2015 (6) TMI 580 - AT - Central Excise

Admissibility of cenvat credit - Inputs and/or input services used in setting up of wind mills, generation of wind power and maintenance as well as operation thereof - Held that - Power shortage is well known to the economy. Hydro power, thermal power as well as wind energy are normally generated at a place nearness to the source of raw material. Wind energy is generated at the place where wind is available and reciprocal arrangement is made with Electricity Board for bartering the energy so generated. This is an accepted phenomena since power/energy generated cannot be stored. Places where wind energy generated is not consumable arrangement between the generator of energy and power distributing agency like electricity board is obviously made to save the power so generated and make that available at the place of manufacture. - there should not be inadmissibility of input credit on input or input services used by wind mills to generate energy which is made available through electricity board under barter system. - In absence of any materials on record showing energy generated by wind mills was used for the purpose other than manufacture or providing of service, all the appeals listed in the Sl. Nos. are allowed subject to in some of appeals are specific observations are made . - Decision in the case of CCE, Aurangabad Vs. Endurance Technology Pvt. Ltd. 2015 (6) TMI 82 - BOMBAY HIGH COURT - Appeal disposed of .

Summary

Issues:
Admissibility of cenvat credit for inputs and/or input services used in setting up and maintenance of wind mills for generation of wind power.
Dispute over disallowance of cenvat credit as energy generated by wind mills was not used in manufacturing or providing any output service.
Revenue's grievance regarding inputs used in maintenance of wind mills.
Revenue's appeal for penalty imposition due to inadmissible cenvat credit.
Adjudicating authority's decision against an appellant due to lack of proper documents submitted.
Revenue's appeal against cenvat credit of service tax paid on lease rental.
Dispute over cenvat credit for service tax paid on security service.

Analysis:
The judgment addresses multiple appeals concerning the admissibility of cenvat credit for inputs and input services utilized in the establishment and operation of wind mills for wind power generation. The central issue revolves around the disallowance of cenvat credit on the grounds that the energy generated by wind mills was not directly employed in manufacturing processes or output services. The contention put forth by the counsels is that the energy generated by wind mills was exchanged with the Tamil Nadu Electricity Board to obtain equivalent power at the manufacturing site or place of service provision. It is emphasized that there is no evidence suggesting an alternative use of the wind-generated energy.

The Tribunal acknowledges the prevailing power shortage scenario and the necessity of utilizing diverse energy sources such as wind power. The judgment highlights the accepted practice of bartering wind energy with electricity boards to ensure the efficient distribution and utilization of generated power. Reference is made to a judgment by the High Court of Bombay, which elucidates the admissibility of cenvat credit for inputs or input services utilized by wind mills under a barter system. In the absence of contradictory evidence, the Tribunal rules in favor of the appellants, allowing the appeals related to cenvat credit for wind power generation activities.

Regarding the maintenance of wind mills, the Tribunal dismisses Revenue's appeals contesting the use of inputs in maintenance activities. Similarly, Revenue's appeals concerning penalty imposition are rejected since cenvat credit is deemed admissible. An appellant's plea, rectifying a documentation error, is granted relief in alignment with other similar cases. Appeals by Revenue against cenvat credit on lease rental and security services face dismissal or partial acceptance based on the specific circumstances of each case.

In conclusion, the judgment resolves all appeals, dismisses miscellaneous applications, and addresses cross objections filed by Revenue. The decision underscores the importance of cenvat credit eligibility for inputs and services related to wind power generation activities while considering the specific operational dynamics of wind energy utilization.