2015 (7) TMI 970 - AT - Service Tax

Effluent treatment services qualify for CENVAT Credit, Tribunal emphasizes environmental protection

Commissioner, Central Excise & Service Tax, Surat-II Versus Mi/s Kanoria Chemicals & Industres Ltd.

The Tribunal held that effluent treatment services mandated by statutory requirements are integral to the manufacturing process and eligible for CENVAT ... Denial of CENVAT Credit - Whether certain pollution control services availed by the appellant are eligible to CENVAT Credit under CENVAT Credit Rules 2004 or not - Appellant was required to maintain certain standards of effluent from Appellant's factory as a mandatory and statutory necessity. - Held that:- permissions granted by Gujarat Pollution Control Board under The Water (Prevention And Control of Pollution) Act, 1974, that Appellant was required to maintain certain standards of effluent from Appellant's factory as a mandatory and statutory necessity. When the activity is required to be done mandatorily under a statutory obligation, then it cannot be said that the same is not in relation to the manufacture of finished goods in Appellant's factory. This principle was settled by Hon'ble Supreme Court in the case of Indian Farmers Fertilizer Co-op. Ltd Vs CCE Ahmedabad (1996 (7) TMI 141 - SUPREME COURT OF INDIA), where duty free raw material Naptha used for effluent treatment plant, was held to be eligible for exemption. - treatment of effluent from a factory has to be considered as essential and integral part of the process of manufacture. The ratio of this judgment will be applicable to the services availed by the Appellant - Decided against Revenue. Issues:1. Eligibility of CENVAT Credit on Effluent Treatment Plant services availed by the Appellant.Analysis:The Revenue filed an appeal against the order allowing CENVAT Credit on the services availed by the Appellant. The Revenue argued that pollution control services were availed beyond the place of removal, and the definition of 'input' services did not include the word 'activity' related to business during the relevant period. The Revenue also cited case law to support their position. On the other hand, the Respondent contended that under the Water (Prevention And Control of Pollution) Act, certain restrictions were imposed on industries for controlling effluent discharge. The Respondent emphasized the importance of these services in relation to the manufacture of goods and referred to relevant legal provisions and judgments to support their argument.The Tribunal examined the case records and the permissions granted by the Gujarat Pollution Control Board under the Water (Prevention And Control of Pollution) Act, 1974. It was noted that the Appellant was required to maintain certain effluent standards as a statutory necessity. The Tribunal referred to a Supreme Court judgment that established the principle that activities done mandatorily under statutory obligations are considered in relation to the manufacture of finished goods. The Tribunal cited a relevant portion of the judgment which emphasized the essential nature of effluent treatment in the manufacturing process. Based on this precedent, the Tribunal concluded that the treatment of effluent from a factory is an essential and integral part of the manufacturing process. Consequently, the appeal by the Revenue was rejected, and the cross objection by the Respondent was disposed of.In summary, the judgment clarified that services related to pollution control and effluent treatment, when mandated by statutory requirements, are considered integral to the manufacturing process and are eligible for CENVAT Credit under the relevant rules. The decision was based on legal precedents emphasizing the importance of environmental protection and pollution control in manufacturing operations.