CESTAT Allows CENVAT Credit Of Service Tax Paid On Corporate Membership Of Club

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Mumbai, has allowed the CENVAT credit of service tax paid on corporate memberships of clubs.

The bench of Anil G. Shakkarwar (Technical) has observed that corporate membership of the club is utilized for business meetings and sales meetings, and therefore, for the period prior to April 1, 2011, service tax paid on corporate membership of the club was admissible for availment of CENVAT credit.

The appellants/assessee were manufacturers of transformers and are availing themselves of the facility of CENVAT credit. The appellants were issued a show cause notice dated January 7, 2010 for the period from August 2006 to November 2007 proposing to deny CENVAT credit for service tax paid on services such as outdoor catering service, rent-a-cab service, club or association service, and services availed to provide food coupons to the employees, which is described by the appellant as hospitality service.

There was a proposal to deny CENVAT credit to the tune of Rs. 3,19,796. Subsequently, on September 17, 2010, another show cause notice on similar lines proposing to deny CENVAT Credit of Rs. 1,10,723 on the same services for the period from November 2009 to March 2010 was issued. Both the show cause notices were adjudicated by the original authority together.

The original authority dropped the proceedings initiated against the show-cause notice. Revenue preferred an appeal before the learned Commissioner (Appeals). Commissioner (Appeals) allowed the appeal filed by the Revenue and set aside the order passed by the original authority and disallowed CENVAT credit for service tax paid on the above-stated services to the appellant. Aggrieved by the said order, the appellant is before the Tribunal.

The appellant has submitted that the first show cause notice was hit by limitation since the same was issued for the period from August 2006 to November 2007 and the normal period was over. After the normal period was over, the show cause notice was issued by invoking an extended period of limitation, but there were no ingredients for the invocation of an extended period of limitation.

Therefore, the proceedings initiated through the show cause notice dated January 7, 2010 cannot survive. In respect of the show cause notice, he submitted that the show cause notice proposed to deny CENVAT credit for service tax paid on outdoor catering service, rent-a-cab service, and corporate membership club service.

Insofar as Outdoor Catering Service and Rent-a-Cab Service are concerned, he has submitted that the manufacturing unit has a large number of employees working in the factory, and as per the Factories Act, they are bound to provide food facilities. Therefore, Outdoor Catering Service, before the 2011 amendment to the definition of input service, was eligible for availment of CENVAT credit. The arguments were put forth by him for the Rent-a-Cab Service, stating that the Rent-a-Cab Service was provided by the appellant to facilitate transportation of employees.

The appellant contended that service tax paid on corporate membership of a club is eligible for availment of CENVAT credit prior to April 1, 2011. In respect of services availed to provide food coupons, he has submitted that food coupons are provided to employees to be utilized during lunch, dinner, etc., and that since the services are utilized by the employees, CENVAT credit is admissible. The issue is involved in a show-cause notice dated January 7, 2010.

The Tribunal has held that the service tax paid by the assesses under the Rent-A-Cab Service and Outdoor Catering Service provided to its employees to transport them to the factory and back and to provide food to employees fall under input services and are entitled to CENVAT credit.

The tribunal allowed CENVAT credit for service tax paid on outdoor catering services and rent-a-cab services.

Case Title: M/s Emco Ltd. Versus Commissioner of Central Excise-Mumbai-III

Citation: Excise Appeal No. 2007 of 2012

Date: 20.03.2023

Counsel For Appellant: Advocate Sushant Murthy

Counsel For Respondent: Authorized Representative P. K. Acharya

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