The entitlement to Cenvat credit for service tax on installation and maintenance of windmills is upheld, emphasizing that location does not negate its admissibility as an input service in manufacturing.

JUDGMENT :

BHARGAV D. KARIA, J.

1. Heard learned advocate Mr. Sudhanshu Bissa for learned advocate Mr. Paresh M. Dave for the appellant and learned advocate Ms. Hetvi Sancheti for the respondent.

2. This Tax Appeal is filed under section 35G of the Central Excise Act, 1944 (For short “the Act”) arising out of the final order dated 25.03.2011 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Ahmedabad (For short “the Tribunal”) in Appeal No.E/1035/10.

3. The appeal is admitted by this Court vide order dated 27.01.2012 for consideration of the following substantial questions of law:

“1) Whether Cenvat Credit of service tax paid on services like installation, commissioning and civil works as well as maintenance for a Windmill was admissible to the appellant in the facts and circumstances of this case?

2) Whether the decision of the Tribunal in denying cenvat credit of service tax paid on services like installation and commissioning as well as civil works and maintenance of a Windmill only because a Windmill was located at a place other than the factory premises and electricity generated at the site of Windmill was not excisable is correct and sustainable in the facts of this case?”

4. Brief facts of the case are that the appellant is a company situated in Ahmedabad and is engaged in the manufacture of goods like H.R. Coils and C.R.Coils and has installed a Windmill in Kutch District for generating electricity using wind energy.

5. For installation and commissioning of this windmill, the appellant has availed erection, commissioning and installation services on which the Agency providing the above services has paid service tax of Rs.1,35,014/- inclusive of Education cess. Subsequently, the appellant after receiving invoices of the erection, commissioning, and installation has availed credit of this amount of service tax in its RG 23A Part II. It is the case of the appellant that these transactions were also duly reflected in the Cenvat register and extracts thereof were also submitted with the monthly returns of the above period. Further, it is the case of the appellant that no objection was raised by the Range and Divisional Officers in this regard.

6. It is the case of the appellant that, after the said agency installed, commissioned and erected the windmill and after windmill started operating successfully, Gujarat Energy Development Agency (GEDA) has also issued certificates for commissioning of windmill so as to certify that the appellant had done all that was necessary under the Government policy for setting up a wind farm for generating wind energy. The appellant having started producing electricity using the above windmill, the units of electricity so generated were given to Gujarat Energy Transmission Corporation Limited (GETCO) who transferred electricity so generated through the State Government grid line, and the certificates in appellant’s favour for quantity i.e. units of electricity generated by the appellant and units of electricity allowed to the appellant for being utilized in its factory after adjusting 4% wheeling charges have also been issued by GETCO on regular basis.

7. It is the case of the appellant that on the basis of these certificates, the appellant has been allowed to utilize the specified number of units of electricity at its factory in relation to manufacturing and other related operations, and no electricity charges or duties have been recovered from the appellant on these units of electricity under the above policy.

8. However, the Central Excise EA-2000 Audit Party found availment of the above cenvat credit objectionable and therefore, a Show Cause Notice came to be issued by the Assistant Commissioner of Central Excise, dated 20.8.2009 proposing to deny and recover Cenvat credit of Rs.1,35,014/- on the ground that credit of service tax and Education cess paid on erection, commissioning and installation services for windmill was not available because windmill was installe