2016 (1) TMI 593 - AT - Central Excise

Cenvat Credit - input service - maintenance and repair services of windmill farm - The electricity generated in this windmill farm are fed into grid of Maharastra State, electricity board for supply and distribution, in return appellant were allowed draw equivalent units for consumption of electricity, at their manufacturing plant, where excisable goods are manufactured and cleared on payment of duty. - Held that - Hon ble High Court of Bombay had considered self same issue in the case of Endurance Technology Pvt. Ltd. 2015 (6) TMI 82 - BOMBAY HIGH COURT - the management, maintenance and repair of windmills installed by the respondents is input service as defined by clause l of Rule 2. Rule 3 and 4 provide that any input or capital goods received in the factory or any input service received by manufacture of final product would be susceptible to CENVAT credit. Rule does not say that input service received by a manufacturer must be received at the factory premises. Credit allowed - Decided in favor of assessee.

Issues Involved:
1. Eligibility for CENVAT credit on service tax paid for services rendered at a windmill farm situated away from the factory premises.
2. Whether the electricity generated at the windmill farm and fed into the MSEB grid can be considered as used in the manufacture of the final product at the factory.

Issue-wise Detailed Analysis:

1. Eligibility for CENVAT credit on service tax paid for services rendered at a windmill farm situated away from the factory premises:

The appellant set up a windmill farm at Satara, generating electricity fed into the Maharashtra State Electricity Board (MSEB) grid. The appellant then drew an equivalent amount of electricity for their manufacturing plant. The appellant availed CENVAT credit on the service tax paid for maintenance and repair services at the windmill farm. The revenue authorities contended that this credit was incorrect and needed to be reversed, issuing show cause notices for the demand of such CENVAT credit along with interest and penalties.

The adjudicating authority confirmed these demands, stating that the provisions of Rule 2(l) of the CENVAT Credit Rules, which define input services, do not cover the activities undertaken by the appellant's service provider. The appellant argued that the issue was no longer res integra, citing the Bombay High Court judgment in Commissioner of Central Excise and Customs, Aurangabad Vs Endurance Technology Pvt. Ltd. The Tribunal agreed with the appellant, noting that the High Court had already considered a similar issue, ruling that services related to maintenance and repairs of windmills are indeed covered under input services as defined by the CENVAT Credit Rules. The Tribunal found the adjudicating authority's interpretation incorrect and set aside the impugned order.

2. Whether the electricity generated at the windmill farm and fed into the MSEB grid can be considered as used in the manufacture of the final product at the factory:

The electricity generated at the windmill farm was fed into the MSEB grid, and the appellant was allowed to draw a specific quantum of electricity from the grid based on an agreed formula. The revenue argued that once the electricity was fed into the grid, its ownership transferred to MSEB, and thus the electricity used at the manufacturing facility could not be considered the same as that generated at the windmill farm. The Tribunal, however, noted that the electricity generated at the windmill farm and the electricity drawn from the grid for manufacturing were equivalent, as admitted by the revenue. This adjustment meant that the electricity generated at the windmill farm was effectively used in the manufacturing process.

The Tribunal referred to the Bombay High Court's judgment in Endurance Technology Pvt. Ltd., which affirmed that electricity generated at a remote location and adjusted against the electricity used at the manufacturing unit could be considered as used in the manufacture of the final product. The Tribunal concluded that the appellant was eligible for the CENVAT credit on the service tax paid for services rendered at the windmill farm, as the electricity generated was indeed used in the manufacturing process.

Conclusion:

The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The Tribunal emphasized that the jurisdictional High Court's decision on the same issue was binding, and the revenue's arguments did not hold, as there was no allegation in the show cause notice regarding the change in ownership affecting the credit eligibility. The appeal was allowed, confirming the appellant's eligibility for CENVAT credit on the service tax paid for services rendered at the windmill farm.

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