(a) The appellant has a manufacturing unit at Jamnagar. They had set up wind mills at a place Kurunga, about 100 Kms. away from their factory.

(b) While setting up of the wind mills, they have availed the services for the purpose of installation, erection and commissioning of wind mills.

(c) The electricity generated at the wind mills are fed to grid of Gujarat Electricity Board on the basis of an agreement and the appellant receives equal quantity of electricity fed by them from the Gujarat Electricity Board at the factory site. Whatever quantity of electricity is used in excess of what they produced is charged to them.

(d) The appellant claimed the service tax paid on the services availed at the wind mill station.

(e) The original authority held that the Service Tax paid in relation to the services availed for the purpose of erection, commissioning of wind mills away from the factory site, cannot be taken as credit and the same has been upheld by the Commissioner (Appeals).

4. The learned advocate for the appellant submits that in terms of Rule 2 of the Cenvat Credit Rules, 2004, any services used by the manufacturer whether directly or indirectly, in or in relation to the manufacture of final product and clearance of final product from the place of removal are to be treated as input services. The electricity is important input required by them in manufacturing; they have generated electricity in Kurunga and got it transferred for their own use through Gujarat Electricity Board power grid; since they have availed the services in relation to the generation of electricity for their own use, credit of service tax paid by them is admissible.

5. The learned SDR submits that this is a case where there is no nexus between the electricity generated at Kurunga and the manufacturing activity taking place at Jamnagar factory. It is being received through Gujarat Electricity Board. The electricity itself is not excisable. Therefore, the service tax credit cannot be allowed.

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 produced in their wind mills. The services used at the site of the wind mills can not be held as input services by the unit in 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.

7. However, since this is an issue of interpretation, I do not find any justification for imposition of penalty.

8. Appeal is, therefore, rejected except for setting aside the penalty imposed.