Cenvat Credit on repair & maintenance of windmill located outside factory premises allowable

Swiss Glascoate Equipments Vs C.C.E. & S.T. (CESTAT Ahmedabad)

The issue involved is whether the appellant is entitled for Cenvat Credit in respect of repair and maintenance of wind mill which is located outside the factory premises. Both the lower authorities have denied the Cenvat Credit on the ground that the wind mill is located outside the factory premises.

CESTAT held that irrespective of the fact that windmill is located outside the factory premises, repair and maintenance service is admissible for Cenvat credit in terms of rule 2 (l) of Cenvat Credit Rules, 2004.

CESTAT followed the case of Commissioner of Central Excise & Customs, Aurangabad v/s Endurance Technology 2015-TIOL-1371-HC-MUM-ST.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

The issue involved is whether the appellants are entitled for Cenvat Credit in respect of repair and maintenance of wind mill which is located outside the factory premises.

2. None appeared on behalf of the appellant.

3. Shri J.A. Patel, learned Superintendent (Authorised Representative) appearing on behalf of the Revenue reiterates the findings of the impugned order.

4. I have carefully considered the submissions made by learned Authorised Representative and perused the records. The issue involved is whether the appellant is entitled for Cenvat Credit in respect of repair and maintenance of wind mill which is located outside the factory premises. Both the lower authorities have denied the Cenvat Credit on the ground that the wind mill is located outside the factory premises. An identical issue has been decided by this Tribunal in the case of Commissioner of Central Excise & Customs, Aurangabad v/s Endurance Technology 2015-TIOL-1371-HC-MUM-ST wherein after considering various judgments following order was passed:

“Both these appeals can be disposed of by this common judgment as the facts and controversies between the parties are similar.

21 The appellant is challenging judgment and order passed by Central Excise Service Tax Appellate Tribunal [CESTAT for short]. The substantial questions that arise for our consideration and which are indentified earlier are as under:

I) Whether the CESTAT is correct in holding that the assessee is entitled to avail the CESTAT credit on “management, maintenance or repair services” provided on services provided to Windmills installed and situated away from factory and factory premises?

II) Whether electricity generated at Supa and Satara, situated for away, could be said to have been used for manufacture of the final product of the assessee at Waluj, Aurangabad.

3] The question No.[II] can be answered in affirmative because admittedly, the electricity generated at Supa and Satara which are situated for away from the manufacturing unit of the appellant can be said to have used for manufacture of final product at Waluj, Aurangabad. Mainly because admittedly such electricity generated at Supa and Satara is adjusted to the electricity used at Waluj. This adjustment is admitted by the revenue and in view of this adjustment, it can safely be stated that the electricity generated at Supa and Satara is the electricity used at Waluj.

4] Question no.1 is main bone of contention between the parties. Even the law on this subject is very well settled by atleast three prominent judgments of our High Court reported in 2010 (20) S.T.R. 589 (Bom.) = 2010-TIOL-686-HC-MUM-ST in the case of Commissioner of Central Excise, Nagpur Versus Ultratech Cement 2010 (260) E.L.T. 369 (Bom.) 2010-TIOL-745-HC-U-ST in the case of Commissioner of Central Excise, Nagpur Versus Ultratech Cement Ltd. And 2013 (32) S.T.R. 532 (Bom.)=2013-TIOL-212-HC-MUM-Cx in the case of Deepak Fertilizers & Petrochemicals Corporation Ltd. Versus C.C.Ex.Belapur. The question between the parties is whether the respondent was entitled to credit on management, maintenance or repair services provided on windmills installed by the respondents. The answer lies in interpretation of Rule 2(B) (k), (1) (m), 3 and 4 of CENVAT Credit Rules, 2004. The relevant Rule 2(B) (k), (1), 3 and 4 of CENVAT Credit Rules, 2004 read as under:

“2(B)(k) “Input” means

(i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known a petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production:

(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service;

Explanation 1: The light diesel oll, high speed diesel oll or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.

Explanation 2: Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;

2(B) (I) “input service means any service –

(i) used by a provider of taxable service for providing an output service, or

(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal.

(m) “Input service distributor” means an office of the manufacturer or producer of final products or provider of output service, which receives invoices Issued under rule 4A of the Service Tax Rules 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be.

Rule 3. CENVAT Credit: (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the CENVAT credit of –

[xl] the additional duty of excise leviable under [Section 85 of Finance Act, 2005 (18 of 2005)] paid on –

(i) any input or capital goods received in the factory of manufacture of final product or premises of the provider of output service on or after the 10th day of September 2004; and

[ii] any input service received by the manufacturer of final product or by the provider of output services on or after the 10 th day of September, 2004

Including the said duties, or tax, or cess paid on any input or input service, as the case ay be, used in the manufacture of intermediate products, by a job-worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No.214/86 Central Excise, dated the 25 th March, 1986, published in the Gazette of India vide number G.S.R.547(E), dated the 25 th March, 1986, and received by the manufacturer for use in, or in relation to the manufacture of final product on or after the 10 th day of September, 2004.

Rule 4: Conditions for allowing CENVAT credit (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service.

[Provided that in respect of final products, namely, articles of jewellery falling under heading 7113 of the First Schedule to the Excise Tariff Act, the CENVAT credit of duty paid on inputs may be taken Immediately on receipt of such inputs in the registered premises of the person who get such final products manufactured on his behalf, on job work basis, subject to the condition that the inputs are used in the manufacture of such final product by the job worker.]

Rule 4(7) The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in rule 9,”

5] On perusal of these Rules, it becomes clear that the management, maintenance and repair of windmills Installed by the respondents is input service as defined by clause “I” of Rule 2. Rule 3 and 4 provide that any input or capital goods received in the factory or any input service received by manufacture of final product would be susceptible to CENVAT credit. Rule does not say that input service received by a manufacture received at the factory premises. The judgments referred to above, also interpret the word “input” service in similar fashion.

In the case of Commissioner of Central Excise, Nagpur Versus Ultratech Cement Ltd. [cited supra), the Division Bench of this Court held that the definition of “input service” is very wide and covers not only services which are directly or indirectly used in or in relation to manufacture of final product but also includes various services used in relation to business of manufacture of final product. The expression “activities” in relation to business is also discussed in this judgment by referring to judgment of Apex Court.

In the case of Deepak Fertilizers & Petrochemicals Corporation Ltd. Versus C.C.Ex. Belapur [cited supra] the Division Bench held as under:

“The definition of the expression input service covers any services used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products. The words ‘directly or indirectly’ and ‘in or in relation to’ are words of width and amplitude. The subordinate legislation has advisedly used a broad and comprehensive expression while defining the expression input service’. Rule 2(1) initially provides that input service means any services of the description falling in sub-clauses (1) and (II). Rule 2(1) then provides an inclusive definition by enumerating certain specified services. Among those services are services pertaining to the procurement of Inputs and inward transportation of inputs. The Tribunal, proceeded to interpret the inclusive part of the definition and held that the Legislature restricted the benefit of Cenvat credit for input services used in respect of inputs only to these two categories viz. for the procurement of inputs and for the inward transportation of inputs. This interpretation which has been placed by the Tribunal is ex-facie contrary to the provisions contained in Rule 2 (l). The first part of Rule 2(l) inter alia covers any services used by the manufacturer directly or indirectly, in or in relation to the manufacture of final products. The inclusive part of the definition enumerates certain specified categories of services. However, it would be farfetched to interpret Rule 2 (l) to mean that only two categories of services in relation to inputs viz. for the procurement of inputs and for the inward transportation of inputs were intended to be brought within the purview of Rule 2 (1). Rule 2 (1) must be read in its entirety. The Tribunal has placed an interpretation which runs contrary to the plain and literal meaning of the works used in Rule 2 (1). Moreover as we have noted earlier, whereas Rule 3(1) allows a manufacturer of final products to take credit duty and Service Tax among others paid on any input or capital goods received in the factory of manufacturer of the final product, insofar as any input service is concerned, the only stipulation is that it should be received by the manufacturer of the final product. This must be read with the broad and comprehensive meaning of the expression ‘input service’ in Rule 2(1). The input services in the present case were used by the appellant whether directly or indirectly, in or in relation to the manufacture of final products. The appellant, it is undisputed, manufactures dutiable final products and the storage and use of ammonia is an intrinsic part of that process.

6] In view of this discussion, we have no hesitation to hold that the answer to question No.(I) is in affirmative. Despite this settled position, learned counsel for the appellant tried to submit that the judgment cited at Sr. No. (2) is being challenged before Supreme Court. This submission does not really help us in deciding the appeals. Both appeals are dismissed.

From the above judgment, it can be seen that the issue is identical in the present case as in the above cited case. Therefore, the ratio of the above judgment is applicable in the present case. Accordingly, irrespective of the fact that windmill is located outside the factory premises, repair and maintenance service is admissible for Cenvat credit in terms of rule 2 (l) of Cenvat Credit Rules, 2004. Accordingly, the impugned orders are set aside. Appeals are allowed.

(Dictated and pronounced in the open court)