The court held that services related to electricity generation for manufacturing qualify as 'input services' for Cenvat Credit, irrespective of physical location, reaffirming broad interpretations of related legislation.

JUDGMENT :

BHARGAV D. KARIA, J.

1. Heard learned advocate Mr. Dhaval Shah for the appellant and learned advocate Mr. Ankit Shah 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 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, 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 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 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 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 d