CESTAT Rules in Favor of Maruti Suzuki: Allows Cenvat Credit on Catering for Business Events, Denies for Factory Workers Post-2011 Amendment [Read Order]

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has partly allowed appeals filed by Maruti Suzuki concerning the admissibility of Cenvat credit on outdoor catering services. The Tribunal upheld the company's eligibility to claim Cenvat credit on catering expenses related to business events such as Auto Expos and product launches. However, it denied the benefit for outdoor catering services availed for employees or factory workers after the 2011 amendment to Rule 2(l) of the Cenvat Credit Rules.

The petitioner, Maruti Suzuki India Limited, through its units at Manesar and Gurgaon, challenged the denial of Cenvat credit on catering services used during the period from 2004 to 2012. The company argued that prior to 1 April 2011, outdoor catering services fell within the definition of input services and thus, credit was rightly claimed. It also asserted that even after the amendment, catering services used for business promotion events like Auto Expo were not for personal consumption and fell under categories such as "sales promotion" and "business exhibition."

The Tribunal agreed with the company’s contention for the pre-2011 period and allowed full credit. For the post-2011 period, the Bench permitted credit for catering services used in business promotion events but rejected credit related to factory workers’ canteen services, stating that such use falls under the exclusion clause of the amended Rule 2(l), which bars input credit if services are used primarily for personal consumption.

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Maruti Suzuki had contended that canteen services for contractual workers should not fall under the exclusion since these workers are not "employees" in the strict sense. However, the Tribunal rejected this distinction and held that under the Factories Act, 1948, the term “worker” includes both direct and contractual labour. Therefore, catering for them also amounted to personal consumption under the Cenvat Credit Rules, post-amendment.

The Tribunal also took note of the findings in the Toyota Kirloskar Motors Pvt. Ltd. case, upheld by the Supreme Court, which held that outdoor catering services primarily for personal use are not eligible for credit. However, it drew a distinction for business events, recognizing that catering at exhibitions and launches supports sales promotion and business activity.

The Bench, comprising S. S. Garg, Member (Judicial) and P. Anjani Kumar, Member (Technical), dismissed the Revenue’s appeal and partly allowed Maruti Suzuki’s appeals by remanding the matter for quantification of actual liability. All penalties were set aside, though applicable interest was directed to be paid.

To Read the full text of the Order CLICK HERE

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