Out Door Catering For Personal Use Excluded From Input Service According To Cenvat Credit Rules

KEY TAKEAWAYS

• Considering the decision of the Karnataka High Court denying the info tax reduction to Toyota Kirloskar Motor Pvt Ltd. for profiting outside catering administration for individual use, the Supreme Court has confirmed that such help is prohibited from input administration according to CENVAT Credit Rules 2004 post-April 1, 2011.

DETAILS

• The Company had established a canteen in the premises of its Factory according to the mandate of the Factories Act, 1948 and it was profiting the open air cooking administrations of one Sodexho Food Solutions Private Limited.
• During the time period of April 2011 to September 2011, the appealing party paid service taxes of Rs. 37,53,952/ - to the specialist co-op i.e., Sodexho Food Solutions Private Limited, and from there on, assumed CENVET acknowledgment of administration expense of Rs.37,53,952/ - as an acknowledge on 'input administration' as characterized under Rule 2(1) of the Cenvat Credit Rules.
• Against this scenario, the Central Tax Department gave a show-cause notice to the Company on April 23, 2012, wherein it was claimed that outdoor catering services were not qualified for input benefits as being prohibited vide Rule 2(I)(c) of the Cenvat Credit Rules.
• From that point, the mediating authority passed a request in April 2013, affirming the interest of 37,53,952/ - with interest and furthermore forced a punishment of Rs. 5 lakhs on the appealing party organization under Section 11AC r/w Rule 15(1) of the Cenvat Credit Rules, 2004.
• In these conditions, the Appellant party favoured an appeal before the Commissioner (Appeals), Bengaluru, supporting its remain to assume praise on 'input administration' as characterized under Rule 2(1) of the Cenvat Credit Rules for outside cooking administrations.
• Nonetheless, the said offer was dismissed and from that point, the litigant organization moved to the CESTAT/Tribunal, which additionally excused the appeal.
• Further, when the Karnataka High Court, as well, considered the view taken by the Tribunal [CESTAT (Central Excise and Service Tax Appellate Tribunal, South Zonal Bench), Bangalore], the litigant organization Toyota Kirloskar Motor Pvt Ltd. moved the Supreme Court against the last judgment and request of the Karnataka High Court.

JUDGEMENT OF THE COURT

• Examining the meaning of 'input administration' preceding the change and post correction (made on April 1, 2011), the Karnataka High Court had noticed that before April 1, 2011, outdoor catering services were covered under the meaning of the 'input service'.
• Nonetheless, the Court additionally noted, after the amendment came into power in the light of explicit prohibition statement, 'outdoor catering' service was not in any manner covered under the meaning of 'input service'.
• Considering this, the Karnataka High Court maintained the request for the Tribunal [CESTAT (Central Excise and Service Tax Appellate Tribunal, South Zonal Bench), Bangalore]
• Consequently, the Karnataka High Court decided not to meddle with the order passed by the Tribunal, and the topic of law was replied for the income and against the assessee and the appeal was thus excused.

QUESTIONS

• Should outdoor catering be added in the purview of input service under CENVAT Credit Rules 2004 ?
• Whether the decision of the Supreme Court to prohibit outside catering from input administration is right ?

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