Credit is admissible even when Windmill is not located inside Factory Premises: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), held that Credit is admissible even when windmill is not located inside factory premises.

The respondent, M/s. India Pistons Ltd is engaged in the manufacture of parts of IC engines, parts of air compressors and circuits. They are also registered with the Central Excise Department. They availed the facility of CENVAT credit of duty paid on inputs, capital goods and input services. They had taken lease of 27 windmills from M/s. Ashok Leyland Wind Energy Ltd. The said company was responsible for development, maintenance and operation of the windmills and for effective functioning of the same.

The respondent availed credit of the service tax paid on the lease rental charges. Show Cause Notice was issued proposing to disallow the credit and also recover the same along with interest and for imposing penalty. After due process of law, the original authority confirmed the demand along with interest and imposed penalty of Rs.2,000/- in terms of Rule 15 of CENVAT Credit Rules, 2004.

Against such order, the respondent filed appeal before the Commissioner (Appeals) who vide the order impugned herein set aside the order passed by the lower authority and held that the respondent is eligible for credit. Aggrieved by such order, the department is before the Tribunal.

A Single Bench consisting of Sulekha Beevi C S, Judicial Member observed that “The issue is whether the credit availed on the service tax paid on lease rental charges paid to the Ashok Leyland Wind Energy Ltd. for the power that has been drawn by the respondent at Chennai is admissible. The High Court in the case of Ashok Leyland held that the credit is admissible and that it is not necessary that the windmill has to be located inside the factory premises. After appreciating the facts and following the decision of the High Court, I am of the view that the impugned order does not call for any interference.”

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