Case Law Details
Commissioner of GST Vs India Pistons Ltd (CESTAT Chennai)
The issue is whether the credit availed on the service tax paid on lease rental charges paid to the Ashok Leyland Wind Energy Ltd. for the power that has been drawn by the respondent at Chennai is admissible. On perusal of the Show Cause Notice, it is seen that the electricity generated by the windmills is transmitted to the Udumalpet TNEB Grid and the respondent draws the same quantity of electricity at Chennai. There is no allegation in the Show Cause Notice that any excess electricity has been sold to any other party. The respondent has availed credit on the lease rental which is calculated on the basis of the electricity consumed by them. Electricity being in a nature which cannot be transported in an ordinary manner, the respondent has made the facility of transmitting it through TNEB grid and drawing it at Chennai. It is not in dispute that the said electricity is supplied to the factory of the respondent and the same is used for manufacturing activity. Merely because the wind generation plant is situated far away from the manufacturing activity, credit cannot be denied.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that the respondents are engaged in the manufacture of parts of IC engines, parts of air compressors and circuits. They are also registered with the Central Excise Department. They availed the facility of CENVAT credit of duty paid on inputs, capital goods and input services. On verification of CENVAT account, it was noticed that the respondent has availed CENVAT credit of lease rentals paid to M/s. Ashok Leyland Wind Energy Ltd. They had taken lease of 27 windmills from M/s. Ashok Leyland Wind Energy Ltd. located in Udumalpet, Coimbatore District. The said company was responsible for development, maintenance and operation of the windmills and for effective functioning of the same. The energy generated by these windmills was surrendered to the power grid at Udumalpet and in turn the same quantum of electricity was supplied to the respondent at Chennai. On perusal of the lease agreement, it was seen that the lease rental is computed on the actual power consumed by respondent on agreed rates. The respondent availed credit of the service tax paid on the lease rental charges. Show Cause Notice dated 25.1.2008 was issued proposing to disallow the credit and also recover the same along with interest and for imposing penalty. After due process of law, the original authority confirmed the demand along with interest and imposed penalty of Rs.2,000/- in terms of Rule 15 of CENVAT Credit Rules, 2004. Against such order, the respondent filed appeal before the Commissioner (Appeals) who vide the order impugned herein set aside the order passed by the lower authority and held that the respondent is eligible for credit. Aggrieved by such order, the department is now before the Tribunal.
2. The learned AR Shri R. Rajaraman appeared and argued for the department. He submitted that the windmill is situated at Udumalpet, Coimbatore and the manufacturing activity is taking place at Sembiam which is in Chennai. The electricity generated at Udumalpet is received through the TNEB Power Grid at Chennai. The service tax paid on services of generation of electricity (which is not excisable) and situated far away from the factory premises cannot be said to be related to the manufacturing activity carried out at Chennai. The view taken by the Commissioner (Appeals) is therefore erroneous and he prayed that the same may be set aside by allowing the appeal.
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