9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (1) TMI 430 - HC - Central ExciseCENVAT Credit - input services - lease rentals and operations and maintenance of windmills situated far away from their factory - case of Revenue is that the windmill is situated far away from the manufacturing plant, there is no nexus and the type of transaction between the assessee - interpretation of Rule 2(l) of CENVAT Credit Rules. Held that - There is no dispute that the electricity generated by the windmills are exclusively used in the manufacturing unit for final products, there is no nexus between the process of electricity generated and manufacture of final products and there is no necessity for the windmills to be situated in the place of manufacture. The definition of input service is wider than the definition of input . Furthermore, if one takes a look at the Rules, more particularly Rule 2(k), as it stood prior to 01.04.2011, which defines input , the words within the factory of production has been specifically inserted - However, these words are physically missing in Rule 2(l), which defines input service and it would mean any service used by a provider of taxable service for providing an output service or used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal. Though the definition of input service has to be widely construed, and in terms of Rule 3, which allows the manufacturer of final products to take the credit of service tax inputs or capital goods received in the factory of manufacture of final products, insofar as any input service is concerned, the only stipulation is that it should be received by the manufacturer of final products - Therefore, this would be the correct manner of interpreting Rule 2(l) of the Rules. The decision of the High Court of Bombay in Endurance Technology Pvt. Ltd. 2015 (6) TMI 82 - BOMBAY HIGH COURT , which has been followed by the Larger Bench of the Tribunal in Parry Engg. Electronics P. Ltd. 2016 (1) TMI 546 - CESTAT AHMEDABAD , where it was held that 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. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Entitlement of Cenvat credit for lease rentals and operations and maintenance of windmills situated far from the factory under Rule 2(l) of the Cenvat Credit Rules, 2004. 2. Nexus between electricity generated at windmills and the manufacturing process of final products. 3. Applicability of penalties and interest for availing Cenvat credit on the said services. Detailed Analysis: Issue 1: Entitlement of Cenvat Credit for Lease Rentals and Operations and Maintenance of Windmills The primary issue is whether the respondents/assessees are entitled to avail Cenvat credit for lease rentals and operations and maintenance of windmills located far from their factory under Rule 2(l) of the Cenvat Credit Rules, 2004. The Tribunal had allowed such credit, relying on the decision of the High Court of Bombay in the case of Endurance Technology Pvt. Ltd., which had attained finality as the Revenue did not appeal against it. The Tribunal's decision was based on the interpretation that the definition of "input service" is broad and includes services used in relation to the business of manufacturing the final product, irrespective of the location of the service. Issue 2: Nexus Between Electricity Generated at Windmills and Manufacturing Process The adjudicating authority had argued that there was no direct nexus between the electricity generated at windmills and the manufacturing process, as the windmills were situated far from the factory. However, the Tribunal found that the electricity generated by the windmills was transmitted to the TNEB grid and an equivalent amount was drawn by the factory, thus establishing a connection. The High Court agreed with this interpretation, emphasizing that the location of windmills in wind-potential areas is necessary and should not negate the nexus between the generated electricity and the manufacturing process. The Tribunal's reliance on the Endurance Technology Pvt. Ltd. case was upheld, where it was determined that input services need not be received at the factory premises to be eligible for credit. Issue 3: Applicability of Penalties and Interest Regarding penalties and interest, the Tribunal had set aside these, noting the absence of any material evidence showing that the energy generated was used for purposes other than manufacturing. The High Court concurred, stating that the Revenue's arguments extended beyond the original allegations in the show cause notice, which focused solely on the location of the windmills. The High Court emphasized the principle of natural justice and the necessity to restrict the scope of the allegations to those initially presented. Conclusion: The High Court upheld the Tribunal's decision, affirming the entitlement of the assessees to avail Cenvat credit for lease rentals and operations and maintenance of windmills under Rule 2(l) of the Cenvat Credit Rules, 2004. It was established that the electricity generated at the windmills had a sufficient nexus with the manufacturing process, and the penalties and interest imposed were unwarranted. The substantial questions of law were answered against the Revenue, and the appeals were dismissed.
|
