Case Law Details

Case Name : Commissioner of Central Excise & Service Tax Vs M/s. Thiru Arooran Sugars Ltd. (Madras High Court)
Appeal Number : C.M.A. No: 1276 of 2010
Date of Judgement/Order : 26/06/2015
Related Assessment Year :
Courts : All High Courts (3993) Madras High Court (302)
CA Urvashi Porwal
Urvashi PorwalBrief of the Case

In the case of Commissioner of Central Excise & Service Tax Vs. M/s. Thiru Arooran Sugars Ltd., Hon’ble Madras High Court held that the CENVAT credit of the service tax paid in respect of cell phone services, catering services and service tax paid on the Goods Transport Agency services in respect of freight charges paid for the outward movement of goods is allowed.

Brief Facts of the Case

The assessee manufactures sugar, molasses, rectified spirit (non-excisable), extra neutral alcohol (exempted), ethanol, denatured ethyl alcohol and fuel oil (dutiable). The assessee was availing Cenvat credit of duty paid on the capital goods and inputs and the service tax paid in respect of input services as per the Cenvat Credit Rules, 2004. On verification of the records it was noticed that the assessee had availed credit of the service tax and education cess paid in respect of cell phone services, catering services and service tax paid on the Goods Transport Agency services in respect of freight charges paid for the outward movement of sugar. It appears that the above said services were not in relation to the manufacture and clearance of final products, as provided under Cenvat Credit Rules.   Therefore, the assessee was issued with a show cause notice and after due process of law the adjudicating authority has ordered recovery of Cenvat credit under proviso to Section 73 and 75 of the Finance Act, 1944 read with Rule 14 of Cenvat Credit Rules and also imposed penalty under Rule 15 of Cenvat Credit Rules.

Aggrieved by the Order-in-Original, the assessee pursued the matter before the Commissioner (Appeals). The Commissioner (Appeals) passed order against the assessee.

As against the said order of the Commissioner (Appeals), the assessee went before the Tribunal. The Tribunal 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) and ABB Ltd., Vs. CCE Bangalore as reported in 2009 (15) STR 23 (Tri-LB) allowed the appeal by holding that Cenvat credit is admissible on ‘outdoor catering service’ as well as ‘outward freight service’ as the same are input service relating to business.

Being aggrieved by the orders of the Tribunal, the Revenue has filed the present appeal before this Court.

Held by Hon’ble Madras High Court

The Hon’ble High Court observed that in an identical circumstance, this Court dealt with the issue with regard to outdoor catering service, in a batch of appeals in C.M.A.Nos.2 of 2010 batch and vide judgment dated 13.02.2015 held in favour of the assessee by following the decision of the Bombay High Court in the case of CCE V. Ultratech Cement Ltd. reported in 2010 -TIOL – 745 – HC- MUM – ST, wherein all the contentions raised by the Revenue has been considered in extenso including the definition of ‘input service’ as defined in the case of Maruti Suzuki Ltd. V. CCE reported in 2009 (240) ELT 641 (SC). The Bombay High Court came to the conclusion that the decision of the Larger Bench of the CESTAT in the case of CCE V. GTC Industries Ltd. 2008 (12) STR 468 is a correct law, however, with a rider that where the cost of the food is borne by the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer.

The Hon’ble Court noted that various High Courts have concurred with the above-said principle of the Bombay High Court and followed the above-said decision. 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.

With regard to the outward freight charges, the Karnataka High Court in the case of CCE V. ABB Ltd., Bangalore reported in [2011] 44 VST 1, which was rendered on the appeal filed by the Department as against the decision of the full Bench of the Tribunal, while answering the issue whether the services availed by a manufacturer for outward transportation of final products from the place of removal should be treated as an input service in terms of Rule 2 (1) (ii) of the CENVAT Credit Rules, 2004 and thereby enabling the manufacturer to take credit of the service tax on the value of such services.

In view of the above, the Hon’ble Madras High Court dismissed this appeal by affirming the order of the Tribunal.

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