2016 (8) TMI 584 - AT - Central Excise

Cenvat credit - Service Tax paid on Consultancy Service in connection with setting-up of Solar Power Project - Held that - it is clear that the said consultancy is in connection with the business of the appellant. The interpretation of the ld. Commissioner (Appeals) that the project relating to electricity generation cannot be considered as connected with the business of the appellant, which is manufacturing of cement, is narrow and unjustified. Further, the denial of credit, on the speculation that the electricity likely to be generated in such Solar Project could also be sold by the appellant, is not justified. - Decided in favour of appellant

Summary

Issues: Denial of cenvat credit on Service Tax paid for Consultancy Service in connection with setting-up of Solar Power Project.

In this case, the appellant, a manufacturing unit, engaged in the manufacture of cement and clinker, was denied cenvat credit on Service Tax paid for Consultancy Service related to setting up a Solar Power Project in West Rajasthan. The lower authorities contended that the Solar Power Project location was far away and there was a possibility of selling the power to outsiders, thus no nexus existed between the project and the manufacturing activity. However, the Tribunal found this reasoning untenable. It was highlighted that the appellant's business, being power-intensive, aligned with the Regulation mandating the use of renewable energy for manufacturers. The consultancy service was deemed to be in connection with the appellant's business, and the denial of credit based on speculation about selling power was deemed unjustified. Reference was made to previous Tribunal orders allowing credit for similar situations, emphasizing that the location of the project should not be a reason for denial as long as the electricity generated was intended for the appellant's use.

The Tribunal, after considering the facts and arguments, found the denial of credit unsustainable and set aside the impugned order, allowing the appeal. The judgment emphasized the connection between the consultancy service for the Solar Power Project and the appellant's manufacturing business, rejecting the lower authorities' reasoning and highlighting the alignment with regulatory requirements for renewable energy use by manufacturers. The decision was based on the interpretation that the consultancy service was indeed related to the appellant's business activities, and the speculation about selling power did not justify the denial of cenvat credit. The Tribunal's decision was supported by precedents where credit was allowed in similar circumstances, irrespective of the project's location.