2018 (7) TMI 520 - AT - Central Excise

CENVAT Credit - input services - operation and maintenance of wind mill - denial on account of nexus - Held that - It is in the interest of justice to remand this matter to the Adjudicating Authority because if the power generated with wind mill is exclusively used in relation to the manufacturing activity, then it is squarely covered within the definition of input service - appeal allowed by way of remand.

Summary

Issues:
1. Irregular availment of cenvat credit on ineligible input services.
2. Liability for disallowance and recovery of cenvat credit.
3. Imposition of interest and penalty.
4. Reversal of cenvat credit on certain services.
5. Interpretation of 'input service' under Cenvat Credit Rules, 2004.
6. Applicability of cenvat credit on operation and maintenance of wind mill.
7. Nexus between services received for windmill and manufacturing activities.
8. Sale of excess power to Electricity Board.
9. Request for remand to adjudicating authority.
10. Issue of extended period of limitation.

Analysis:
1. The appellant was found to have irregularly availed cenvat credit on ineligible input services, leading to a demand for recovery. The audit revealed discrepancies in availing credit on services not used in relation to the manufacture of final products, such as hazardous handling service, club membership, and life insurance.

2. The adjudicating authority ordered the recovery of the disallowed cenvat credit along with interest and penalty. The appellant's appeal against this order was rejected by the Commissioner (Appeals), upholding the liability for recovery and penalty.

3. The definition of 'input service' under the Cenvat Credit Rules, 2004 was crucial in determining the eligibility of the cenvat credit. The appellant argued that services related to the operation and maintenance of the windmill were directly or indirectly used in the manufacturing process, justifying the availment of cenvat credit.

4. The appellant contended that the electricity generated by the windmill was utilized in their manufacturing activity, disputing the respondent's claim that excess power was sold to the Electricity Board. The nexus between the services received for the windmill and the manufacturing activities was a point of contention.

5. The Tribunal considered the lack of evidence regarding the sale of power to the Electricity Board and the absence of records for the relevant period. The issue of extended period of limitation was raised, emphasizing the necessity of positive evidence to establish willful suppression.

6. Ultimately, the Tribunal remanded the matter to the Adjudicating Authority for a fresh decision, considering the exclusive use of power generated by the windmill in manufacturing activities. The remand also aimed to address the issue of extended period of limitation, emphasizing the importance of a thorough examination of the facts.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's decision to remand the case for further examination, ensuring a fair and comprehensive review of the matter.