Cenvat credit on windmill services remains admissible where captive power is wheeled and banked for factory use.

Cenvat credit on service tax paid for operation, maintenance, repair and insurance of windmills located away from the factory was treated as admissible where the electricity generated was injected into the grid and later withdrawn at the factory under a wheeling and banking arrangement. The arrangement was treated as part of the assessee's captive power supply, directly supporting manufacture at the factory. The analysis followed the larger bench ruling in Parry Electronics and Engg. Pvt. Ltd., which recognised such windmill-related services as input services for Cenvat purposes when the generated power is surrendered to the grid for factory use.

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Issues: Whether Cenvat credit of service tax paid on operation, maintenance, repair and insurance services for windmills located away from the factory was admissible when the electricity generated was injected into the grid and withdrawn at the factory under a wheeling and banking arrangement.

Analysis: The windmills were set up under a tripartite wheeling and banking agreement under which power generated at the windmill site was injected into the grid and the appellant was entitled to draw equivalent power at its factory, after payment of wheeling charges. The arrangement showed that the electricity so generated was part of the appellant's captive power arrangement and directly supported manufacture at the factory. The dispute was held to be covered by the larger bench ruling in Parry Electronics and Engg. Pvt. Ltd., which recognized credit eligibility for services used at windmills located away from the factory where the generated electricity was surrendered to the grid and withdrawn for use in the factory.

Conclusion: Cenvat credit was admissible and the denial of credit was unsustainable.

Final Conclusion: The assessee succeeded on the credit eligibility issue and was entitled to the relief flowing from acceptance of the claim.

Ratio Decidendi: Services used for operating and maintaining windmills are input services for Cenvat purposes when the electricity generated is supplied through a wheeling and banking arrangement for captive use in the factory.

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