Cenvat credit on Outdoor Catering services used in relation to business activities

Even after amendment made in the definition of ‘Input services’ w.e.f April 1, 2011, Cenvat credit on Outdoor Catering services used in relation to business activities continues to be eligible when the cost is borne by the Company and not recovered from the employees.

In the instant case, Hindustan Coca Cola Beverages Pvt. Ltd. (the Appellant) availed Cenvat credit on Outdoor Catering services for the period December, 2011 to December, 2012, which was denied by the Lower Authorities and the Ld. Commissioner (Appeals) on the ground that the definition of Input services given under Rule 2(l) of the Cenvat Credit Rules, 2004 (the Credit Rules) has been amended w.e.f April 1, 2011 to specifically exclude any Input service used for personal use or consumption by any employee.

Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Mumbai, and relying upon Circular D.O.F No. 334/3/2011-TRU dated February 28, 2011 and Circular No. 943/4/2011-CX dated April 29, 2011, submitted the following:

• Outdoor Catering service is used by the Appellant in relation to carrying out the business of manufacturing of excisable goods;
• Cenvat credit has been claimed only to the extent the cost of such expenses are borne by the Appellant and not recovered from the employees;
• Outdoor Catering services per se is not ineligible Input services but it is not eligible for Cenvat credit only when it is used for personal use or consumption of any employee or a sub-group of employee;
• Deletion of the word ‘activities relating to business’ from the definition of Input services and adding of specific clauses of inclusion and exclusion is only to make it explicit what was already implicit. Accordingly, all Input services used for business continue to be eligible for Cenvat credit unless excluded specifically.

The Hon’ble CESTAT, Mumbai observed the following:

• Rule 2(l) of the Credit Rules specifically uses the words ‘used primarily for personal use or consumption of any employee’, which should be given due effect;
• Outdoor Catering services is used by the Appellant in relation to their business activities and the same is used by all employees in general;
• The Government while issuing the Budget clarification or subsequent Circulars has clarified that what is not eligible is the Input services meant for personal use or consumption of any employee or the cost of which is included as part of salary of the employee as a cost to Company basis;

Therefore, on the basis of above, the Hon’ble Tribunal held that since in the instant case, Outdoor Catering services are used by the Appellant in relation to their business activities, cost of which is borne by the Appellant and not by the employees, they are rightly entitled to claim Cenvat credit of the same.