2016 (11) TMI 584 - AT - Service Tax

Waste Water Treatment Services Exempt from Service Tax Under Existing Regulatory Guidelines

CESTAT Mumbai allowed an appeal against a service tax demand for industrial waste water treatment. The Tribunal ruled that waste water treatment does not ... Business auxiliary services - processing of goods - service tax liability on treatment of industrial effluent/waste - applicability of CBEC clarification excluding waste treatment from 'processing of goods' analogyBusiness auxiliary services - processing of goods - service tax liability on treatment of industrial effluent/waste - Whether treatment of disposable industrial wastewater by the appellant for and on behalf of the waste generator amounts to 'processing of goods' attracting service tax under the category of business auxiliary services for 2006 - 07. - HELD THAT: - The appellant received industrial waste water from Apte Organics and treated it before release into a common drainage leading to a common effluent treatment plant. The Tribunal accepted the appellant's submission that the CBEC letter dated 13.07.2007 excludes incineration/shredding or analogous treatment of waste from being classified as 'processing of goods' carried out on behalf of a client. The Tribunal found that treatment of effluent waste is undertaken to meet disposal specifications for entry into the common effluent treatment plant and, by its nature, does not constitute processing of goods. Reliance was placed on prior Tribunal decisions (Bharuch Enviro Infrastructure Ltd., Globe Enviro Care Ltd., Ferro Scrap Nigam Ltd.) applying the same principle. The Tribunal further noted that the show cause notice did not invoke any specific clause of the definition of Business Auxiliary Services to sustain the levy. Applying the CBEC clarification and the cited precedents, the activity was held not to fall within the 'processing of goods' limb of business auxiliary services.The demand of service tax under business auxiliary services for treatment of the industrial wastewater for 2006 - 07 is not sustainable; the impugned order is set aside and the appeal is allowed.Final Conclusion: Appeal allowed; Order in Original No. US/281/RGD/2012 dated 27.04.2012 is set aside insofar as it demanded service tax on the appellant's treatment of industrial waste water for 2006 - 07, the activity not being 'processing of goods' under business auxiliary services. The CESTAT Mumbai, in appeal against Order-in-Original No. US/281/RGD/2012, addressed the issue of service tax demand under 'business auxiliary services' for treatment of industrial waste water by the appellant for Apte Organic Pvt. Ltd. Both lower authorities had held that such treatment amounted to 'services rendered to a client for processing of goods.'The Tribunal examined the appellant's activity of treating industrial waste water before releasing it into a common effluent treatment plant and relied on CBEC Circular No. 137/111/2007-CX4 (dated 13 July 2007), which clarified that incineration/shredding of biomedical waste does not qualify as 'processing of goods.' Applying this analogy, the Tribunal found that the appellant's treatment of waste does not constitute processing of goods on behalf of the client.The Tribunal further relied on precedents-Bharuch Enviro Infrastructure Ltd. (2008 (12) STR 622), Globe Enviro Care Ltd. (2011 (21) STR 241), and Ferro Scrap Nigam Ltd. (2014 (36) STR 955)-to support this view. It emphasized that the treatment is aimed at meeting regulatory specifications for disposal, not processing goods, and noted that the show cause notice did not invoke any specific clause under the definition of Business Auxiliary Services.Concluding that the impugned order was 'unsustainable,' the Tribunal set it aside and allowed the appeal.