Service Tax - whether service tax paid on canteen services is input service in manufacture of final product - Bombay High Court quashes Larger Bench Decision
THE Larger Bench of the CESTAT in Commissioner of Central Excise vs. GTC Industries Ltd - 2008-TIOL-1634-CESTAT-MUM-LB had held that “ Whether the cost of foods is borne by the worker or by the factory, the same will form part of expenditure incurred by the manufacturer and will have a bearing on the cost of production. In view of the same, employment of outdoor caterer for providing catering services has to be considered as an input service relating to the business and CENVAT credit in respect of the same will be admissible.”
But the Nagpur Bench of the Bombay High Court in Commissioner of Central Excise, Nagpur v/s. Ultratech Cement Ltd. had held that, “ The Larger Bench of CESTAT in the case of GTC Industries Ltd.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 (see last para). 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 ”.
Now in the appeal pertaining to GTC, the High Court has quashed the Larger Bench Order and the Tribunal is directed to decide the issue in the light of the High Court order in the Ultratech decision.
This means that, while outdoor catering service would be an eligible input that part of the Service Tax, which is borne by the worker, will not be allowed as credit.