Gujarat High Court
M/S 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. 319 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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M/S 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 R. 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 29.04.2008 passed by the
Customs, Excise and Service Tax Appellate
Tribunal, Ahmedabad (For short "the
Tribunal") in Appeal No.E/146/2008.
3. The appeal is admitted by this Court
vide order dated 29.01.2010 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(1) 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 of the appellants 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
CESTAT 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 company engaged in the
manufacture of electronic products falling
under Chapters 85 and 91 of the Central
Excise Tariff Act, 1985. The products
manufactured by the appellants attract
excise duty. The appellants have its
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factory at Morbi.
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
Gujarat Electricity Board (GEB) for
transmitting the power from wind mill site
to the factory premises. As per the
arrangement with GEB, the electricity
generated at wind farm was to be supplied
to GEB which in turn supply 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
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in the factory.
7. For the purpose of operation and
maintenance of the wind farm located at
Bhogat, the appellant had entered into an
agreement with M/s Suzlon Energy Ltd
(hereinafter referred to as "Suzlon")
whereby the appellant received maintenance
and repair service and reimbursed the
service tax amount paid by Suzlon on such
services. The Appellant availed Cenvat
credit of such service tax amount as input
service.
8. 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
wind mill site which is approximately 225
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km away from the factory of the
appellants. Accordingly, a show cause
notice dated 26.03.2007 was issued to the
appellant denying the Cenvat credit of Rs.
1,25,110/- being availed by the appellant
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.
9. In response to the show cause notice,
the appellant filed reply stating that the
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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.
10. The adjudicating authority vide
impugned order-in-original dated
19.06.2007 has confirmed the demand
proposed in the show cause notice dated
26.03.2007 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
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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
adjudicating authority has confirmed the
denial of Cenvat credit of Rs. 1,25,110/-
and also imposed penalty of equal amount
under Rule 15(3) of the Cenvat Rules read
with Section 11AC of the Act.
11. Being aggrieved, the appellant
preferred an appeal before the
Commissioner (Appeals), Central Excise,
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Rajkot who vide order-in-appeal dated
12.12.2007 upheld the order-in-original.
12. Being aggrieved, the appellant
preferred an appeal before the Tribunal.
13. The Tribunal vide impugned Final
order dated 29.04.2008 dismissed the
appeal observing as under:
"11. After a detailed
consideration of all the points
raised by both the parties, I find
no reason to differ from the two
orders already passed by this
Tribunal on the same subject in
identical situation. The apex
court's judgment in M/s.Vikram
Cement's case does not help the
appellants since the power plant
is not a captive power plant. The
Tribunal has already examined and
considered the fact that power is
delivered by electricity board
after charging wheeling charges
and decision has been taken that
credit is not admissible in such
situation. Input services have
been received in the power plant
belonging to the applicants but
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the power has been delivered to
the electricity board. The
transaction of delivery of power
to the electricity board and sale
of power by the electricity board
with the assessee are two
independent transactions. The
electricity board is only giving
credit for the power received in
the grid and it does not mean that
there is a direct nexus between
the service received in the power
plant and the items manufactured
in the factory belonging to the
appellants. In view of the totally
independent transactions unrelated
to each other and in view of the
fact that the power produced at
the wind mill and power
requirement of the factory also
need not have to be matched or
tallied, I do not think that the
appellants are eligible for the
benefit. In view of the above, 1
reject the appeals filed by both
the appellants.
14. 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
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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.
15. 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.
16. 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
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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
Technology Pvt. Ltd. reported in 2017 (52)
S.T.R. 361 (Bom.)
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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)
17. 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
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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.
18. 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
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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.
19. On the other hand, learned advocate
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
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excisable and therefore, service tax
credit is rightly rejected by the
Tribunal.
20. 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
installation agency" means any
agency providing service in
relation to erection,
commissioning or installation."
"(39a) "erection, commissioning or
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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;"
Cenvat Credit Rules, 2004 :
"Rule 2(l)"input service" means
any service, -
(i) used by a provider of taxable
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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
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."
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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
manufacturer of final product
would be susceptible to Cenvat
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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:
"5. On perusal of these Rules,
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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
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
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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
procurement of inputs and
inward transportation of
inputs. The Tribunal,
proceeded to interpret the
inclusive part of the
definition and held that the
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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
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
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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,
learned counsel for the
appellant tried to submit that
the judgment cited at Sr. No.
(2) is being challenged before
Supreme Court. This submission
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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
generated on two different
places far away could be said
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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
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(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 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
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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.
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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
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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 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.
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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
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.
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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."
21. 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
