Facts in Brief:

1. The assessee in each one of the case availed Cenvat Credit facility on outdoor catering services provided in the factory premises to its employees and that was objected to by the Department stating that outdoor catering services does not fall within the ambit of definition 'input service', specified under Rule 2(l) of the Cenvat Credit Rules, 2004.

2. The Department was of the view that catering/canteen services are neither used in or in relation to the manufacture or clearance of final product nor it can be said to be an activity relating to business. Almost on an identical issue, in all above these cases, the Department proceeded to disallow the cenvat credit.

3. The Adjudicating Authority vide order-in-original, allowed cenvat credit holding that the persons to whom food supplied are employed in a factory directly or indirectly for the manufacture of goods and when they were supplied with food through the services of outdoor caterers, then such service is definitely in relation to the manufacture and thus qualify to be called an 'input service'. Aggrieved by the Order-in-Original, the Department pursued the matter before the Commissioner (Appeals), who dismissed the appeals, thereby upheld the order of the Adjudicating Authority. As against the said order of the Commissioner (Appeals), the Department went before the Tribunal.

4. The Tribunal in majority of the cases following the Larger Bench decision of the Tribunal in the case of Commissioner of Central Excise, Mumbai V. GTC Industries Ltd. reported in 2008 (12) STR 468 (Tri.-LB) dismissed the appeals holding that Cenvat credit is admissible on 'outdoor catering service' as the same is an input service relating to business. In some of the cases, the Tribunal followed the decision of the Supreme Court in the case of Maruti Suzuki Ltd. V. CCE reported in 2009 (240) ELT 641 (SC) dismissed the appeal, thereby upheld the contention of the Department where Cenvat credit has been denied.

HC held as under,

5. The Larger Bench of CESTAT in the case of GTC Industries Ltd. (supra) has also observed that the credit of service tax would be allowable to a manufacturer even in cases where the cost of the food is borne by the worker. That part of the observation made by the Larger Bench cannot be upheld, because, 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. Shri Shridharan, learned Counsel for the assessee fairly conceded to the above position in law and in fact filed an affidavit affirmed by a responsible officer of the assessee wherein it is stated that the proportionate credit to the extent embedded in the cost of food recovered from the employee/worker has been reversed.

6. For all the aforesaid reasons, the question of law framed by the revenue is answered in the affirmative, i.e., in favour of the assessee and against the revenue. However, the CENVAT credit reversed by the assessee, belatedly, having not been verified by the Excise Authorities, the Excise Authorities are directed to verify the same and pass an appropriate order in that behalf. "

7. The Karnataka High Court in the case of CCe V. Stanzen Toyetetsu India (P) Ltd. reported in 2011 (23) STR 444 (Kar.) has also concurred with the above-said principle and held as follows:

It is in this context that when the assessee provides outdoor canteen facilities because of a statutory obligation imposed on him under Section 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.

8. Again the Karnataka High Court in the case of Resil Chemicals Pvt. Ltd. Vs. CCE, Bangalore - I reported in 2014 (36) STR 1260 (Kar.) and in the casae of CCE, Bangalore V. Ace Designers reported in 2011-TIOL-931-HC-Kar-CX followed the decision in the case of CCe V. Stanzen Toyetetsu India (P) Ltd. reported in 2011 (23) STR 444 (Kar.) held in favour of the assessee.

9. The Gujarat High Court, in an identical circumstance, has taken a similar view in the case of Commissioner of Central Excise, Ahmedabad I V. Ferromatik Milacron India Ltd. reported in (2010) 36 VST 376, wherein, the Gujarat High Court held as follows:

" As noted herein above, under the provisions of section 46 of the Factories Act, it is mandatory for the employer to provide canteen services to the staff. Thus, the provision of canteen services is a statutory requirement. Provision of canteen services being indispensable, it is incumbent on a manufacturer of goods, to provide the same if he desires to run his factory. In view of the definition of "input service" which means any service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products, the input service does not have to be used directly in the manufacture of final products, it may be a service which is only indirectly used in relation to the manufacture of final products. In the circumstances, canteen services which are indispensible in relation to manufacture of the final products, would certainly fall within the ambit of "input service" as defined under the Rules."

Following the above-said decision of the Gujarat High Court, the Allahabad High Court in the case of Commissioner of Central Excise V. M/s.HCL Technologies, reported in 2014 - TIOL - 20010HC-ALL-CX held as follows:

"The next category is Outdoor Catering Services. The Commissioner furnished a cogent justification for allowing the Cenvat Credit save and except for a partial disallowance in respect of the consumption of alcoholic beverages. In this regard, reference may be made to the decision of the Gujarat High Court in Commr. of C. Ex., Ahmedabad Vs Ferromatik Milacron India Ltd. 2011 (211) STR 8 (Guj.) = 2010-TIOL-851-HC-ADM-ST"

10. The only other argument raised by the Revenue is that Notification No.3 of 2011 dated 01.03.2011, which excluded the services in the question by amendment dated 01.03.2011, is by way of substitution and therefore, it should take into effect in respect of the period in dispute also.

Such a plea, at the threshold, has to be rejected, since Rule 1b of the Rules clearly states that the said amendment shall come into force on 1st day of April 2011. The said amendment reads as follows:

"1.(a) These rules may be called the CENVAT Credit (Amendment) Rules, 2011.

(b) Save as otherwise provided in these Rules, they shall come into force on the 1st day of April, 2011."

Rule 2(l), as amended with effect from 01.03.2011 vide Notification No.3/2011 dated 01.03.2011, reads as follows:

(v) for clause (l), the following shall be substituted, namely:-

(l) input service means any service, -

(i) used by a provider of taxable service for providing an output service; or

(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernisation, 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, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes services,-

(A) Specified in sub-clauses (p), (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for-

(a) Construction of a building or a civil structure or a part thereof; or

(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (B) specified in sub-clauses (d), (o), (zo) and (zzzzj) of clause (105) of section 65 of the Finance Act, in so far as they relate to a motor vehicle except when used for the provision of taxable services for which the credit on motor vehicle is available as capital goods; or (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;";

11. Therefore, the issue as decided by the Tribunal and the various Courts clearly settled the issue that the Cenvat Credit has been properly availed in respect of outdoor catering services. 

Case Reference - The Commissioner Of Central ... vs M/S.Visteon Powertrain Control.