Goods and Services Tax

M/s. Pepsico India Holdings Pvt. Ltd. Versus Commissioner of GST & Central Excise Chennai South

2019 (1) TMI 559 – CESTAT CHENNAI – TMI – CENVAT Credit – input services – canteen services provided to employees – Held that:- Larger Bench of the Tribunal in the case of Wipro Ltd. Vs. Commissioner of Central Excise, Bangalore [2018 (4) TMI 149 – CESTAT BANGALORE] has held that outdoor catering services are excluded from the definition of input services with effect from 1.4.201 – credit cannot be allowed.

Penalty – Held that:- The issue is interpretational one and that the appellant have disclosed the details of the credit availed in their ST-3 returns – penalty imposed cannot sustain and the same is set aside.

The impugned order is modified to the extent of setting aside the penalty imposed without disturbing the demand or interest thereon under outdoor catering service – appeal allowed in part. – Appeal No. E/41945/2018 – Final Order No. 40050/2019 – Dated:- 10-1-2019 – Ms. Sulekha Beevi C.S., Member (Judicial) Shri Raghavan Ramabhadran, Advocate for the Appellant Shri

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mitted that the appellant is in appeal only against the disallowance of credit on canteen services / outdoor catering services. The appellant is a factory as defined under the Factories Act, 1948. The outdoor catering services are incurred by the appellant as per the statutory obligation under section 46 of the Factories Act to provide canteen facility to its workmen / employees within the factory premises. Therefore, the service is integrally connected with the activity of manufacture. The credit has been disallowed by the department alleging that outdoor catering services is excluded by the exclusion clause in the definition of input service. The exclusion is applicable only to services relating to personal consumption. In other words, credit is eligible when outdoor catering services are not for personal consumption of the employees. 2.1 The Larger Bench of the Tribunal in the case of Wipro Ltd. Vs. Commissioner of Central Excise, Bangalore – 2018 (4) TMI 149 CESTAT Bangalore has he

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risdictional High Court in the case of Ganesan Builders – 2018 VIL 475 MAD ST to argue that the Hon ble Court had occasion to deal with the exclusion clause provided in the definition with effect from 1.4.2011 relating to insurance service. In the said case, the credit was denied by the authorities below on the ground that insurance service is intended for the employees of the company and therefore should be construed as for personal use or consumption of the employees. However, while interpreting the exclusion clause, the Hon ble Court held that the employee insurance is provided under a statutory requirement stipulated in Workmen s Compensation Act, 1996 which is a beneficial legislation for the welfare of the employees. Since it is a statutory requirement, the Court held that the services cannot be held to be used primarily for personal use or consumption of an employee. Thus, the Hon ble High Court has laid down a test as to whether the services used to provide certain employee ben

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s (supra), the very same ratio should be applicable to the case of outdoor catering services also. 2.4 The decision of the Hon ble jurisdictional High Court in the case of Rane TRW Steering System Ltd. – 2018 (2) TMI 1745 – Madras High Court was also taken assistance by the ld. counsel to support his argument. In the said case, when the gardening services were availed by the assessee as per the pollution control norms/requirement, the credit was held to be eligible for the period after 1.4.2011. 2.5 The ld. counsel put forward an alternate plea with regard to penalty. In any case, the issue involved is interpretational in nature involving legal provisions as seen from the fact that the matter was referred to the Larger Bench. The appellant was regularly filing returns and also disclosed the credit availed on outdoor catering service in their ST-3 returns. Therefore, there is no ingredients for imposing penalty and prayed to set aside the penalty. 3. The ld. AR Shri L. Nandakumar suppor

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ovide facilities like canteen for the employees within the factory premises. The ld. counsel has made detail submissions with regard to the statutory requirement for providing canteen facility to the employees within the factory premises. The definition of input services after 1.4.2011 contains exclusion clause wherein certain services are specifically excluded. For better appreciation, the definition of input service as it stands after 1.4.2011 is reproduced as under:- (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,

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rvice of general insurance business, servicing, repair and maintenance, insofar as they relate to a motor vehicle which is not a capital goods, except when used by- (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person; or (b) an insurance company in respect of a motor vehicle insured or reinsured by such person; 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; [Explanation: For the purpose of this clause, sales promotion includes, services by way of sale of dutiable goods on commission basis]. 5.1 Clause (C) of the above definition states that services such as those is provided in relation to outdoor cateri

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it would not qualify as input service . In the instant case, as per Factories Act, 1948, the appellants are compelled to provide food facilities inside the factory. It is more importantly used by the appellant to comply with the mandatory requirement under Factories Act. If they do not comply with such provision of the Factories Act, the appellants will definitely not be able to engage in the production/manufacture of final products. Therefore outdoor catering services are used by appellant in relation to the business of manufacture and not for any personal use or consumption of employee. 5.2 The Tribunal thus noted that the outdoor catering services are availed primarily as per requirement of appellant in order to engage in manufacture of finished product and is not for personal consumption or personal use of employee. However, the said decision was referred to the Larger Bench and vide decision in the case of Wipro Ltd. (supra), the Larger Bench of Tribunal held that since outdoor c

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