Karnataka High Court
M/S Resil Chemicals Private Limited vs The Commissioner Of Central Excise on 9 July, 2014
Bench: N.Kumar, B.Manohar
1
IN THE HIGH COURT OF KARNATAKA, BANGALORE
DATED THIS THE 09TH DAY OF JULY, 2014
PRESENT:
THE HON'BLE Mr.JUSTICE N.KUMAR
AND
THE HON'BLE Mr.JUSTICE B.MANOHAR
C.E.A. No.33/2012 & C.E.A. Nos.38-39/2012
BETWEEN:
M/s.Resil Chemicals Private Limited,
No.40/1, Garudacharpalya,
Mahadevpura P.O. Bangalore - 560 048.
...Appellant
(By Sri.T.M.Subramanian, Advocate)
AND:
The Commissioner of Central Excise,
Bangalore 1 Commissionerate,
Central Revenue Building,
Bangalore - 560 001.
...Respondent
(By Sri.Y.Hariprasad, Advocate)
These Appeals are filed under Section 35G of the Central
Excise Act, 1944 arising out of order dated 02.03.2012 passed in
Order Nos.144 to 146/2012, praying that this Hon'ble Court be
pleased to decide the question of law in favour of the appellant
and set aside that portion of the CESTAT order Nos.144 to
146/2012 dated 02.03.2012 that relate to outdoor catering
service.
2
These Appeals coming on for Hearing, this day,
N.KUMAR, J., delivered the following:
JUDGMENT
The Appeal was admitted to consider the following substantial questions of law, which was framed on 07.01.2013:
1. Whether the Tribunal is right in holding that a manufacturer of an industrial product cannot avail CENVAT credit in respect of cost incurred towards catering services provided by an outdoor caterer which food is sold to its employees engaged in the factory?
2. Whether the question of availment of such input credit would have been linked to the number of employees in the factory of the assessee, being more than 250 persons or less than that?
2. The assessee has preferred this appeal against the order passed by the Tribunal holding that 3 the assessee cannost claim CENVAT credit on "out door catering service."
3. This Court had an occasion to consider the said question in the case of C.C.E. Vs M/s.Stanzen Toyotetsu India (P) Ltd. reported in 2012(1) KCCR page 468, where it was held as under:
"12. It is in this context that when the assessee provides outdoor canteen facilities because of a statutory obligation imposed on him under Section 46 of the Factories Act, it becomes a condition of service as far as the employees are concerned. He has paid the service tax on outdoor canteen services. The said expenses incurred by the assessee will also be taken into consideration before fixing the price of the final product. It may be a welfare measure but certainly it is not a charity provided by the employer to the employees. It is an onerous legal obligation imposed on him. The cost incurred in rendering such service will be included in the cost of production."4
4. This judgment has been noticed by the Tribunal but the relief sought was denied to the assessee on the ground that the assessee has employed less than 250 persons in the factory premises and therefore, the assessee is not entitled to the said benefit. In the aforesaid judgment of this Court, it is not laid down that to be eligible for the CENVAT credit, there should be an obligation under Section 46 of the Factories Act for the assessee to run a canteen. A Canteen is run for the welfare of its employees to see that they get the best food and they are able to perform well in the factory premises which has a direct nexus with the production of the goods and therefore, all input tax which results in the production of the goods is to be given set off by way of CENVAT credit. Therefore, the finding recorded by the Tribunal cannot be sustained. Infact, this question was gone into by the Principal Bench of CESTAT - II, 5 New Delhi and at Paragraph No.6, it has been held as under:
"As far as outdoor catering service is concerned, there is no law laid down anywhere that such service will be in relation to manufacture only if the number of employees is more than 250. In some of the decisions, the affected parties had argued that they were required under Factories Act to provide such services. The ratio of the decisions quoted by the Respondent cannot be understood to mean that catering will qualify as input service only if number of employees is more than 250. The effect of providing canteen within the factory is same whether the number of employees is more than 250 or less than
250."
5. Thus, this is the correct legal position. In that view of the matter, the impugned order passed by the Tribunal is liable to be set aside. Accordingly, it is set aside and the substantial questions of law are 6 answered in favour of the assessee and against the Revenue.
Sd/-
JUDGE Sd/-
JUDGE dh*