Gujarat High Court
Ajanta Transistors Clock Mfg Co vs Commissioner Of Central Excise on 13 November, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
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Reserved On : 15/10/2025
Pronounced On : 13/11/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 1679 of 2008
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
✓
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AJANTA TRANSISTORS CLOCK MFG CO
Versus
COMMISSIONER OF CENTRAL EXCISE
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Appearance:
MR ANAND NAINAWATI(5970) for the Appellant(s) No. 1
MR UTKARSH R SHARMA(6157) for the Opponent(s) No. 1
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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. Anand
Nainawati for the appellant and learned
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advocate Mr. Utkarsh Sharma 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 04.03.2008 passed by the
Customs, Excise and Service Tax Appellate
Tribunal, Ahmedabad (For short "the
Tribunal") in Appeal No.E/793 & 880/2007.
3. The appeal is admitted by this Court
vide order dated 28.08.2009 for
consideration of the following substantial
questions of law:
1. Whether on the facts and
circumstances of the case, the
CESTAT is correct in holding that
the services received in respect
of operation, maintenance of
captive wind mill plant are not
entitled for the Cenvat Credit
under rule 2(l) of the Cenvat
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Credit Rules, 2004?
2. Whether on the facts and
circumstances of the case, the
CESTAT is correct in rejecting the
appeal on the ground that in order
to qualify under the definition of
input service, the service has to
be received in the factory of
production?
3. Whether on the facts and
circumstances of the case, the
Appellate Tribunal is correct in
rejecting the appeal of the
Appellants on the ground that the
services received in respect of
generation of electricity which is
used in or in relation to the
manufacture of dutiable products,
are not entitled for Cenvat
credit?"
4. Brief facts of the case are that the
appellant is a partnership firm and
engaged in the manufacture of electronic
products falling under Chapters 85 and 91
of the Act the Central Excise Tariff Act,
1985. The appellant was having its factory
at Morbi.
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5. The appellant had set up a wind farm
at Village Bhogat which is approximately
225 KM away from the factory premises. The
appellant entered into an agreement with
the Gujarat Electricity Board (GEB) for
transmitting the power from wind mill site
to the factory premises. As per the
arrangement with the GEB, the electricity
generated at wind farm was to be supplied
to GEB which in turn supplies the
electricity to the factory after deducting
wheeling charges.
6. It is the case of the appellant that
the GEB adjusts the number of units
supplied by wind farm while raising the
bills for the consumption of electricity
in the factory.
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7. For the purpose of operation and
maintenance of the wind farm located at
Bhogat, the appellants have entered into
an agreement with M/s Suzlon Energy Ltd
(hereinafter referred to as "Suzlon").
8. Under the agreement entered into with
Suzlon, the appellants received
maintenance and repair service and
reimbursed the service tax amount paid by
Suzlon on such services. The Appellants
availed the Cenvat credit of such service
tax amount as input service.
9. The Internal Audit Party of the
Department raised an objection about the
availability of the Cenvat credit of the
maintenance or repair services availed at
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wind mill site which is approximately 225
km away from the factory of the
appellants. Accordingly a show cause
notice dated 16.12.2005 was issued to the
appellants denying the Cenvat credit of
Rs. 1,03,649/- being availed by the
appellants on the maintenance or repair
services received at the wind mill site on
the ground that the services received at
wind mill site were not input services
inasmuch as the electricity generated at
wind mill site was not used in the
manufacture of dutiable products and the
wind mill farm was located at a distance
from the factory of production. The show
cause notice also proposed to impose
penalty under Rule 15 of the Cenvat Rules.
10. On similar ground, another show
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cause notice dated 24.04.2006 was issued
to the appellant for denying Cenvat Credit
of Rs.1,70,170/- being availed on the
input services received at wind farm
during the period May 2005 to March 2006.
11. In response to the show cause notices,
the appellants filed reply stating that
the services received at wind farm did
qualify as input service since such
services were used directly or directly in
the manufacture of final products and the
wind farm has been set up in accordance
with the policy of the State Government
and the electricity generated at wind farm
is entirely used in the manufacture of
dutiable products and therefore, the
appellants are entitled for the Cenvat
credit.
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12. The adjudicating authority vide
impugned order-in-original dated
17.07.2006 has confirmed the demand
proposed in the show cause notice dated
16.12.2005 holding that the services
received at wind farm will not qualify as
input service since the electricity
generated at wind farm is not used in the
manufacture of dutiable products and such
electricity is supplied to GEB under the
agreement. It was further held that the
electricity used in the manufacture of
dutiable product is purchased from GEB
under the separate agreement and that no
manufacturing activities are undertaken at
wind farm. Hence the services received at
wind farm will not be eligible for credit
as input services. Accordingly, the
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adjudicating authority has confirmed the
denial of Cenvat credit of Rs. 1,03,649/-
and also imposed penalty of equal amount
under Rule 15(3) of the Cenvat Rules read
with Section 11AC of the Act.
13. Similarly, the order-in-original dated
18.07.2006 has also confirmed the denial
of Cenvat credit of Rs. 1,70,170/-.
14. Being aggrieved by the above orders of
the adjudicating authority, the appellant
filed two separate appeals before the
respondent no.1-Commissioner (Appeals)
Central Excise, Rajkot.
15. Respondent no.1 passed a common order-
in-appeal dated 23.04.2007. upholding
both the order-in-originals passed by the
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Assistant Commissioner, Central Excise,
Rajkot.
16. Being aggrieved by the impugned order-
in-appeal, the appellants preferred an
appeal before the Tribunal. The Tribunal
by the impugned order dated 04.03.2008
relying upon its earlier judgment in case
of Atul Auto v. CCE in Final Order
No.A/332/WZB/AHD/2008 dated 29.02.2008
rejected the appeal filed by the appellant
observing as under:
"The dispute in the present appeal
relates to the credit of service
tax paid by the service provider
in respect of wind mill situated
away from the appellant's factory.
The electricity generated from the
said wind mill is being sold to
Paschim Gujarat Vidyut Corporation
Ltd., who in turn supplied the
same to the appellant.
2. I find that an identical
dispute was decided vide Order
No.A/332/WZB/AHD/2008, dt.29.2.08
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in case of Atul Auto Vs. CCE
Rajkot. For better appreciation,
Para 3 of this order is being
reproduced below:
3. It is admitted position that
the electricity generated at the
wind mill firm unit is not being
supplied directly to the
appellant, but is transferred to
PGVCL, who are further supplying
the same to the appellant. It is
not necessary that the electricity
generated at the wind mill firm is
totally being transferred to the
appellant. Their consumption can
be less or more than the requisite
units of electricity. As such, the
lower authorities have rightly
concluded that the electricity
generated at the wind mill is
being supplied to PGVCL, and the
electricity purchased by them from
PGVCL, is being consumed by them
for the manufacture of their
goods. It cannot be said that the
said wind mill firm unit is a part
of the appellant's factory
premises so as to allow credit of
service tax paid in respect of
services utilized at the wind mill
firm house. No infirmity can be
found in the order of Commissioner
(Appeals). I also note that the
issue stands decided by the
Tribunal's decision in the case of
M/s Rajasthan Metals (P) Ltd. 2007
(8) STR 498 (Tri-Ahmd) and I see
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no reasons to take a different
view. The appeal is, accordingly,
rejected."
3. In view of the above, I reject
the appeal."
17. Learned advocate Mr. Anand Nainawati
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.
18. 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
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purpose of utilising the power generated
by the Wind Mills for consumption at
factory for manufacturing purpose which is
connected through GEB Power Grid/High
tension supply lines.
19. 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
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support of his submission, reliance was
placed on the following decisions:
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.
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Commr of C. Ex., Aurangabad reported in
2011 (273) E.L.T. 248 (Tri.-Mumbai)
20. 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 assesse. 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.
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21. Reliance was also placed on Circular
No.97/8/2007-S.T. dated 23.08.2007 more
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.
22. On the other hand, learned advocate
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Mr. Utkarsh Sharma for the respondent
reiterated the contentions raised before
the Tribunal and submitted that there is
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.
23. 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
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been held as under:
"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
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(b) plumbing, drain laying
or other installations for
transport of fluids; or
(c) heating, ventilation
or air-conditioning
including 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
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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, 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
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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.
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
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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
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:
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"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 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
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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 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
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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 any
services used by the
manufacturer directly or
indirectly, in or in
relation to the
manufacture of final
products. The inclusive
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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
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with the broad and
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
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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
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
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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 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
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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 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
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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 the
decisions of the Apex
Court.
xxx
25. As already pointed
out, there is no dispute
that the electricity
generated by the windmills
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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
the manufacturer, whether
directly or indirectly, in
or in relation to the
manufacture of final
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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
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Parry Engg. & Electronics
P. Ltd."
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).
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27. In view of foregoing
reasons, we answer the questions
of law in favour of the
appellant assessee and against
the Revenue. Appeal is
accordingly allowed."
24. 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
