The definition of 'input service' under CENVAT Credit Rules includes services used by manufacturers, regardless of location, affirming entitlement to credit for service tax paid on windmill installation.

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 H. 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 02.08.2011 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Ahmedabad (For short “the Tribunal”) in Appeal No.E/576/11.

3. The appeal is admitted by this Court vide order dated 15.02.2012 for consideration of the following substantial questions of law:

“a) In view of the definition of “input service” as provided in Rule 2 of the CENVAT Credit Rules, 2004, whether the Tribunal below committed substantial error of law in holding that CENVAT Credit of service tax paid on services, like installation, commissioning and civil works as well as maintenance for a windmill comes within the purview of Rule 3 of the said Rules.

(b) Whether the Tribunal below committed substantial error of law in denying the CENVAT credit of service tax paid on services, like installation and commissioning as well as civil works and maintenance of a windmill only because the windmill was located at a place other than the factory premises and electricity generated at the site of windmill was not excisable.”

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.2,87,122/- 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 appellants 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