2008 (4) TMI 279 - AT - Service Tax

Cenvat credit of service tax paid on maintenance and repair services received for the power plant situated away form factory no direct nexus between service received in power plant and items manufactured in factory further, in view of the fact that the power produced at the wind mill and power requirement of the factory also need not have to be matched or tallied, appellants are not eligible for the benefit of cenvat credit assessee s appeal rejected

Summary

Issues:
1. Stay petition seeking waiver of pre-deposit of Cenvat credit of service tax.
2. Admissibility of Cenvat credit on maintenance and repair services for wind energy plant.
3. Interpretation of input services under Cenvat Rules.
4. Nexus between services received and final product manufactured.

Analysis:
1. The judgment addresses a stay petition by M/s. Ellora Times Ltd. (ET) and M/s. Ajanta Transistor Clock Mfg. Co. Ltd. (ATC) regarding the waiver of pre-deposit of Cenvat credit of service tax. The issue involved in both appeals is the same, leading to the waiver of pre-deposit for ET as ATC had already deposited the duty amount as ordered.

2. The appellants, engaged in manufacturing electric products, sought Cenvat credit on service tax paid for maintenance and repair services for a wind energy plant. Adjudication proceedings were initiated, resulting in conflicting orders. While Cenvat credit was denied for ATC, it was dropped for ET by the Jt. Commissioner. The Commissioner (Appeals) ruled in favor of the Revenue, denying Cenvat credit for both cases.

3. The debate centered on the interpretation of input services under the Cenvat Rules. The appellants argued that services received at the wind mill qualified as input services under Rule 2(1) and Rule 3(1) of the Cenvat Rules, emphasizing that the place of service receipt need not be the factory. They cited various legal precedents to support their stance, including Supreme Court judgments and Tribunal decisions.

4. The Tribunal, after considering arguments from both sides, rejected the appeals. It emphasized the lack of a direct nexus between services received at the power plant and the items manufactured in the factory. The judgment highlighted the independent nature of transactions involving power delivery to the electricity board and sales, concluding that the appellants were not eligible for Cenvat credit due to the absence of a significant connection between the services received and the final products manufactured.

In conclusion, the judgment underscores the importance of establishing a clear nexus between services received and the final products manufactured to determine the admissibility of Cenvat credit, emphasizing the independent nature of transactions in assessing eligibility for such benefits.