Statutory pollution-control services qualify as input services for CENVAT credit when integral to manufacturing operations.

Pollution control and effluent treatment plant services used to meet statutory pollution-control requirements were treated as input services under Rule 2(l) of the CENVAT Credit Rules, 2004. Because the services were mandatorily obtained to comply with prescribed effluent standards under the Water (Prevention and Control of Pollution) Act, 1974 and the permissions issued by the pollution control authority, they had a direct nexus with manufacture and were necessary to keep the factory operational. The treatment of effluent was regarded as an essential and integral part of the manufacturing process, so the related service tax credit was allowable and the Revenue's challenge failed.

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Issues: Whether pollution control and effluent treatment plant services availed for complying with statutory pollution-control requirements are eligible for CENVAT credit as input services under Rule 2(l) of the CENVAT Credit Rules, 2004.

Analysis: The services were required to be availed to maintain prescribed effluent standards under the Water (Prevention And Control of Pollution) Act, 1974 and the permissions issued by the pollution control authority. When an activity is mandatorily undertaken in compliance with a statutory obligation and is necessary to keep the factory operational, it bears a direct nexus with manufacture and cannot be treated as unrelated to the manufacturing process. The treatment of effluent is an essential and integral part of the process of manufacture, and the same principle applies to the services used for that purpose.

Conclusion: The pollution control and effluent treatment services are eligible input services for CENVAT credit, and the Revenue's challenge fails.

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