Decision by CESTAT South Zonal Bench at Bangalore, on Food Coupons to Employees dated 28-12-2012

The Commissioner of Service Tax Bangalore (Appellant )

Versus

M/s. C. Cubed Solutions Pvt. Ltd. (Respondent)

(Arising out of Order-in-Appeal No. 120/2010 dated 10.03.2010 passed by the Commissioner of Central Excise, Bangalore for the transactions for the period 01.01.2008 to 31.03.2008)

1.            M/s. C. Cubed Solutions Pvt. Ltd is a 100% EOU taking benefit of the CENVAT credit scheme. They are provider of output services namely Online Data Retrieval or Access Service and their entire service is exported. Consequently, they are not able to utilize CENVAT credit taken for payment of service tax on any domestic services rendered. Therefore, they claim refund of such credit under Rule 5 of the CENVAT Credit Rules 2004 read with Notification No. 5/2006-CE (N.T) dated 14.03.2006.

2.            For the period 01.01.2008 to 31.03.2008, they had claimed refund of Rs. 2,96,940/  of which - Rs. 2,53,655/- was sanctioned by the adjudicating authority and  Rs. 43,285/- was rejected.

3.             Against this rejection, they moved the Commissioner (Appeals). The Commissioner (Appeals) has allowed refund of this amount also, stating that he was satisfied that there is enough nexus between the input services and the exported services and therefore, the appellants are eligible for the refund.

4.            Aggrieved by the order of the Commissioner (Appeals), Revenue has filed this appeal. The learned AR for Revenue submits that the appellants had taken credit on services like Advertising Services, Food Pass Services, Security Services etc. which have no direct nexus with the exported services and therefore the finding of the Commissioner (Appeals) is not correct.

5.            Following are the  split up of the amounts involved:: 

Items	Rs
Advertising	3,413
Food Pass	2,409
House Keeping	10,188
Network and Connectivity	84,572
Repairs and Maintenance   Computer	17,223
Audit	15,534
Recruitment	3,584
Rent	1,51,860
Security Service	8,157
Total	296940

                                                 

    6.        The respondent argued that it is an EOU  and is providing output services and the asset of the respondent is only computers and staff. And each of the services in the above table is with reference to these two assets.  For example t the advertisement has been published for recruitment of personnel. The recruitment service is one of the services which is specifically included in the inclusive portion of the definition of input services at Rule 2(l) of CENVAT Credit Rules, 2004 and therefore there cannot be any doubt about the nexus of this services with the business process.

7.            There was some detailed discussion in the matter of food passes. She submits that these are food coupons issued to selected employees to enable them to have food while at work. Since the Courts have recognized that providing food to employees has a close nexus to the business process, there is no reason to deny CENVAT credit on this item. It appears that the agency issuing the food passes has paid service tax under the head of Business Auxiliary Service .

8.Food Passes:  On this point the arguments by the appellant   is as follows:

                                     It almost like cash which can be encashed for purchase of any goods in selected shops. Therefore, it  not possible to establish a clear nexus that this was for providing service while doing the business of the respondent. This is just another form of perk being given to the employees who consume it in their personal capacity and not in the business process and therefore CENVAT credit cannot be allowed.

9.          The Judgment: 

The input services tabulated above except in the case of food pass are services  necessary for acquiring and utilizing their business assets namely people and computers

However, in the matter of food passes, in as much as the manner in which these food passes are utilized is not a matter which can be clearly established. Without such information it is not possible to come to a conclusion that there was a nexus between the food passes and the business process of the respondent. Moreover this is essentially in the nature of a payment of a perk to the employee rather than as an input service for business .

 So the appeal is allowed  only to the limited extent of   Rs. 2409/- with regard to Food Passes  The appeal of Revenue is rejected in respect of the remaining amounts.