2009 (9) TMI 543 - AT - Service Tax

Stay- Cenvat Credit of Service Tax- The demands have been confirmed as the assessees, who are manufacturers of cast articles of iron and aluminium for use in motor vehicles, are held not to be entitled to avail credit of service tax. Credit denied on the ground that electricity generated from windmills transferred to state grid and then drawn to factory and nexus absent between windmills located outside factory and production. Held that- in the light of the decision of Madra Cements Ltd. v. CCE, Madurai, dispense with predeposit of the disputed amounts and stay recovery thereof pending the appeals.

Summary

Issues:
1. Waiver of predeposit of service tax and penalty in two separate appeals.
2. Entitlement of credit of service tax paid on lease rentals and operation and maintenance charges of windmills for manufacturers of cast articles.
3. Nexus between windmills located outside the factory and the production process.
4. Prima facie case for waiver based on previous Tribunal orders.
5. Distinguishing the present case from the decision in Maruti Suzuki Ltd. v. CCE, Delhi.
6. Application of the 'input service' concept in the context of electricity generation and supply.

Analysis:
1. The judgment dealt with applications for waiver of predeposit of substantial amounts along with penalties in two appeals concerning the period from Nov. 07 to Sept. 08 and June 06 to Sept. 07. The demands were confirmed as the manufacturers were denied credit of service tax paid on windmill-related charges due to the lack of nexus with the production process.

2. The Tribunal considered the assessees' argument, citing a strong prima facie case for total waiver based on previous orders in similar cases. Reference was made to the Madras Cements case and other precedents to support the waiver, emphasizing the distinction from the Maruti Suzuki Ltd. case where the electricity was cleared for distribution, unlike in the present scenario.

3. The judgment highlighted the importance of the 'input service' concept in determining the eligibility for credit, specifically in the context of electricity generation and supply from windmills. The decision to dispense with predeposit and stay recovery of disputed amounts was made based on the Madras Cements case's ratio, indicating a favorable interim outcome for the appellants.

4. The Tribunal's analysis focused on the specific circumstances of the case, drawing parallels with previous rulings to justify the waiver decision. The application of legal principles, including the interpretation of 'input service' and nexus requirements, played a crucial role in the judgment's outcome, ensuring a fair consideration of the appellants' claims.

5. By distinguishing the present case from the Maruti Suzuki Ltd. decision, the Tribunal clarified the key differences in the electricity supply chain and utilization, reinforcing the rationale behind granting the waiver. The judgment's comprehensive approach to evaluating the legal precedents and factual nuances demonstrated a thorough understanding of the complex issues involved in the appeals.

6. Overall, the judgment provided a detailed analysis of the waiver applications, focusing on the legal principles governing the credit eligibility for service tax paid on windmill-related charges. The decision to dispense with predeposit and stay recovery pending the appeals reflected a balanced consideration of the parties' arguments and the relevant legal framework, ensuring a just outcome in light of the specific facts and precedents cited.