TMI Blog2019 (1) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... and it would mean any service used by a provider of taxable service for providing an output service or 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. Though the definition of input service has to be widely construed, and in terms of Rule 3, which allows the manufacturer of final products to take the credit of service tax inputs or capital goods received in the factory of manufacture of final products, insofar as any input service is concerned, the only stipulation is that it should be received by the manufacturer of final products - Therefore, this would be the correct manner of interpreting Rule 2(l) of the Rules. The decision of the High Court of Bombay in Endurance Technology Pvt. Ltd. [2015 (6) TMI 82 - BOMBAY HIGH COURT], which has been followed by the Larger Bench of the Tribunal in Parry Engg. Electronics P. Ltd. [2016 (1) TMI 546 - CESTAT AHMEDABAD], where it was held that Management, maintenance and repair of windmills installed by the respondents is input service as defined by clause l of Rule 2. Rule 3 and 4 provide that any input or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no nexus between the process of electricity generated at the windmills and in the manufacture of final products by the assessee? And (iii) Whether the Customs, Excise and Service Tax Appellate Tribunal is correct in allowing CENVAT Credit for the services received in respect of windmill, which is an immovable property and the services do not qualify as an input service as defined under the CENVAT Credit Rules, 2004? 6.The respondent/assessee (M/s.Ashok Leyland Ltd.) is engaged in the manufacture of engines for use in heavy vehicles, gensets, etc. They have units in Ennore, Ambattur and Hosur. The assessee procured windmills on outright purchase and lease basis located in Udumalpet and Palladam Taluks in Coimbatore District and Radhapuram Taluk in Tirunelveli District. The assessee entered into an agreement with the Tamil Nadu Electricity Board (TNEB) for generation of power through the windmills and transmit the same to the TNEB grid and the TNEB, in turn, would transmit the power agreed to the factory premises of the assessee. The assessee was paying lease rentals for the windmills operated on lease basis and operations, and maintenance charges for the windmills own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to third parties. Further, by referring to the terms of the agreement, it was stated that the agreement envisages generation of power by windmills as well as transmission to their factory, which shows that the electricity generated is being capable of physically delivered at the factory of the assessee. Thus, they contended that there is nexus between the power generated through windmills and the goods manufactured. That the three activities, viz., sale, supply and consumption take place immediately, even though the place of generation and manufacture are different. Therefore, the assessee sought to sustain the availment of credit of service charges incurred in relation to windmills. 8.The assessee relied upon the decisions of the Tribunal in support of their contentions. They further contended that there is no condition with regard to input services that the same should be received at the factory, where manufacturing activity takes place for taking credit. In support of such contention also, they placed reliance on certain decisions of the Tribunal. The assessee distinguished the decision of the Hon'ble Supreme Court in the case of Maruti Suzuki Ltd. vs. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar away from the manufacturing plant, there is no nexus and the type of transaction between the assessee and the TNEB is a barter system and it is, in effect, a sale of electricity at one point and purchase of electricity at the other. Therefore, it is submitted that there are two distinct and independent transaction and they had no nexus with each other and therefore, the question of giving credit, with regard to input services, does not arise. To support his argument, the learned counsel relied on a decision of the Tribunal in the case of Ellora Times Ltd. vs. Commissioner of Central Excise, Rajkot., 2009 (13) S.T.R. 168 (Tri. - Ahmd.). 13.Further, by referring to the decision in Maruti Suzuki Ltd. (supra), it is contended that the Court though was examining a case with regard to inputs, the Hon'ble Supreme Court has observed that electricity generation is a separate and distinct activity, it is an independent activity, it has its own economics and it does not form part of the process in which inputs are transformed into separate identifiable commodity, though it may stand connected to such processes. Further, it was held that electricity generation is an ancillary act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, we are not required to go into the question as to whether there was any excess energy generated, whether it was sold to third parties or whether the assessee had sold it to the Electricity Board on costs, etc., and these issues become hypothetical in the instant case because, there is no such allegation against the assessee on any excess generation than what was utilised. The only allegation against the assessee is with regard to the fact that the windmills are located far away from the manufacturing unit. Undoubtedly, the windmills cannot be located at any place, and it is to be erected, wherever the wind power is available. Therefore, such an interpretation if to be accepted, would defeat the very concept of generation of green power in the country. Therefore, this interpretation should lean towards the sustenance of such environmental friendly measures for which the Government has granted certain special concessions. 17.Thus, we are to consider as to whether there has been any nexus between the energy generated and the manufacturing activity of the assessee. This very issue was considered in Endurance Technology Pvt. Ltd. (supra). In fact, we find two substantial quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, by referring to the decision in Commissioner of Central Excise, Nagpur vs. Ultratech Cement, 2010 (20) S.T.R.589 (Bom.) (supra), it was 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. Further, the expression activities in relation to business was also discussed in the said decision following the decisions of the Apex Court. 20.By placing reliance on the decision in the case of Deepak Fertilizers Petrochemicals Corporation Ltd. (supra), the first question was answered in the affirmative. At this juncture, it would be beneficial to refer to the operative portions of the said judgment. 4.Question No.1 is main bone of contention between the parties. Even the law on this subject is very well settled by alteast three prominent judgments of our High Court reported in [1] 2010 (20) S.T.R. 589 (Bom.) in the case of Commissioner of Central Excise, Nagpur v. Ultratech Cement [2] 2010 (260) E.L.T. 369 (Bom.) = 2010 (20) S.T.R. 577 (Bom.) in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices. 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 Rules 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(l). Rule 2(l) must be read in its entirety. The Tribunal has placed an interpretation which runs contrary to the plain and literal meaning of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of the clearance of excess electricity outside the factory to the joint ventures, vendors, grid etc., would be admissible for Cenvat credit, as it is cleared for a price. This question was answered against the assessee. However, the facts of the case on hand are totally different and therefore, the Revenue would not be justified in referring to the observations of the Hon'ble Supreme Court in the said judgment about the concept of generation of electricity, as we have to test the correctness of the impugned order on the given facts and circumstances of the case. 25.As already pointed out, there is no dispute that the electricity generated by the windmills are exclusively used in the manufacturing unit for final products, there is no nexus between the process of electricity generated and manufacture of final products and there is no necessity for the windmills to be situated in the place of manufacture. Further, as already noticed, the definition of input service is wider than the definition of input . Furthermore, if one takes a look at the Rules, more particularly Rule 2(k), as it stood prior to 01.04.2011, which defines input , the following has been specif ..... 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