2011 (3) TMI 1084 - AT - Central Excise

Availment of modvat credit - Services utilized for installation and civil work and maintenance of wind mill located at a far of place from the factory premises - electricity is being generated in windmills at Kutch which is far away from the factory premises based at Ahmedabad - Held that - As the electricity generated at the wind mill is not being supplied directly to the appellant s factory but to GEB as the consumption can be less or more than the requisite units of electricity. Since the electricity which is going to be used by them need not be exact quantity of electricity produced in their windmills, the services used at the site of the windmills cannot be held as input services by the manufacturing unit at Ahmedabad. Decided against the assessee. Penalty levy- Held that - As it is seen that it is not a case of suppression or mis-statement and the issue being a pure legal issue of interpretation, imposition of any penalty is not called for.

Summary

Issues: Availment of modvat credit for services used at a windmill site located far from the factory premises and penalty imposition.

Availment of Modvat Credit: The judgment revolves around the dispute concerning the availment of modvat credit for services utilized for installation, civil work, and maintenance of a windmill situated at a distance from the factory premises. The appellant argued that the electricity generated at the windmill is transferred to the Gujarat Electricity Board (GEB), which then supplies it back to the appellant's factory in Ahmedabad. However, the lower authorities denied the modvat credit, stating that there was no direct nexus between the service received at the windmill site and the items manufactured at the factory. They emphasized that the electricity generated at the windmill is not directly consumed in the factory and that the services used at the windmill site cannot be considered input services for the manufacturing unit in Ahmedabad. The Tribunal referred to previous decisions to support the denial of modvat credit, concluding that the issue had already been settled, and upheld the denial of service tax credit.

Penalty Imposition: Regarding the penalty imposed, the Commissioner (Appeals) acknowledged that there was no suppression or misstatement in the case and reduced the penalty to Rs. 2000. The Tribunal, in line with previous decisions, held that since the issue was a pure legal matter of interpretation, no penalty should be imposed. Consequently, the Tribunal set aside the penalty of Rs. 2000 imposed on the appellant. The appeal was disposed of accordingly, with the denial of the service tax credit upheld and the penalty being annulled.