Gujarat High Court
Rajshanti Metals Pvt Ltd 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. 2599 of 2009
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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RAJSHANTI METALS PVT LTD
Versus
COMMISSIONER OF CENTRAL EXCISE
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Appearance:
MR DHAVAL SHAH for the Appellant(s) No. 1
MR ANKIT SHAH(6371) 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. Dhaval Shah
for the appellant and learned advocate Mr.
Ankit Shah for the respondent.
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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 28.11.2008 passed by the
Customs, Excise and Service Tax Appellate
Tribunal, West Zonal Bench at Ahmedabad
(For short "the Tribunal") in Appeal
No.E/1101/2007.
3. The appeal is admitted by this Court
vide order dated 21.10.2010 for
consideration of the following substantial
questions of law:
"(i) Whether the Hon. CESTAT,
Ahmedabad is correct in denying
Cenvat Credit of service tax paid
for installation and commissioning
of windmill of Rs.3,17,472/- under
the provisions of Rule 2(l) of
Cenvat Credit Rules, 2004 ?
(ii) Whether the Hon. CESTAT,
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Ahmedabad is correct in denying
the Cenvat Credit of service tax
towards up front fees for
obtaining loan from the bank for
purchase of Wind Mill of
Rs.27,132/- under the provisions
of Rule 2(l) of Cenvat Credit
Rules, 2004 ?
(iii) Whether the Hon. CESTAT,
Ahmedabad is correct in laying
down the law that the services
obtained for installation of
windmill and for procuring loan
for such windmill is not an input
service under the provisions of
Rule 2(l) of Cenvat Credit Rules,
2004 ?"
4. Brief facts of the case are that the
appellant company was engaged in
manufacturing of excisable goods falling
under Chapter 7A of the Schedule to the
Central Excise Tariff Act, 1905 and
holding Central Excise Registration No.
AABCR0211QXM001. The appellant is also
availing Cenvat Credit on inputs and
inputs services used in the manufacture of
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final products under the Cenvat Credit
Rules, 2004 (hereinafter referred to as
"the said Rules").
5. The appellant had entered into a
contract with M/s. Enercon (India) Ltd.,
Daman for installation and operation of
the windmill at Navadra, which is around
100 kms away from the factory. The
electricity generated in the said wind
mills is supplied to M/s Paschim Gujarat
Vij Company Limited ('PGVCL' for short).
M/s Enercon (India) Ltd., Daman has
provided services namely, installation,
erection and commissioning of wind mill at
Navadra, and issued two invoices on which
they have paid the Service Tax to the tune
of Rs. 3,17,472/-. The appellant has taken
credit of service tax paid on such input
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services. The appellant also availed
credit of service tax of Rs. 27,132/- for
the payment made to State Bank of
Saurashtra, Jamnagar towards upfront fees
recovered by the said bank for sanction of
their term loan against Wind Energy
Converter and the said Bank had issued a
debit memo towards such taxes recovered by
bank from them. The appellant however,
reversed the above said credits on being
pointed out by the Jurisdictional Excise
Officers, but under protest. Therefore,
the appellant was issued a show cause
notice by the Jurisdictional Assistant
Commissioner proposing disallowance of the
wrongly availed Cenvat credit of Rs.
3,44,604/- and appropriation of the
reversal of the said credit paid under
protest under Rule 14 of the Cenvat Credit
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Rules,2004, on the ground that the
services on which credit is taken, are not
used in or in relation to manufacture of
final products, as well as the service
provided is not in the factory premises
but it is provided far away from factory
and imposition of the penalty under Rule
15 of the said Rules for wrong availment
of Service Tax Credit was also proposed.
6. The Adjudicating Authority vide order
dated 09.04.2007 has disallowed the
Service Tax credit of Rs. 3,44,604/- under
Rule 14 of the Cenvat Credit Rules, 2004
and appropriated the said credit reversed
under protest against the demand. The
adjudicating authority also vacated the
protest made by the appellant in reversal
of the Cenvat credit wrongly availed, and
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imposed penalty of Rs.50,000/- under Rule
15 of the Cenvat Credit Rules, 2004.
7. Being aggrieved, the appellant
preferred an appeal before the
Commissioner (Appeals) who vide order
dated 26.09.2007 rejected the appeal of
the appellant.
8. Being aggrieved, the appellant
preferred an appeal before the Tribunal.
The Tribunal vide impugned Final order
dated 28.11.2008 dismissed the appeal
observing as under:
"The issue to be decided in the
instant appeal relates to whether
the appellants are eligible to
avail the Service Tax credit paid
by the service provider ie. M/s
Enercon (India) Ltd. at the
Windmill Farm located at Navadra
village which is 100 kms away from
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the appellant manufacturing unit
located at Jamnagar, Gujarat and
whether the appellants is eligible
to avail the service tax credit on
Bank charges for securing loan
from the Bank for purchase of wind
mill. Also, whether the appellant
is eligible to avail the said
credit and utilize the said credit
for payment of duty of the
excisable goods cleared from their
manufacturing unit or not. The
Lower Authority in his OIO held
that the manufacturing unit is not
eligible to avail the service tax
credit of the Windmill Farm unit
on the grounds that there is no
nexus between service provider and
the manufacture of excisable goods
of manufacturing unit and these
both are independent transactions
and the distance is 100 km. away
from each other. The Lower
Authority has confirmed the
demand, appropriated the credit
already reversed by the appellant,
the credit reversed under protest
by the appellant was vacated and
also imposed penalty on the
appellants under Cenvat Credit
Rules, 2004.
2. Commissioner (Appeals) rejected
the appeal by observing as under:
"13. It is evident from the above
facts that, primarily the Windmill
Farm Unit located at Navadra
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village (which is 100 kms away)
and the manufacturing unit located
at 8-42, MIDC, Shankar Tekari,
Udyognagar, Jamnagar ie,
appellants are two separate and
independent units of M/s Rajshanti
Metals Pvt Ltd. The power
generated at their Windmill unit
located at Navadra is supplied
PGVCL which is an independent
company owned by State Gout. The
wheeling agreement of getting back
equivalent electricity from the
above company ie PGVCL is nothing
but sort of buy back or exchange
offer agreed between the two
companies. Further, it is noticed
that it is not the case where the
entire 0.8 KW power generated at
the Windmill Farm unit, at Navadra
is directly transmitted to the
manufacturing unit at Jamnagar
Whereas, the total power generated
at their windmill unit has been
supplied or sold as the case may
be to the PGVCL company who in
turn gives the credit of the
number of units to their
manufacturing unit located at
Jamnagar in the ratio of
percentage mutually agreed in
terms of the agreement entered
with GETCO Lid.
"17. The appellants in support of
their claim tried to equate the
electricity generated at their
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Windmill Farm unit, Navadra with
the electricity if generated in
their manufacturing unit for
captive consumption and tried to
compare the electricity generated
at Wind Farm unit as an
intermediate product as if it is
produced at their factory for
manufacture of excisable goods at
Jamnagar. As already explained in
preceding paragraphs, neither the
power generated at Windmill Farm
unit can be termed as an
intermediate product_for their
unit at Jamnagar nor it is termed
as captive generation of
electricity for manufacture of
final products. The appellant's
plea that under the explanation to
the definition of the input
services i.e. directly or
indirectly used in relation to
manufacture of final products
under Cenvat Credit Rules is in no
way connected to the present case
and not justified for the reasons
already explained in the above
paragraphs. The Windmill Farm unit
located at Navadra is in no way
connected or linked to their
manufacturing unit at Jamnagar.
Further, it is also proved that
the energy generated at Windmill
Farm unit supplied/transferred to
another independent company i.e.
PGVCL which is an independent
company registered under Company's
Act. Therefore, the transaction of
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independent supplying power to
PGVCL at Windmill Farm unit is
definitely an independent activity
and no way link to manufacturing
unit under Cenvat Credit Rules.
Further, the consumption of
electricity in the appellant
factory premises and the
adjustment given to PGVCL at
Jamnagar in the form of credit of
number of units to offset the
power taken from their Windmill
Farm unit at Navadra by way of
compensation is another
independent transaction. The
definition of input and input
service credit and further
explanation provided to the
definition of input service is
clear and unambiguous. The term
input service as explained under
Rule 2(1)(ii) of Cenvat Credit
Rules stipulates that any input
service 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 applies to the input
services availed by the
manufacturer and in the present
case, the manufacturer is the
appellant i.e. manufacturing unit
at Jamnagar and neither they have
used any services in the factory
at Jamnagar in or in relation to
manufacture of final product nor
they have used in relation to
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setting up, modernization,
renovation or repairs of a factory
etc.. at their factory premises so
as to claim any input service
credit. The service tax credit
pertaining to erection and
commissioning of Windmill Farm
unit at Navadra village definitely
is service rendered at Windmill
Farm unit which is in all respect
independent for the reasons
already explained in the preceding
paragraphs. The appellant's
company having adjustment of
electricity in the form of credit
with the PGVCL which is also an
independent State Govt. company
cannot be treated as input
services rendered in or in
relation to manufacture of final
products under Cenvat Credit Rules
as contended by the appellant and
beyond the scope of Cenvat Credit
Rules and not sustainable. The
appellants are in no way entitled
for availing the service tax
credit of the Windmill Farm unit
at Navadra village.
19. In this regard, I rely the
Hon'ble CESTAT, WZB Ahemdabad
recent judgment vide Order
No.A/2438/WZB/AHD/07,dt.07.09.2007
on similar issue in the case of
appeal filed by M/s Rajhans Metals
Pvt. Ltd. against OIA passed by
this appellate authority wherein
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the Tribunal held that the service
tax credit availed on installation
and maintenance at windmill is not
admissible. The relevant para 6 of
the CESTAT order is as under:
"6. I have fully considered the
submissions made by both sides. If
it is the case of generation of
electricity with the help of the
wind mills within the factory
premises, there should be no doubt
about extending service tax credit
claimed by them. In this case, the
electricity is being generated in
wind mills far away from the
factory premises. The electricity
as such is not excisable. The
electricity is generated by them
at place away from the factory.
The electricity generated by them
is surrendered to the Electricity
Board. The quantum of electricity
which is going to be used by them
need not be exact quantity of
electricity product in their wind
nulls. The services used at the
side of the wind mills cannot be
held as input services by the unit
at Jamnagar. As electricity is not
excisable, the Cenvat Credit is
not available even at the premises
of the wind mills. Cenvat credit
claimed is inadmissible and the
order of the Commissioner in this
regard deserves to be upheld."
In the above said order, the
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Hon'ble Tribunal has clearly held
that as the electricity is not
excisable, the Cenvat credit is
not available even at the premises
of the windmills and therefore,
the appellants is not eligible to
avail Cenvat credit claimed in
this regard. The ratio of the
above judgment squarely applies to
the present appeal as the issues
are identical in nature,
accordingly the appellants are
riot entitled to avail the Cenvat
credit in the present case."
Learned advocate Shri P.V. Sheth
fairly agree that the issue is
squarely covered by the earlier
decisions of the Tribunal in case
of Rajhans Metals P. Ltd. 2007 (8)
STR 498 (Tri-Ahmd). He further
submits that the said decision
stand followed in case of M/s Atul
Auto Ltd. being Order
No.A/332/WZB/.AHD/08, dt.29.2.08.
3. same. In view of the above, I
find no merits in the present
appeal."
9. Learned advocate Mr. Dhaval Shah
appearing for the appellant submitted that
only ground on which Cenvat Credit is
denied by the respondent authorities and
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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.
10. 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
factory for manufacturing purpose which is
connected through GEB Power Grid/High
tension supply lines.
11. It was submitted that the appellant
was already paying charges for excess use
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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:
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
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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)
12. 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
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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.
13. 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
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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.
14. On the other hand, learned advocate
Mr. Ankit Shah 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
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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.
15. 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:
"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
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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 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;"
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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,
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
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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.
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
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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
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
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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
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
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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 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
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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 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
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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
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,
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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 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
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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 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
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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 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
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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 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
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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."
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
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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
favour of the appellant assessee
and against the Revenue. Appeal is
accordingly allowed."
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16. 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
