2008 (2) TMI 395 - AT - Central Excise

Service tax credit for Wind Mills installation requires direct consumption at manufacturing facility.

The Tribunal affirmed the Commissioner (Appeals) order, dismissing the appeal in a dispute over service tax credit for the erection and commissioning of ... Input service credit - service tax credit on erection and commissioning of generation units - utilisation of input services for manufacture - distinct supply through third-party distributor - facility not being part of factory premisesInput service credit - service tax credit on erection and commissioning of generation units - distinct supply through third-party distributor - facility not being part of factory premises - Whether service tax credit paid for erection and commissioning of the windmill unit is admissible to the appellant where the electricity generated at the windmill is transferred to a State distribution company (PGVCL) and then supplied to the appellant. - HELD THAT: - The Tribunal upheld the finding of the Commissioner (Appeals) that the electricity generated at the windmill unit was transferred to PGVCL, an independent State Government company, which in turn supplied electricity to the appellant and raised monthly bills reflecting adjustments for units generated at the windmill. Because the power was not supplied directly to the appellant from the windmill and supply passed through an independent distributor, the windmill unit could not be treated as part of the appellant's factory premises. The consumption by the appellant could be more or less than the units generated at the windmill and the lower authorities correctly concluded that the service in question was utilised by the windmill unit and not directly by the appellant for manufacture. The Tribunal followed its earlier decision in M/s. Rajhans Metals (P) Ltd. and found no reason to take a different view.Service tax credit in respect of erection and commissioning of the windmill unit is not admissible to the appellant; the appeal is rejected.Final Conclusion: The appeal is dismissed; service tax credit claimed for services relating to the windmill unit is not allowable because the windmill was not part of the appellant's factory and the electricity was supplied via PGVCL rather than directly to the appellant. Issues:Dispute regarding service tax credit for erection and commissioning of Wind Mills for electricity generation.Analysis:The judgment revolves around the dispute concerning the service tax credit paid by a service provider for the erection and commissioning of Wind Mills for electricity generation, located at a considerable distance from the appellant's factory. The Commissioner (Appeals) extensively examined the facts and determined that the electricity generated at the wind mill was not directly consumed by the appellant but was transferred to M/s. Pacchim Gujarat Vidut Corporation Ltd. (PGVCL), a State Government company, which then supplied electricity to the appellant, accompanied by adjustments in the monthly electricity bills based on the units generated at the wind mill. The Tribunal concurred with the lower authorities' findings that the electricity from the wind mill was being supplied to PGVCL, and the electricity purchased by PGVCL was consumed by the appellant for their manufacturing processes. It was clarified that the wind mill unit was not considered part of the appellant's factory premises, thus disallowing the credit of service tax paid for services at the wind mill. The judgment also referenced a previous decision by the Tribunal in the case of M/s. Rajhans Metals (P) Ltd., indicating consistency in the interpretation of similar issues. Consequently, the appeal was dismissed, affirming the Commissioner (Appeals) order.This case highlights the importance of direct consumption in determining eligibility for service tax credit, emphasizing that even if electricity is generated at a separate location, the crucial factor is whether it is directly consumed by the appellant. The judgment underscores that the transfer of electricity to an intermediary, like PGVCL in this instance, does not alter the consumption dynamics. The decision reinforces the principle that for service tax credit purposes, the actual consumption of the service by the appellant at their manufacturing facility is pivotal, irrespective of the electricity's origin or intermediary transfers. The reference to a previous Tribunal decision further solidifies the legal interpretation and application of service tax credit rules in similar contexts, ensuring consistency and predictability in judicial outcomes.