Gujarat High Court
M/S Gujarat Ambuja Exports Ltd vs Commissioner Of Central ... on 13 November, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025
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Reserved On : 15/10/2025
Pronounced On : 13/11/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 815 of 2011
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
✓
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M/S GUJARAT AMBUJA EXPORTS LTD
Versus
COMMISSIONER OF CENTRAL EXCISEAHMEDABAD-III
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Appearance:
MR ANAND NAINAWATI(5970) for the Appellant(s) No. 1
MR BL NARASIMHAN(5813) for the Appellant(s) No. 1
MR NEEL P LAKHANI(10679) for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr. Anand Nainawati for the appellant and learned Page 1 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined advocate Mr. Neel P. Lakhani for the respondent.
2. This Tax Appeal is filed under section 35G of the Central Excise Act, 1944 (For short "the Act") arising out of the final order dated 15.10.2010 passed by the Customs, Excise and Service Tax Appellate Tribunal, Ahmedabad (For short "the Tribunal") in Appeal No.E/1327 & 1388/2009.
3. The appeal is admitted by this Court vide order dated 29.12.2011 for consideration of the following substantial questions of law:
" i) Whether on the facts and circumstances of the case, the CESTAT is correct in holding that the services received in respect Page 2 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined of operation, maintenance, erection, commissioning and installation of captive wind mill plant are not entitled for the Cenvat Credit under rule 2(I) of the Cenvat Credit Rules, 2004?
ii) Whether on the facts and circumstances of the case, the CESTAT is correct in rejecting the appeal of the appellant on the ground that in order to qualify under the definition of input service, the service has to be received in the factory of production?
iii) Whether on the facts and circumstances of the case, the CESTAT is correct in rejecting the appeal of the Appellants on the ground that the services received in respect of generation of electricity which is used in or in relation to the manufacture of dutiable products, are not entitled for Cenvat credit?"
4. Brief facts of the case are that the appellant is a company having its factory at Himmatnagar and is engaged in the manufacture of Cotton Yarn which attracts excise duty. The appellant avails Cenvat Page 3 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined Credit of input, capital goods, and input services.
5. The appellant had set up a wind farm at village Kuranga, Taluka Dwarka, District Jamnagar i.e. 450 kilometres away from its factory premises. For setting up of this wind farm, the appellant had entered into an agreement with GEB for transmitting the power from site of windmill to its factory premises. It is the case of the appellant that as per the agreement with GEB, the electricity generated at the site of windmill will be supplied to the GEB, which in turn will supply the electricity to the factory of the appellant after deducting wheeling charges. It is the case of the appellant that GEB adjusts the number of units Page 4 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined supplied by the windmill farm while raising the bills for consumption of electricity by the factory of the appellant.
6. For installation and commissioning of this windmill, the appellant has availed erection, commissioning, installation and maintenance services on which the Agency providing the above services has paid service tax inclusive of Education cess.
Subsequently, the appellant after receiving invoices of the erection, commissioning and installation has availed credit of this amount of service tax. It is the case of the appellant that these transactions were also duly reflected in the Cenvat register and extracts thereof were also submitted with the monthly Page 5 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined returns of the above period. Further, it is the case of the appellant that no objection was raised by the Range and Divisional Officers in this regard.
7. It is the case of the appellant that, after the said agency installed, commissioned and erected the windmill and after windmill started operating successfully, Gujarat Energy Development Agency (GEDA) has also issued certificates for commissioning of windmill so as to certify that the appellant had done all that was necessary under the Government policy for setting up a wind farm for generating wind energy. The appellant having started producing electricity using the above windmill, the units of electricity so generated were given to Page 6 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined Gujarat Energy Transmission Corporation Limited (GETCO) who transferred electricity so generated through the State Government grid line, and the certificates in appellants favour for quantity i.e. units of electricity generated by the appellant and units of electricity allowed to the appellant for being utilized in its factory after adjusting 4% wheeling charges have also been issued by GETCO on regular basis.
8. It is the case of the appellant that on the basis of these certificates, the appellant has been allowed to utilize the specified number of units of electricity at its factory in relation to manufacturing and other related operations, and no electricity charges or Page 7 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined duties have been recovered from the appellant on these units of electricity under the above policy.
9. However, a Show Cause Notice came to be issued by the Joint Commissioner of Central Excise on 12.03.2008 proposing to deny the Cenvat credit of Rs.6,26,013/-
along with penalty under Rule 15(4) of the Cenvat Rules being availed by the appellant on the erectioning and commissioning services received at the windmill site during the period from April 2004 to June 2007 and stating that the services received at the windmill site were not input services in as much as the electricity generated at the windmill site was not used in the manufacture of dutiable products and the windmill farm Page 8 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined was located at a distance from the factory premises of the appellant.
10. The appellant filed a reply to the above Show Cause Notice submitting that the services received at the windmill site are input services as such services were used in the process of manufacture of final products. The appellant also submitted that the wind farm has been set up in accordance with the policy of state government and the electricity generated at the windmill farm is entirely used in the manufacture of dutiable products.
Hence, the appellant is entitled for cenvat credit.
11. However, the Joint Commissioner of Central Excise passed a Order-in-Original Page 9 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined No.13/JC(AMS)/2008 dated 11.12.2008 holding that the services received at windmill site would not qualify under the definition of input services and thereby confirmed that credit of Rs. 6,26,013/-
was not admissible to the appellant, and also imposed penalty of Rs.6,26,013/-
under Rule 15(4) of the Cenvat Credit Rules, 2004.
12. Being aggrieved by the Order-in-
Original, the appellant preferred an appeal before the Commissioner (Appeals), Ahmedabad who by Order-in-Appeal No. 170/2009 (Ahd-III) CE/KCG/Commr(A) dated 20.05.2009 rejected the appeal of the appellant and upheld the demand of cenvat credit. The Commissioner (Appeals) while passing the order-in-appeal placed Page 10 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined reliance upon the decision of the tribunal in case of Rajhans Limited in Order No. A/2438/WZB/AHD/07 dated 07.09.2007 and held that electricity generated at windmill plant is not used in the factory, rather the same is supplied to Gujarat electricity board. Therefore, it cannot be held that windmill plant is a captive power plant. It was further held that the activity of generation of electricity at windmill plant and consumption of the electricity in the factory are two independent activities and therefore, it cannot be held that the services received at windmill plant are the services in relation to the manufacture of dutiable products. It was further held that the services received at windmill plant are not the services received in the factory Page 11 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined since the windmill plant is 450 Km away from the factory, and the same is an independent unit. Therefore, the service is received at windmill plant will not be qualified as input services.
13. Being aggrieved, the appellant filed an appeal before the Tribunal against the above order of the Commissioner (Appeals).
The Tribunal vide order dated 15.10.2010 by following its earlier judgement in case of Rajhans Metals (P) Ltd. Vs. CCE 2007 (8) STR 498 rejected the appeal of the appellant observing as under:
"Both the appeals are being disposed off by a common order as the issue involved is identical.
2. Both the appellants are engaged in the manufacture of excisable goods and have installed one wind mill for generation of electricity Page 12 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined at a long distant place from their factory. The issue under consideration relates to availment of cenvat credit of service tax paid in relation to the services utilised for wind mill farm project. The same stands denied to the appellants on the ground that wind mill as also the factory are two independent units, one engaged in manufacture of excisable goods and the other for generating electricity. As such the services obtained at the wind mill cannot be held to be input services so as to allow the cenvat credit of service tax.
3. The details of the matter are not being gone into in as much as both sides agree that identical issues stand decided by the Tribunal in the precedent decisions. Reliance in this regard is made to the Tribunal's decision in the case of Rajans Metals Pvt. Ltd. Vs. CCE Rajkot reported in 2007 (8) STR 498 (Tri. Ahmd.). The learned advocates appearing for the appellants fairly agree that the said decision of the Tribunal stands subsequently followed in number of other decisions. Both sides also agreed that though a tax appeal filed against the above order stands admitted by the Hon'ble High Court of Gujarat but there is no interim order staying Page 13 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined the operation of the said decision.
4. As such by following the above decision, I find no merits in the appellants' appeals. The same are accordingly rejected. I also note that the Commissioner (Appeals) has fairly held that the appellants are liable to pay interest only in respect of the amount of credit utilised by them. He has also dropped penalty in respect of both the appellants, by following the earlier decision."
14. Learned advocate Mr. Anand Nainawati appearing for the appellant submitted that only ground on which Cenvat Credit is denied by the respondent authorities and as upheld by the Tribunal is that the electricity was being generated in Wind Mills far away from the factory premises and as electricity is not excisable, Cenvat Credit is not available even at the premises of the Wind Mills.
15. It was submitted that the electricity Page 14 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined generated by the Wind Mills was utilised by the appellant in its manufacturing unit through GEB. It was submitted that the agreement with GEB was only for the purpose of utilising the power generated by the Wind Mills for consumption at factory for manufacturing purpose which is connected through GEB Power Grid/High tension supply lines.
16. It was submitted that the appellant was already paying charges for excess use of power from GEB in addition to power generated by the Wind Mills transmitted through GEB power grid. It was therefore, submitted that there is nexus between the power generated through Wind Mills and the goods manufactured as three activities i.e sale, supply and consumption takes place immediately even though place of Page 15 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined generation and manufacturing are different and therefore, the appellant is entitled to avail the credit of service charges incurred in relation to the Wind Mills. In support of his submission, reliance was placed on the following decisions:
1) Commissioner of Central Excise v.
Excel Crop Care Ltd. reported in 2018 (12) STR 436 (Guj.).
2) C.C.E. & Cus., Aurangabad v. Endurance Technology Pvt. Ltd. reported in 2017 (52) S.T.R. 361 (Bom.)
3) Commissioner of C. Ex. & S.T., Chennai v. Ashok Leyland Ltd. reported in 2019(369) E.L.T. 162 (Mad.) Page 16 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined
4) Parry Engg. & Electronics P. Ltd. v.
C.C.E. & S.T., Ahmedabad-I,II,III reported in 2015(40) S.T.R. 243 (Tri.-LB)
5) Endurance Technologies P. Ltd. v.
Commr of C. Ex., Aurangabad reported in 2011 (273) E.L.T. 248 (Tri.-Mumbai)
17. It was submitted that this Court in case of Excel Crop Care Ltd.(supra) after considering the provisions of the Act and the Rules and more particularly, definition of "input service" as defined in Rule 2(l)(i) of the Rules held that mobile service provider, who is liable to pay service tax and recovers the same by adding such service tax in his bill, is the person providing taxable service and is rendering "output service" so as to Page 17 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined constitute "input service" in the hands of respondent assessee. It was therefore, submitted that the service tax paid by the appellant on the installation and erection of the Wind Mill is required to be given credit under the provisions of the Rules.
18. Reliance was also placed on Circular No.97/8/2007-S.T. dated 23.08.2007 more particularly, clause 8.3 thereof in which doubt raised regarding the admissibility of the Cenvat Credit on service tax paid in respect of mobile phones was answered to the effect that in the Rules, no condition has been prescribed with regard to admissibility of credit of service tax only on telephone connection installed in the business premises. It was therefore, submitted that the for the electricity Page 18 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined utilised for manufacturing by the appellant provided by GEB against supply of electricity generated by Wind Mills, the appellant was entitled to the credit of service tax.
19. On the other hand, learned advocate Mr. Neel P. Lakhani for the respondent reiterated the contentions raised before the Tribunal and submitted that there is no connection between the electricity generated at the place of installation of Wind Mills by the appellant and the manufacturing activity taking place at its factory as the electricity is being received through GEB. It was pointed out that the electricity itself is not excisable and therefore, service tax credit is rightly rejected by the Page 19 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined Tribunal.
20. Having heard the learned advocates for the respective parties and having considered the facts of the case, the issue on hand has already been decided by this Court by order of even date in Tax Appeal No.1037 of 2008, wherein it has been held as under:
"18. Having heard the learned advocates for the respective parties and having considered the facts of the case, it would be germane to refer to the relevant provisions of the Act and the Rules.
Finance Act, 1994:
"65(29) - "commissioning and installation agency" means any agency providing service in relation to erection, commissioning or installation."
"(39a) "erection, commissioning or installation" means any service provided by a commissioning and installation agency, in relation to,-Page 20 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025
NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined (1) erection, commissioning or installation of plant, machinery or equipment; or
(ii) installation of-
(a) electrical and electronic devices, including wirings or fittings therefor; or
(b) plumbing, drain laying or other installations for transport of fluids; or
(c) heating, ventilation or air- conditioning including related pipe work, ductwork and sheet metal work; or
(d) thermal insulation, sound insulation, fire proofing or water proofing; or
(e) lift and escalator, fire escape staircases or travelators; or
(f) such other similar services;"
Cenvat Credit Rules, 2004 :
"Rule 2(l)"input service" means any service, -
(i) used by a provider of taxable service for providing an output service, or
(ii) used by the manufacturer, Page 21 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;"
Rule (4) Conditions for allowing CENVAT credit (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service."
19. Definition of term "input service" as appearing in Rule 2(l) Page 22 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined of the Rules would also include any service used by a provider of taxable services for providing an output service, or used by the manufacturer, whether directly or indirectly, in relation to the manufacture of final products and clearance of final products from the place of removal.
20. In the facts of the case, the appellant has utilised the electricity supplied by GEB against the electricity generated by Windmills and therefore, service tax paid by the appellant on the installation, erection and services in connection with maintenance of the Wind Mills are exclusively used in relation to manufacturing activity and therefore, the same would be squarely covered under the definition of "input service", as the management, maintenance and repair of Windmills installed by the appellant would fall within "input service" as defined by clause (l) of Rule 2 read with Rule 4 of the Rules which provides that any input or capital goods received in factory or any input services received by the manufacturer of final product would be susceptible to Cenvat Credit.
21. It is pertinent to note that there is no provision in the Rules which stipulates that input services received by the manufacturer must be received by the manufacturer at the Page 23 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined factory premises.
22. This Court in case of Excel Crop Care Ltd. (supra) while considering the question as to the allowability of Cenvat Credit on mobile services after considering Rule 2(l) of the Rules held that the mobile service provider who is liable to pay service tax and recovers the same by adding such service tax in his bill, is the person providing taxable service and is rendering output service so as to constitute input service in the hands of the assessee and therefore, the ground on which the credit was disallowed as the phones were not installed in the factory premises was held to be a ground not germane to the provisions of the Rules.
23. The Hon'ble Bombay High Court in case of Endurance Technology Pvt. Ltd.(supra) on similar issue of allowability of Cenvat Credit on electricity generated from the Windmills has held as under:
"5. On perusal of these Rules, it becomes clear that the management, maintenance and repair of windmills installed by the respondents is input service as defined by clause "I" of Rule 2. Rule 3 and 4 provide that any input or capital goods received in the factory or any input service received by manufacture of final Page 24 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined product would be susceptible to CENVAT credit. Rule does not say that input service received by a manufacturer must be received at the factory premises. The judgments referred to above, also interpret the word "input" service in similar fashion.
In the case of Commissioner of Central Excise, Nagpur v. Ultratech Cement Ltd. [cited supra), the Division Bench of this Court 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. The expression "activities" in relation to business is also discussed in this judgment by referring to judgment of Apex Court.
In the case of Deepak Fertilizers & Petrochemicals Corporation Ltd. v. C.C.Ex. Belapur [cited supra) the Division Bench held as under:
"The definition of the
expression input service'
covers any services used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of Page 25 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined final products. The words 'directly or indirectly' and 'in or in relation to' are words of width and amplitude. The subordinate legislation has advisedly used a broad and comprehensive expression while defining the expression 'input service'. Rule 2(1) initially provides that input service means any services of the description falling in subclauses (i) and (ii). Rule 2(1) then provides an inclusive definition by enumerating certain specified services.
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 Rule 2(1). The first part of Rule 2(1) inter alia covers any services used by the manufacturer directly or Page 26 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined 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(1) 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(1). Rule 2(1) must be read in its entirety. The Tribunal has placed an interpretation which runs contrary to the plain and literal meaning of the words used in Rule 2(1). Moreover as we have noted earlier, whereas Rule 3(1) allows a manufacturer of final products to take credit of excise duty and Service Tax among others paid on any input or capital goods received in the factory of manufacturer of the final product, insofar as any input service is concerned, the only stipulation is that it should be received by the manufacturer of the final product. This must be read with the broad and comprehensive meaning of the expression 'input service' in Rule 2(1). The input services Page 27 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined in the present case were used by the appellant whether directly or indirectly, in or in relation to the manufacture of final products. The appellant, it is undisputed, manufactures dutiable final products and the storage and use of ammonia is an intrinsic part of that process."
6. In view of this discussion, we have no hesitation to hold that the answer to question No. (1) is in affirmative. Despite this settled position, learned counsel for the appellant tried to submit that the judgment cited at Sr. No. (2) is being challenged before Supreme Court. This submission does not really help us in deciding the appeals. Both appeals are dismissed."
24. Similarly, Hon'ble Madras High Court in case of Ashok Leyland Ltd. (supra) after considering the decision of Bombay High Court in case of Endurance Technology Pvt. Ltd.(supra) held as under:
"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 Page 28 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined find two substantial questions of law framed for consideration in Endurance Technology Pvt. Ltd. (supra), which are more or less identical to that of the questions of law framed in these appeals.
The first question framed for consideration was whether the assessee is entitled to avail Cenvat credit on management, maintenance or repair services provided on services to windmills installed and situated away from the factory premises. The second question was whether electricity generated on two different places far away could be said to have been used for manufacture of the final product of the assessee in its factory at Aurangabad.
18. So far as the second substantial question of law is concerned, it was answered in the affirmative in the light of the stand taken that admittedly, such electricity generated at those two different locations was adjusted to the electricity used in the factory at Aurangabad and this adjustment was admitted by the Revenue and accordingly, the second question was answered in favour of the assessee. In the case on hand also, in the show cause notice, the adjudicating authority does not dispute the fact that equivalent quantity, Page 29 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined that is, the quantity generated is the same as the quantity drawn by the assessees from the TNEB grid. On the first question of law, with regard to the availment of cenvat credit on input services, the Hon'ble Supreme Court referred to the decisions of the High Court of Bombay in the case of Commissioner of Central Excise, Nagpur v. Ultratech Cement, 2010 (20) S.T.R. 589 (Bom.); Commissioner of Central Excise, Nagpur v.
Ultratech Cement Ltd., 2010 (260) E.L.Τ. 369 (Bom.); and Deepak Fertilizers & Petrochemicals Corporation Ltd. v. C.C. Ex. Belapur, 2013 (32) S.T.R. 532 (Bom.). The Hon'ble Supreme Court, after taking note of the relevant rules, held that it becomes clear that management, maintenance and repair of windmills installed by the respondents is input service as defined in Clause I of Rule 2. It was held that Rules 3 and 4 provide that any input or capital goods received in the factory or any input service received for manufacture of final product would be susceptible to Cenvat credit. Further, it was held that Rule does not say that input service received by a manufacturer must be received at the factory premises and the decisions relied on also interpret the word "input service"
in similar fashion.Page 30 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025
NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined
19. Further, by referring to the decision in Commissioner of Central Excise, Nagpur v. 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.
xxx
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 Page 31 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined a look at the Rules, more particularly Rule 2(k), as it stood prior to 1-4-2011, which defines "input", the following has been specifically inserted.
"within the factory of
production".
However, these words are
physically missing in Rule 2(1), which defines "input service" 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(1) of the Rules.
26. In the light of the above, we are of the considered view that Page 32 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined the decision in the case of Ellora Times Ltd. (supra) does not lay down the correct legal position and we agree with the decision of the High Court of Bombay in Endurance Technology Pvt. Ltd. (supra), which has been followed by the Larger Bench of the Tribunal in Parry Engg. & Electronics P. Ltd."
25. In view of above settled legal position and in absence of words "within the factory of production"
in Rule 2(l) which defines "input service" which would mean that any service used by a provider of taxable service for providing an output service or used by the manufacturer whether directly or indirectly, or in relation to the manufacture of final product and clearance of final product from the place of removal, the definition of 'input service' has to be widely construed and therefore, the appellant would be entitled to the credit of service tax paid on inputs or capital goods or services received for Windmills for goods manufactured in the factory because only stipulation is that the input service should be received by the manufacturer of products.
26. Therefore, in view of decision of this Court in case of Excel Crop Care Ltd. (supra) we are in respectful agreement with the Page 33 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025 NEUTRAL CITATION C/TAXAP/815/2011 CAV JUDGMENT DATED: 13/11/2025 undefined decision of Hon'ble Bombay High Court in case of Endurance Technologies P. Ltd. (supra) as well as decision of Hon'ble Madras High Court in case of Ashok Leyland Ltd. (supra).
27. In view of foregoing reasons, we answer the questions of law in favour of the appellant assessee and against the Revenue. Appeal is accordingly allowed."
21. Adopting the same reasoning, we answer the questions of law in favour of the appellant assessee and against the Revenue. Appeal is accordingly allowed.
(BHARGAV D. KARIA, J) (PRANAV TRIVEDI,J) RAGHUNATH R NAIR Page 34 of 34 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:12:55 IST 2025