Gujarat High Court
M/S Real Strips Ltd vs Commissioner Of Central Excise-Ii on 13 November, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
Reserved On : 15/10/2025
Pronounced On : 13/11/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 1131 of 2011
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
==========================================================
Approved for Reporting Yes No
✓
==========================================================
M/S REAL STRIPS LTD
Versus
COMMISSIONER OF CENTRAL EXCISE-II
==========================================================
Appearance:
MR SUDHANSHU BISSA FOR MR PARESH M DAVE(260) for the
Appellant(s) No. 1
MS HETVI H SANCHETI(5618) for the Opponent(s) No. 1
==========================================================
CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr. Sudhanshu
Bissa for learned advocate Mr. Paresh M.
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
Dave for the appellant and learned
advocate Ms. Hetvi Sancheti for the
respondent.
2. This Tax Appeal is filed under section
35G of the Central Excise Act, 1944 (For
short "the Act") arising out of the final
order dated 25.03.2011 passed by the
Customs, Excise and Service Tax Appellate
Tribunal, West Zonal Bench at Ahmedabad
(For short "the Tribunal") in Appeal
No.E/1035/10.
3. The appeal is admitted by this Court
vide order dated 27.01.2012 for
consideration of the following substantial
questions of law:
"1) Whether Cenvat Credit of
service tax paid on services like
installation, commissioning and
civil works as well as maintenance
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
for a Windmill was admissible to
the appellant in the facts and
circumstances of this case?
2) Whether the decision of the
Tribunal in denying cenvat credit
of service tax paid on services
like installation and
commissioning as well as civil
works and maintenance of a
Windmill only because a Windmill
was located at a place other than
the factory premises and
electricity generated at the site
of Windmill was not excisable is
correct and sustainable in the
facts of this case?"
4. Brief facts of the case are that the
appellant is a company situated in
Ahmedabad and is engaged in the
manufacture of goods like H.R. Coils and
C.R.Coils and has installed a Windmill in
Kutch District for generating electricity
using wind energy.
5. For installation and commissioning of
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
this windmill, the appellant has availed
erection, commissioning and installation
services on which the Agency providing the
above services has paid service tax of
Rs.1,35,014/- inclusive of Education cess.
Subsequently, the appellant after
receiving invoices of the erection,
commissioning, and installation has
availed credit of this amount of service
tax in its RG 23A Part II. It is the case
of the appellant that these transactions
were also duly reflected in the Cenvat
register and extracts thereof were also
submitted with the monthly returns of the
above period. Further, it is the case of
the appellant that no objection was raised
by the Range and Divisional Officers in
this regard.
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
6. It is the case of the appellant that,
after the said agency installed,
commissioned and erected the windmill and
after windmill started operating
successfully, Gujarat Energy Development
Agency (GEDA) has also issued certificates
for commissioning of windmill so as to
certify that the appellant had done all
that was necessary under the Government
policy for setting up a wind farm for
generating wind energy. The appellant
having started producing electricity using
the above windmill, the units of
electricity so generated were given to
Gujarat Energy Transmission Corporation
Limited (GETCO) who transferred
electricity so generated through the State
Government grid line, and the certificates
in appellant's favour for quantity i.e.
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
units of electricity generated by the
appellant and units of electricity allowed
to the appellant for being utilized in its
factory after adjusting 4% wheeling
charges have also been issued by GETCO on
regular basis.
7. It is the case of the appellant that
on the basis of these certificates, the
appellant has been allowed to utilize the
specified number of units of electricity
at its factory in relation to
manufacturing and other related
operations, and no electricity charges or
duties have been recovered from the
appellant on these units of electricity
under the above policy.
8. However, the Central Excise EA-2000
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
Audit Party found availment of the above
cenvat credit objectionable and therefore,
a Show Cause Notice came to be issued by
the Assistant Commissioner of Central
Excise, dated 20.8.2009 proposing to deny
and recover Cenvat credit of Rs.1,35,014/-
on the ground that credit of service tax
and Education cess paid on erection,
commissioning and installation services
for windmill was not available because
windmill was installed at a place other
than the factory and hence, availment of
credit was in contravention of Rules 3(1)
and 4(1) of Cenvat Rules.
9. The appellant filed a reply to the
above Show Cause Notice. However, the
Assistant Commissioner of Central Excise.
Division-IV, Ahmedabad-II passed Order-
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
in-Original dated 2.3.2010 thereby
confirming that credit of Rs.1,35,014/-
was not admissible to the appellant, and
also ordered for appropriation and
adjustment of the amount of Rs.1,35,014/-
along with interest of Rs.14,627/- already
deposited by the appellant during the
intervening period, and a penalty of
Rs.1,35,014/-.
10. Being aggrieved by the Order-in-
Original, the appellant preferred an
appeal before the Commissioner (Appeals),
Ahmedabad who by Order-in-Appeal dated
11.5.2010 upheld the demand of cenvat
credit along with interest but reduced the
penalty to Rs.2000/-. The Commissioner
(Appeals) while passing the order-in-
appeal placed reliance upon the decisions
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
of the Tribunal in cases like Rajhans
Metals Pvt. Ltd. (supra) and Atul Auto
Ltd. -2009 (237) ELT 102 etc. wherein the
Tribunal has held in all such cases that
credit of service tax paid on services
availed in respect of installation,
erecting, commissioning and maintenance of
Windmills was not admissible because the
Windmills were installed at a far away
place and not in the factory premises and
because the electricity generated by using
Windmills was not excisable and
accordingly the services used at the site
of the Windmills could not be held as
input services for the manufacturing unit
located elsewhere.
11. Being aggrieved, the appellant filed
an appeal before the Tribunal against the
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
above order of the Commissioner (Appeals).
The Tribunal vide order dated 25.3.2011
upheld the order as regards denial of
cenvat credit and recovery of interest
however penalty of Rs.2,000/- came to be
set aside by the Tribunal observing as
under:
"After hearing both the sides, I
find that the only dispute in the
present appeal is as regards
availment of modvat credit in
respect of services utilized for
installation and civil work and
maintenance of wind mill located
at a far of place from the factory
premises. The said wind mill is
located at Kutch whereas the
factory premises is at Ahmedabad.
The electricity produced in the
said wind mill is transferred to
the Gujarat Electricity Board, who
in turn provide the same to the
appellant according to their
requirements and bills are raised
for consumption of such
electricity.
2 The lower authorities have
denied the benefit of the modvat
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
credit of service tax paid in
respect of the services utilized
at the wind mill site by holding
that the same cannot be considered
to be an input service. For better
appreciation para 8 of
Commissioner' (Appeals) order is
reproduced below:
"8 Rule 2(1) of the CCR, 2004
defines 'input service' as any
service used by the manufacturer,
whether directly or indirectly, in
or in relation to the manufacture
of final products and clearance of
final products upto the place of
removal. The inclusive definition
gives a exhaustive list of
services. In the instant case the
electricity is being generated in
windmills at Kutch which is far
away from the factory premises
based at Ahmedabad. The
electricity as such is not
excisable and whatever electricity
is generated is transferred to the
Gujarat Electricity Board (GEB)
and the GEB in turn is providing
electricity to the appellant and
raising bill which is being
consumed for the manufacture of
their goods. I therefore find that
the transaction of delivery of
power to the GEB and supply of
power by the GEB to the appellant
is two independent transactions as
there is no direct nexus between
the service received in the power
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
plant and the items manufactured
in the factory belonging to the
the appellant. Generating
electricity at the wing mill and
transferring the same to the GEB
is one activity and supplying
electricity in the factory of the
appellant is another activity
because it cannot be said that the
power generated at wind mill is
being directly consumed in the
factory. The electricity supplied
by the GEB is not the same
electricity which is generated at
the windmill. As the appellant
have mentioned in their appeal
memorandum that if the electricity
is not utilized in six months,
it will be deemed to have lapsed
for any other purpose for which
the company shall be held
ineligible under the agreement.
Thus the electricity generated at
the wind mill is not being
supplied directly to the
appellant's factory but to GEB as
the consumption can be less or
more than the requisite units of
electricity. Since the electricity
which is going to be used by them
need not be exact quantity of
electricity produced in their
windmills, the services used at
the site of the windmills cannot
be held as input services by the
manufacturing unit at Ahmedabad."
3. Learned advocate appearing for
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
the appellant also fairly agrees
that the issue is no more res-
integra and stands settled by the
Tribunal in the cases of -
1. Rajhans Metals (P) Ltd. Vs. CCE
Rajkot [2007 (8) STR 498 (Tri. -
Ahd.)],
2. Ellora Times Ltd. Vs. CCE
Rajkot [2009 (13) STR 168 (Tri. -
Ahd.)],
3. Atul Auto Ltd. Vs. CCE Rajkot
[2009 (237) ELT 102 (Tri. -
Ahd.)].
In as much as the issue already
stands decided by the Tribunal, I
find no merits in the present
appeal. The denial of service tax
credit is accordingly upheld.
4. As regards penalty it is seen
that Commissioner (Appeals) has
observed that it is not a case of
suppression or mis-statement and
has accordingly reduced the
equivalent penalty to Rs.2000/-.
In the above referred decisions,
the penalty stands decided by the
Tribunal in toto by observing that
the issue being a pure legal issue
of interpretation, imposition of
any penalty is not called for.
Accordingly I set aside the
penalty of Rs.2000/- imposed upon
the appellant. The appeal is
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
disposed off in above terms."
12. Learned advocate Mr. Sudhanshu Bissa
appearing for the appellant submitted that
only ground on which Cenvat Credit is
denied by the respondent authorities and
as upheld by the Tribunal is that the
electricity was being generated in Wind
Mills far away from the factory premises
and as electricity is not excisable,
Cenvat Credit is not available even at the
premises of the Wind Mills.
13. It was submitted that the electricity
generated by the Wind Mills was utilised
by the appellant in its manufacturing unit
through GEB. It was submitted that the
agreement with GEB was only for the
purpose of utilising the power generated
by the Wind Mills for consumption at
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
factory for manufacturing purpose which is
connected through GEB Power Grid/High
tension supply lines.
14. It was submitted that the appellant
was already paying charges for excess use
of power from GEB in addition to power
generated by the Wind Mills transmitted
through GEB power grid. It was therefore,
submitted that there is nexus between the
power generated through Wind Mills and the
goods manufactured as three activities i.e
sale, supply and consumption takes place
immediately even though place of
generation and manufacturing are different
and therefore, the appellant is entitled
to avail the credit of service charges
incurred in relation to the Wind Mills. In
support of his submission, reliance was
placed on the following decisions:
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
1) Commissioner of Central Excise v.
Excel Crop Care Ltd. reported in 2018 (12)
STR 436 (Guj.).
2) C.C.E. & Cus., Aurangabad v. Endurance
Technology Pvt. Ltd. reported in 2017 (52)
S.T.R. 361 (Bom.)
3) Commissioner of C. Ex. & S.T., Chennai
v. Ashok Leyland Ltd. reported in
2019(369) E.L.T. 162 (Mad.)
4) Parry Engg. & Electronics P. Ltd. v.
C.C.E. & S.T., Ahmedabad-I,II,III reported
in 2015(40) S.T.R. 243 (Tri.-LB)
5) Endurance Technologies P. Ltd. v.
Commr of C. Ex., Aurangabad reported in
2011 (273) E.L.T. 248 (Tri.-Mumbai)
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
15. It was submitted that this Court in
case of Excel Crop Care Ltd.(supra) after
considering the provisions of the Act and
the Rules and more particularly,
definition of "input service" as defined
in Rule 2(l)(i) of the Rules held that
mobile service provider, who is liable to
pay service tax and recovers the same by
adding such service tax in his bill, is
the person providing taxable service and
is rendering "output service" so as to
constitute "input service" in the hands of
respondent assessee. It was therefore,
submitted that the service tax paid by the
appellant on the installation and erection
of the Wind Mill is required to be given
credit under the provisions of the Rules.
16. Reliance was also placed on Circular
No.97/8/2007-S.T. dated 23.08.2007 more
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
particularly, clause 8.3 thereof in which
doubt raised regarding the admissibility
of the Cenvat Credit on service tax paid
in respect of mobile phones was answered
to the effect that in the Rules, no
condition has been prescribed with regard
to admissibility of credit of service tax
only on telephone connection installed in
the business premises. It was therefore,
submitted that the for the electricity
utilised for manufacturing by the
appellant provided by GEB against supply
of electricity generated by Wind Mills,
the appellant was entitled to the credit
of service tax.
17. On the other hand, learned advocate
Ms. Hetvi Sancheti for the respondent
reiterated the contentions raised before
the Tribunal and submitted that there is
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
no connection between the electricity
generated at the place of installation of
Wind Mills by the appellant and the
manufacturing activity taking place at its
factory as the electricity is being
received through GEB. It was pointed out
that the electricity itself is not
excisable and therefore, service tax
credit is rightly rejected by the
Tribunal.
18. Having heard the learned advocates for
the respective parties and having
considered the facts of the case, the
issue on hand has already been decided by
this Court by order of even date in Tax
Appeal No.1037 of 2008, wherein it has
been held as under:
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
"18. Having heard the
learned advocates for the
respective parties and
having considered the
facts of the case, it
would be germane to refer
to the relevant provisions
of the Act and the Rules.
Finance Act, 1994:
"65(29) - "commissioning and
installation agency" means any
agency providing service in
relation to erection,
commissioning or
installation."
"(39a) "erection,
commissioning or installation"
means any service provided by
a commissioning and
installation agency, in
relation to,-
(1) erection, commissioning or
installation of plant,
machinery or equipment; or
(ii) installation of-
(a) electrical and electronic
devices, including wirings or
fittings therefor; or
(b) plumbing, drain laying or
other installations for
transport of fluids; or
(c) heating, ventilation or
air-conditioning including
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
related pipe work, ductwork
and sheet metal work; or
(d) thermal insulation, sound
insulation, fire proofing or
water proofing; or
(e) lift and escalator, fire
escape staircases or
travelators; or
(f) such other similar
services;"
Cenvat Credit Rules, 2004 :
"Rule 2(l)"input service"
means any service, -
(i) used by a provider of
taxable service for providing
an output service, or
(ii) 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,
and includes services used in
relation to setting up,
modernization, renovation or
repairs of a factory, premises
of provider of output service
or an office relating to such
factory or premises,
advertisement or sales
promotion, market research,
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
storage upto the place of
removal, procurement of
inputs, activities relating to
business, such as accounting,
auditing, financing,
recruitment and quality
control, coaching and
training, computer networking,
credit rating, share registry,
and security, inward
transportation of inputs or
capital goods and outward
transportation upto the place
of removal;"
Rule (4) Conditions for
allowing CENVAT credit (1) The
CENVAT credit in respect of
inputs may be taken
immediately on receipt of the
inputs in the factory of the
manufacturer or in the
premises of the provider of
output service."
19. Definition of term "input
service" as appearing in Rule 2(l)
of the Rules would also include
any service used by a provider of
taxable services for providing an
output service, or used by the
manufacturer, whether directly or
indirectly, in relation to the
manufacture of final products and
clearance of final products from
the place of removal.
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
20. In the facts of the case, the
appellant has utilised the
electricity supplied by GEB
against the electricity generated
by Windmills and therefore,
service tax paid by the appellant
on the installation, erection and
services in connection with
maintenance of the Wind Mills are
exclusively used in relation to
manufacturing activity and
therefore, the same would be
squarely covered under the
definition of "input service", as
the management, maintenance and
repair of Windmills installed by
the appellant would fall within
"input service" as defined by
clause (l) of Rule 2 read with
Rule 4 of the Rules which provides
that any input or capital goods
received in factory or any input
services received by the
manufacturer of final product
would be susceptible to Cenvat
Credit.
21. It is pertinent to note that
there is no provision in the Rules
which stipulates that input
services received by the
manufacturer must be received by
the manufacturer at the factory
premises.
22. This Court in case of Excel
Crop Care Ltd. (supra) while
considering the question as to the
allowability of Cenvat Credit on
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
mobile services after considering
Rule 2(l) of the Rules held that
the mobile service provider who is
liable to pay service tax and
recovers the same by adding such
service tax in his bill, is the
person providing taxable service
and is rendering output service so
as to constitute input service in
the hands of the assessee and
therefore, the ground on which the
credit was disallowed as the
phones were not installed in the
factory premises was held to be a
ground not germane to the
provisions of the Rules.
23. The Hon'ble Bombay High Court
in case of Endurance Technology
Pvt. Ltd.(supra) on similar issue
of allowability of Cenvat Credit
on electricity generated from the
Windmills has held as under:
"5. On perusal of these Rules,
it becomes clear that the
management, maintenance and
repair of windmills installed
by the respondents is input
service as defined by clause
"I" 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
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
manufacturer must be received
at the factory premises. The
judgments referred to above,
also interpret the word
"input" service in similar
fashion.
In the case of Commissioner of
Central Excise, Nagpur v.
Ultratech Cement Ltd. [cited
supra), the Division Bench of
this Court held that the
definition of "input service"
is very wide and covers not
only services which are
directly or indirectly used in
or in relation to manufacture
of final product but also
includes various services used
in relation to business of
manufacture of final product.
The expression "activities" in
relation to business is also
discussed in this judgment by
referring to judgment of Apex
Court.
In the case of Deepak
Fertilizers & Petrochemicals
Corporation Ltd. v. C.C.Ex.
Belapur [cited supra) the
Division Bench held as under:
"The definition of the
expression input service'
covers any services used by
the manufacturer, whether
directly or indirectly, in or
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
in relation to the manufacture
of final products. The words
'directly or indirectly' and
'in or in relation to' are
words of width and amplitude.
The subordinate legislation
has advisedly used a broad and
comprehensive expression while
defining the expression 'input
service'. Rule 2(1) initially
provides that input service
means any services of the
description falling in
subclauses (i) and (ii). Rule
2(1) then provides an
inclusive definition by
enumerating certain specified
services. Among those services
are services pertaining to the
procurement of inputs and
inward transportation of
inputs. The Tribunal,
proceeded to interpret the
inclusive part of the
definition and held that the
Legislature restricted the
benefit of Cenvat credit for
input services used in respect
of inputs only to these two
categories viz. for the
procurement of inputs and for
the inward transportation of
inputs. This interpretation
which has been placed by the
Tribunal is ex facie contrary
to the provisions contained in
Rule 2(1). The first part of
Rule 2(1) inter alia covers
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
any services used by the
manufacturer directly or
indirectly, in or in relation
to the manufacture of final
products. The inclusive part
of the definition enumerates
certain specified categories
of services. However, it would
be farfetched to interpret
Rule 2(1) to mean that only
two categories of services in
relation to inputs viz. for
the procurement of inputs and
for the inward transportation
of inputs were intended to be
brought within the purview of
Rule 2(1). Rule 2(1) must be
read in its entirety. The
Tribunal has placed an
interpretation which runs
contrary to the plain and
literal meaning of the words
used in Rule 2(1). Moreover as
we have noted earlier, whereas
Rule 3(1) allows a
manufacturer of final products
to take credit of excise duty
and Service Tax among others
paid on any input or capital
goods received in the factory
of manufacturer of the final
product, insofar as any input
service is concerned, the only
stipulation is that it should
be received by the
manufacturer of the final
product. This must be read
with the broad and
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
comprehensive meaning of the
expression 'input service' in
Rule 2(1). The input services
in the present case were used
by the appellant whether
directly or indirectly, in or
in relation to the manufacture
of final products. The
appellant, it is undisputed,
manufactures dutiable final
products and the storage and
use of ammonia is an intrinsic
part of that process."
6. In view of this discussion,
we have no hesitation to hold
that the answer to question
No. (1) is in affirmative.
Despite this settled position,
learned counsel for the
appellant tried to submit that
the judgment cited at Sr. No.
(2) is being challenged before
Supreme Court. This submission
does not really help us in
deciding the appeals. Both
appeals are dismissed."
24. Similarly, Hon'ble Madras High
Court in case of Ashok Leyland
Ltd.(supra) after considering the
decision of Bombay High Court in
case of Endurance Technology Pvt.
Ltd.(supra) held as under:
"17. Thus, we are to consider
as to whether there has been
any nexus between the energy
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
generated and the
manufacturing activity of the
assessee. This very issue was
considered in Endurance
Technology Pvt. Ltd. (supra).
In fact, we find two
substantial questions of law
framed for consideration in
Endurance Technology Pvt. Ltd.
(supra), which are more or
less identical to that of the
questions of law framed in
these appeals. The first
question framed for
consideration was whether the
assessee is entitled to avail
Cenvat credit on management,
maintenance or repair services
provided on services to
windmills installed and
situated away from the factory
premises. The second question
was whether electricity
generated on two different
places far away could be said
to have been used for
manufacture of the final
product of the assessee in its
factory at Aurangabad.
18. So far as the second
substantial question of law is
concerned, it was answered in
the affirmative in the light
of the stand taken that
admittedly, such electricity
generated at those two
different locations was
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
adjusted to the electricity
used in the factory at
Aurangabad and this adjustment
was admitted by the Revenue
and accordingly, the second
question was answered in
favour of the assessee. In the
case on hand also, in the show
cause notice, the adjudicating
authority does not dispute the
fact that equivalent quantity,
that is, the quantity
generated is the same as the
quantity drawn by the
assessees from the TNEB grid.
On the first question of law,
with regard to the availment
of cenvat credit on input
services, the Hon'ble Supreme
Court referred to the
decisions of the High Court of
Bombay in the case of
Commissioner of Central
Excise, Nagpur v. Ultratech
Cement, 2010 (20) S.T.R. 589
(Bom.); Commissioner of
Central Excise, Nagpur v.
Ultratech Cement Ltd., 2010
(260) E.L.Τ. 369 (Bom.); and
Deepak Fertilizers &
Petrochemicals Corporation
Ltd. v. C.C. Ex. Belapur, 2013
(32) S.T.R. 532 (Bom.). The
Hon'ble Supreme Court, after
taking note of the relevant
rules, held that it becomes
clear that management,
maintenance and repair of
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
windmills installed by the
respondents is input service
as defined in Clause I of Rule
2. It was held that Rules 3
and 4 provide that any input
or capital goods received in
the factory or any input
service received for
manufacture of final product
would be susceptible to Cenvat
credit. Further, it was held
that Rule does not say that
input service received by a
manufacturer must be received
at the factory premises and
the decisions relied on also
interpret the word "input
service" in similar fashion.
19. Further, by referring to
the decision in Commissioner
of Central Excise, Nagpur v.
Ultratech Cement, 2010 (20)
S.T.R. 589 (Bom.) (supra), it
was held that the definition
of "input service" is very
wide and covers not only
services which are directly or
indirectly used in or in
relation to manufacture of
final product, but also
includes various services used
in relation to business of
manufacture of final product.
Further, the expression
"activities" in relation to
business was also discussed in
the said decision following
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
the decisions of the Apex
Court.
xxx
25. As already pointed out,
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.
Further, as already noticed,
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 1-4-2011, which
defines "input", the following
has been specifically
inserted.
"within the factory of
production".
However, these words are
physically missing in Rule
2(1), 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
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
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(1) of the
Rules.
26. In the light of the above, we
are of the considered view that
the decision in the case of Ellora
Times Ltd. (supra) does not lay
down the correct legal position
and we agree with the decision of
the High Court of Bombay in
Endurance Technology Pvt. Ltd.
(supra), which has been followed
by the Larger Bench of the
Tribunal in Parry Engg. &
Electronics P. Ltd."
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
25. In view of above settled legal
position and in absence of words
"within the factory of production"
in Rule 2(l) which defines "input
service" which would mean that any
service used by a provider of
taxable service for providing an
output service or used by the
manufacturer whether directly or
indirectly, or in relation to the
manufacture of final product and
clearance of final product from
the place of removal, the
definition of 'input service' has
to be widely construed and
therefore, the appellant would be
entitled to the credit of service
tax paid on inputs or capital
goods or services received for
Windmills for goods manufactured
in the factory because only
stipulation is that the input
service should be received by the
manufacturer of products.
26. Therefore, in view of decision
of this Court in case of Excel
Crop Care Ltd. (supra) we are in
respectful agreement with the
decision of Hon'ble Bombay High
Court in case of Endurance
Technologies P. Ltd. (supra) as
well as decision of Hon'ble Madras
High Court in case of Ashok
Leyland Ltd. (supra).
27. In view of foregoing reasons,
we answer the questions of law in
NEUTRAL CITATION
C/TAXAP/1131/2011 CAV JUDGMENT DATED: 13/11/2025
undefined
favour of the appellant assessee
and against the Revenue. Appeal is
accordingly allowed.
19. Adopting the same reasoning, we answer
the questions of law in favour of the
appellant assessee and against the
Revenue. Appeal is accordingly allowed.
(BHARGAV D. KARIA, J)
(PRANAV TRIVEDI,J)
RAGHUNATH R NAIR
