Shri Ravindran, Adv.(Sl. No.1) vs For The

Customs Excise and Service Tax Appellate Tribunal25 February 2015

CitationAppeal No. 175/2006-CE dated 14.11.2006,

Ratio decidendi

The rule this decision rests on

Cenvat credit on inputs and input services used in setting up, operating and maintaining wind mills is admissible where the energy generated is bartered through the State Electricity Board for equivalent power consumed at the manufacturing unit or place of output service provision, since such energy is then used in manufacture or provision of service, and absent material showing the energy was otherwise utilised, the disallowance on the ground of non-relation to manufacture cannot be sustained. Where the Revenue's disallowance of cenvat credit on inputs and input services rests solely on the premise that the wind-mill energy was not used in manufacture or output service, and the Revenue has not controverted the uncontroverted fact that such energy was bartered to the Electricity Board for equivalent power at the appellant's place of manufacture, the Revenue's appeals against such credit fail, and penalty imposed on that basis cannot stand where the credit is admissible. Cenvat credit on service tax paid on lease rentals is admissible where the rent is directly attributable to the generation of wind energy, so that Revenue appeals against allowance of such credit fail.

Written by Miss Lucy from the judgment below, not taken from a headnote.

Judgment

As delivered

IN THE CUSTOMS, EXCISE & SERVICE TAXAPPELLATE TRIBUNALSOUTH ZONAL BENCH AT CHENNAI

E/00058/2007, E/00156/2008, E/00231/2008, E/00232/2008, E/00347/2008, E/00567/2008, E/00001/2009, E/00005/2009, E/00044/2009, E/00054/2009, E/00055/2009, E/00064/2009, E/00065/2009, E/00128/2009, E/00169/2009, E/00255/2009, E/00363/2009, E/00372/2009, E/MISC/00199/2011 & E/00384/2009, E/MISC/00200/2011 & E/00385/2009, E/00449/2009, E/00470/2009, E/00481/2009, E/00536/2009, E/00593/2009, E/00712/2009, E/00084/2010, E/00269 - 274/2010, E/00435/2010, E/00473/2010, E/00513/2010, E/00595/2010, E/00634/2010, E/00651/2010, E/00712/2010, ST/00580/2010, ST/00581/2010, E/00400/2011, E/00504/2011, E/40062/2013 & E/CO/41408/2013, E/40063/2013 & E/CO/41409/2013

(All the above appeals arising out of:

Order-in-Appeal No. 175/2006-CE dated 14.11.2006, passed by the Commissioner of Central Excise (Appeals), Salem.

Order-in-Appeal No.186/2007 dt. 30.11.2007 passed by the Commissioner of Central Excise (Appeals), Chennai-II

Order-in-Appeal No.19/2008 dt. 29.01.2008 passed by the Commissioner of Central Excise (Appeals), Chennai-II

Order-in-Appeal No.11/2008-CE DT. 23.01.2008 passed by the Commissioner of Central Excise (Appeals), Coimbatore.

Order-in-Appeal No. 61/2008 dt. 15.04.2008 passed by the Commissioner of Central Excise (Appeals), Coimbatore.

Order-in-Appeal No. 97/2008 dt. 29.09.08 passed by the Commissioner of Central Excise (Appeals), Coimbatore.

Order-in-Appeal No. 91/08 dt. 29.09.08 passed by the Commissioner of Central Excise (Appeals), Coimbatore.

Order-in-Appeal No. 67-68/08 dt.06.10.08 passed by the Commissioner of Central Excise (Appeals), Madurai

Order-in-Appeal No. 94-95/08 dt.29.11.08 passed by the Commissioner of Central Excise (Appeals), Madurai

Order-in-Appeal No. 95/08 dt.29.11.08 passed by the Commissioner of Central Excise (Appeals), Madurai

Order-in-Appeal No. 94-95/08 dt.29.11.08 passed by the Commissioner of Central Excise (Appeals), Madurai

Order-in-Appeal No. 17/09 dt.12.01.09 passed by the Commissioner of Central Excise (Appeals), Coimbatore

Order-in-Appeal No. 39/09 dt.16.12.09 passed by the Commissioner of Central Excise (Appeals), Coimbatore

Order-in-Appeal No. 21/09 dt.23.01.09 passed by the Commissioner of Central Excise (Appeals), Coimbatore

Order-in-Appeal No. 82/09 dt.23.03.09 passed by the Commissioner of Central Excise (Appeals), Madurai

Order-in-Appeal No. 98/09 dt.25.03.09 passed by the Commissioner of Central Excise (Appeals), Madurai

Order-in-Appeal No. 04-05/09 dt.09.04.09 passed by the Commissioner of Central Excise (Appeals), Chennai-I

Order-in-Appeal No. 98/09 dt.29.06.09 passed by the Commissioner of Central Excise (Appeals), Salem

Order-in-Appeal No. 79/09 dt.06.05.09 passed by the Commissioner of Central Excise (Appeals), Coimbatore

Order-in-Appeal No. 87/09 dt.05.06.09 passed by the Commissioner of Central Excise (Appeals), Coimbatore

Order-in-Appeal No. 95/09 dt.27.07.09 passed by the Commissioner of Central Excise (Appeals), Coimbatore

Order-in-Appeal No. 104/09 dt.28.08.09 passed by the Commissioner of Central Excise (Appeals), Coimbatore

Order-in-Appeal No. 110/09 dt.24.09.09 passed by the Commissioner of Central Excise (Appeals), Coimbatore

Order-in-Appeal No. 181/09 dt.26.11.09 passed by the Commissioner of Central Excise (Appeals), Salem

Order-in-Appeal No. 63-68/2010 dt. 22.02.10 passed by the Commissioner of Central Excise, LTU Chennai.

Order-in-Appeal No. 48/2010 dt. 31.03.10 passed by the Commissioner of Central Excise (Appeals), Trichy

Order-in-Appeal No. 143/10 dt. 30.04.10 passed by the Commissioner of Central Excise (Appeals), Madurai.

Order-in-Appeal No. 170-171/10 dt. 11.05.10 passed by the Commissioner of Central Excise (Appeals), Madurai

Order-in-Appeal No. 127/10 dt, 07.07.10 passed by the Commissioner of Central Excise (Appeals), Trichy

Order-in-Appeal No.130/10 dt. 22.07.10 passed by the Commissioner of Central Excise (Appeals), Trichy

Order-in-Appeal No. 79/10 dt. 21.07.10 passed by the Commissioner of Central Excise (Appeals), Coimbatore.

Order-in-Appeal No. 394/10 dt. 30.08.10 passed by the Commissioner of Central Excise (Appeals), Madurai

Order-in-Appeal No. 216/10 dt. 17.06.10 passed by the Commissioner of Central Excise (Appeals), Madurai.

Order-in-Appeal No. 218/2010 dt. 18.06.2010 passed by the Commissioner of Central Excise (Appeals), CCE, Tirunelveli

Order-in-Appeal No. 203/2011 dt. 29.04.2011 passed by the Commissioner of Central Excise (Appeals), CCE, Tirunelveli.

Order-in-Appeal No. 135/2011 dt. 29.08.11 passed by the Commissioner of Central Excise (Appeals), Coimbatore

Order-in-Appeal No.52-53/2012 dt. 28.09.12 passed by the Commissioner of Central Excise LTU, Chennai

Parties in appeal:

1. The India Cements Ltd Vs. CCE, SALEM

2. CCE, Chennai-II Vs. Nelcast Limited.

3, 4, 15,16,24,25 & 39. L G Balakrishnan And Bros Ltd. Vs. CCE, Coimbatore.

5, 23 Rangammal Steels And Malleables Vs. CCE & ST, Coimbatore

6. Premier Mills Pvt Ltd Vs. CCE & S.T.,Coimbatore

7. Ammarun Foundries Vs. CCE, Coimbatore.

8, 10, 11, CCE & S.T.,Madurai Vs. Madras Cements Ltd.

9, 12, 13, 40, Madras Cements Ltd Vs. CCE,Madurai

14. Psg And Sons Charities Metallurgy And Foundry Division Vs. CCE & S.T, Coimbatore

17. L S Mills Ltd Vs. CCE, MADURAI

18. Shri Renuga Soft X Towels Vs. CCE, MADURAI

19, 20. Hinduja Foundries Ltd Vs. CCE, Chennai-I

21, 27 CCE, Salem Vs. Pallipalayam Spinners Pvt Ltd

22. Lakshmi Electrical Control Systems Ltd Vs. CCE,COIMBATORE

26. V R Foundries Vs. CCE, COIMBATORE

28, 28,30,31, 32, 33 Ashok Leyland Ltd Vs. CCE, LTU, Chennai

34, 37, 38. CCE, Trichy Vs. Hydro S And S Industries Ltd.

35. DCW Ltd. Vs. C.C.E. & S.T.,Tirunelveli

36,41, 42, 43 Kilburn Chemical Ltd. Vs. CCE, Tirunelveli.

44. VeejayLakshmi Engineering Works Ltd Vs. CCE,Coimbatore.

45, 46. CCE, Chennai Vs. Axles India Ltd.

Appearance

Shri Ravindran, Adv.(Sl. No.1) Shri P.C. Anand, Adv., (Sl.No. 2, 34, 37) Shri Raghavan Ramabhadran, Adv., (Sl.No.3,4,15,16,24,2539) Shri Mudimannar, Adv., (Sl.No.5) Shri J Shankararaman (Sl.No.6) None (Sl.No. 7, 22,26,44) Shri R. Parthasarathy, Consultant, (Sl.No.8,9,12,1340) Shri Muthuvenkataraman, Adv., (Sl.No.17,18) Shri M. Kannan, Adv., (Sl.No.19,20,28,29,30,31,32,33) Ms. L Mythili (Sl.no.21,22) Shri S. Venkatachalam (Sl.No. 36,41,42,43) Ms. Sridevi, Adv., (Sl.No.45,46) For the appellants

Shri Rammohan Rao, DC (AR)

For the respondent

CORAM

Honble Shri D.N, PANDA, Judicial Member Honble Shri R. PERIASAMI, Technical Member

FINAL ORDER No. 40281-40326/2015

Date of Hearing/Decision: 25.02.2015

Per: D.N. Panda

In appeals at serial numbers 40,48,49,53,55,56, 59,62,63,64,66,68,69,70, 71,73,74,75,76,77,81,82,83,84,85,86,89, 91,98,99,101 & 105 of the cause list today it is agreed by both sides that the issue involved in these appeal relate to admissibility of cenvat credit in respect of both inputs and/or input services used in setting up of wind mills, generation of wind power and maintenance as well as operation thereof. But disallowance thereof has been made on the ground that those do not relate to manufacture since energy generated by wind mills were not used in the manufacture or providing of any output service.

2. Ld. Counsels submit that even though the wind mills are located outside the factory where manufacturing is done energy generated by such the wind mills were barterd to Tamil Nadu Electricity Board to avail equivalent MW of power from that Board at the place of manufacture or place of provision of output service of the concerned appellants. There is no allegation that energy generated by wind mills have been utilized otherwise.

3. In absence of any material on record to the contrary, above proposition of appellants remained uncontroverted by Revenue.

4. Power shortage is well known to the economy. Hydro power, thermal power as well as wind energy are normally generated at a place nearness to the source of raw material. Wind energy is generated at the place where wind is available and reciprocal arrangement is made with Electricity Board for bartering the energy so generated. This is an accepted phenomena since power/energy generated cannot be stored. Places where wind energy generated is not consumable arrangement between the generator of energy and power distributing agency like electricity board is obviouly made to save the power so generated and make that available at the place of manufacture.

5. Our view above is fortified from the judgment of the Honble High Court of Bombay in Central excise appeal No. 14/2012 in the case of CCE, Aurangabad Vs. Endurance Technology Pvt. Ltd., disposed on 02.12.2014. The Honble Court examining the meaning of the input under Cenvat Credit Rules, 2004 and admissibility of credit of tax on such input held that there should not be inadmissibility of input credit on input or input services used by wind mills to generate energy which is made available through electricity board under barter system.

6. For the reasoning above and in absence of any materials on record showing energy generated by wind mills was used for the purpose other than manufacture or providing of service, all the appeals listed in the aforesaid Sl. Nos. are allowed. Consequential relief if any in these appeals shall flow in accordance with law.

7. In appeals listed at Sl.No. 47, 72 and 79 of the cause list, Revenue has grievance that the inputs were used in the maintenance of the wind mill. For the reason stated above, Revenue appeal are dismissed. Similarly, Revenue appeals listed at Sl.No. 60, 61, 88,93, and 95 of the cause list stand dismissed in view of the reasoning as above.

8. So far as the Revenue appeal at S.No. 57 of the cause list is concerned, Revenues prayer for imposition of penalty is not entertainable since cenvat credit is admissible, held as above. That is dismissed accordingly.

9. So, appeal at Sl.No. 65 in the cause list is concerned, Shri Raghavan Ramabadran, ld. Counsel submits that adjudicating authority held against the appellant recording reason that there were no proper documents submitted for his examination. Such error has been rectified informing the service tax registration number to the Authority. Therefore, appellant may also be granted similar relief like others. Such prayer being reasonable is allowed.

10. In appeals at Sl. No. 106 & 107 of the cause list, ld. Counsel says that these two appeals have been filed by Revenue against cenvat credit of service tax paid on lease rental allowed by the authority below. Record reveals that rent paid is directly attributable to the generation of wind energy. Therefore, these two appeals of Revenue fail.

11. In appeals at Sl.No. 102 & 104 of cause list, ld. Counsel does not press disallowance of cenvat credit in respect of service tax paid on security service. Accordingly these two appeals on that count fail. But cenvat credit on the inputs used in generation of energy by the wind mills is allowed. There shall be no penalty in the appeals wherever that was levied

12. In view of the above decision all the appeals are disposed, miscellaneous applications stand dismissed and cross objections filed by Revenue stand disposed.

(Order pronounced and dictated in the open Court)

(R. PERIASAMI) (D.N. PANDA) TECHNICAL MEMBER JUDICIAL MEMBER

This page reproduces a public judgment and a summary of it. It is research material, not legal advice, and it is no substitute for advice from an advocate on your own facts.

Research this judgment with Miss Lucy

Ask what it holds, what has followed it, and what it means for your matter — in plain English, with the citations.

Try Miss Lucy free