Cenvat credit for dedicated transmission systems is allowed where goods and related installation services directly support manufacture.

Cenvat credit is stated to be admissible on transmission towers, their spares and parts, where the dedicated transmission line is used exclusively for manufacture and has a direct nexus with the manufacturing activity. Credit cannot be denied merely because the items are treated as immovable property or are located outside the factory premises. The same nexus principle is applied to the related services of erection, commissioning and installation, which are treated as eligible input services supporting the functioning of the transmission system. On this basis, the rejection of credit is set aside and consequential relief follows.

---

---

Issues: (i) Whether Cenvat credit was admissible on transmission towers and their spares or parts used for the dedicated power transmission line; (ii) Whether Cenvat credit was admissible on the input service of erection, commissioning and installation of the transmission towers or lines.

Issue (i): Whether Cenvat credit was admissible on transmission towers and their spares or parts used for the dedicated power transmission line.

Analysis: The transmission line was found to be laid exclusively for the appellant's use and electricity was treated as an essential requirement for manufacture. The denial of credit merely because the goods were said to form immovable property or were located outside the factory was held to be unsustainable. Applying the user test and the principle that duty-paid items used for fabrication or installation of equipment integral to manufacturing operations can qualify for credit, the Tribunal held that the items used for the transmission line had the requisite nexus with the manufacturing activity.

Conclusion: Cenvat credit on transmission towers and their spares or parts was held admissible, in favour of the assessee.

Issue (ii): Whether Cenvat credit was admissible on the input service of erection, commissioning and installation of the transmission towers or lines.

Analysis: Once the transmission towers and lines themselves were accepted as eligible for credit, the related services of erection, commissioning and installation were also treated as services having a direct nexus with the installation and functioning of the eligible system. The Tribunal applied the same credit principle to the ancillary services supporting the transmission infrastructure used for the manufacturing activity.

Conclusion: Credit on the input service of erection, commissioning and installation was held admissible, in favour of the assessee.

Final Conclusion: The rejection of Cenvat credit was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Goods and services used in the erection and functioning of an exclusive transmission system essential for manufacture are eligible for Cenvat credit when they have a direct nexus with the manufacturing activity, and credit cannot be denied merely because the system is treated as immovable property or is located outside the factory premises.

---