvat credit should be allowed on amount attributable to service charges which was collected from its employees


Castrol India Ltd.


Commissioner of Central Excise, Raigad


ORDER NO. A/1529/2015/SMB
APPEAL NO. E/86150/2013-MUM.

JUNE  15, 2015

Haren M. Gandhi, Manager Indirect Taxes for the Appellant. Ashutosh Nath, Asstt. Commissioner AR for the Respondent.


1. This appeal is filed against Order-in-Appeal Nos. US/898 & 899/RGD/2012 dtd. 13/12/2012 passed by the Commissioner of Central Excise (Appeals-II), Mumbai wherein Ld. Commissioner has upheld the orders-in-original No. Raigad/ADC/25/12-13 dated 29/5/2012 and No. Raigad/ADC/26/12-13 dated 30/5/2012 and rejected the appeal of the appellant. The issue involved in the present case is that whether Cenvat credit is admissible on the service of outdoor catering services provided by the outdoor caterers in the factory of the appellant.

2. Shri. Haren M. Gandhi, Manager, Indirect Taxes, appearing on behalf of the appellant submits that the period involved in the present case is prior to 1/4/2011 and he submits that the outdoor catering services for personal use was excluded from the definition of input service as given in the Cenvat Credit Rules, and w.e.f. 1/4/2011, therefore prior to 1/4/2011 outdoor catering services used in the factory premises for catering of food to the workers and employees is admissible input service and Cenvat Credit is legally allowable on such services. In support of his submission he placed reliance on judgment of Larger Bench of this Tribunal in case of CCE v. GTC Industries Ltd. [2008] 17 STT 63 (Mum. – CESTAT). He further submits that in their own case, this Tribunal has allowed the Cenvat Credit in respect of outdoor catering services reported as CCE v. Castrol India Ltd. [Appeal No. ST/410/2009, dated 7-5-2010]. In view of the said judgment particularly in their own case the issue of availability of Cenvat Credit in respect of outdoor catering services remained res-integra. He further submits that show-cause notice is clearly time bar inasmuch as show cause notice was issued on 6/5/2011 for the period from 2006-07 to 2010-11. He submits that there is no suppression on their part for the reason that they have been submitting all the information related to availment of Cenvat Credit on the outdoor catering service along with monthly return of every month during relevant period. He invited my attention to the copies of monthly return wherein appellant have submitted service tax credit register and copies of input service register along with annexure of each month. He submits that in this return appellant have submitted regularly the details of service tax credit taken by them, these details clearly disclosed the availment of Cenvat Credit in respect of outdoor catering service and amount of Service tax. It is his submission that with this complete disclosure regarding availment of Cenvat Credit in respect of outdoor catering service, there is no reason to allege the suppression of facts. Therefore the invocation of extended period in the show-cause notice is absolutely illegal and incorrect. Therefore demand beyond one year from the date of show-cause notice is not maintainable on the ground of time bar. Without prejudice he submits that the appellant, before the Commissioner (Appeals) made alternative submission that they are collecting small amount of 3% from the employee towards the catering service therefore at the most credit attributed to the said 3% amount of the total catering service charged, can only be denied however, the Commissioner (Appeals) has not considered the same in the proper perspective.

3. On the other hand, Shri. Ashutosh Nath, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that it is admitted fact that appellant have collected certain amount of service charges from workers and employees of the appellant company, therefore they are not entitled for Cenvat Credit on the outdoor catering service. He submits that extended period was rightly invoked by the adjudicating authority as well as Ld. Commissioner (Appeals) for the reason that appellant have not disclosed collection of amount from the employee against outdoor catering charges. Thus appellant has suppressed the fact. He further submits that as regard the collection of 3% amount as submitted by the appellant, the same has not been verified by the lower authority therefore on this point matter should be remanded to the adjudicating authority. In support of his submission he placed reliance on the following judgments:—

(a) CEMA Electric Lighting Products India (P.) Ltd. v. CCE [2014] 48 taxmann.com 232/47 GST 189 (Guj.)
(b) CCE v. Sterling Biotech Ltd. [Final Order No. 1216 of 2010, dated 1-12-2010]
(c) CCE v. Bosch Chassis Systems India Ltd. [Appeal No. E/1148/2009-Mum., dated 27-9-2011]

4. I have carefully considered the submissions made by both sides and perused record.

5. In view of the judgments of Larger Bench in the case of the GTC Industries Ltd. (supra) and also in the judgment of this Tribunal in the appellant own case, the appellant is entitled for the credit of Service tax paid on outdoor catering service. However it was submitted by the Ld. Counsel that they have collected 3% of the total catering charges from their employees. In view of the judgment cited by the Ld. A.R. Cenvat credit shall not be allowed on the amount attributed to the service charges which is collected from the employees. As regard the time bar, I have gone through monthly return submitted by the appellant from time to time and found that appellant have submitted the copies of input service invoices on which Cenvat credit was availed. The annexure of such invoices clearly shows that they have availed Cenvat credit in respect of outdoor catering service. I have also gone through the annexure which has been filed along with monthly return by the appellant to their Jurisdictional Range Superintendent wherein description of service, amount of Cenvat credit have been clearly disclosed. With this, it can be conveniently said that appellant have been disclosing entire facts as regard availment of Cenvat credit in respect of outdoor catering service, therefore I am of the view that demand pertaining to the period beyond one year from the date of show cause notice is not sustainable being time barred. In view of the above discussion, I pass following order:

(a) Demand beyond one year from the show cause notice is hereby dropped.
(b) The demand for normal period of one year shall be re-quantified on the amount of catering charges collected by the appellant from the employees/workers.
(c) Appellant shall be liable to pay interest on the re-quantified amount, if there is any delay in payment of such amount of Cenvat Credit.
(d) In view of the facts and circumstances of the case I waive the penalty.

The appeal is disposed of in above terms.


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