Input services for pollution control qualify for Cenvat credit

The Tribunal allowed the assessee's appeal, concluding that the Commissioner (Appeals) erred in denying cenvat credit for services used in constructing secured landfill and jarofix storage pond. The Tribunal held that these services are essential for pollution control, qualifying as input services under the Cenvat Credit Rules. The Department's appeal was dismissed, and the Commissioner was directed to exercise caution in future decisions.

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Issues Involved:
1. Admissibility of Cenvat credit on services used for construction of secured landfill and jarofix storage pond.
2. Contradictory decisions by the Commissioner (Appeals) on similar issues.

Detailed Analysis:

1. Admissibility of Cenvat Credit:

The primary issue is whether the cenvat credit on services used for the construction of secured landfill and jarofix storage pond for disposal of industrial waste and polluted water is admissible to the assessee engaged in the manufacture of lead and zinc concentrates, zinc cathode, and sulphuric acid.

The relevant definition of "input service" under Rule 2(l) of the Cenvat Credit Rules, 2004, includes services used directly or indirectly in or in relation to the manufacture of final products and their clearance up to the place of removal. However, it excludes services related to the construction of civil structures or parts thereof.

The appellant argued that the services for secured landfill and jarofix storage pond are integrally connected with the manufacturing process, thus qualifying as input services. They relied on previous favorable decisions, including the Tribunal's Final Order No. 52328/2018 and Final Order No. 53167-53172/2018, which recognized these services as essential for manufacturing.

The Department contended that these services are excluded from the definition of input services as they pertain to civil structures, as stated in Rule 1(A)(a) of the CCR, 2004. They argued that the Commissioner (Appeals) rightly denied the credit in the order dated 28.05.2018.

2. Contradictory Decisions by Commissioner (Appeals):

The Commissioner (Appeals) delivered two contradictory decisions on similar issues within a short span. In the order dated 28.05.2018, the Commissioner denied the cenvat credit for the periods March 2012 to June 2012 and January 2013 to September 2013. However, in an earlier order dated 31.01.2018, the Commissioner allowed the credit for the period July 2012 to November 2012, acknowledging that the apparatus used for effluent treatment is part and parcel of the manufacturing process.

Tribunal’s Findings:

The Tribunal referred to several precedents, including the Apex Court's rulings in Collector of Central Excise Vs. Rajasthan State Chemical and JK Cottons Spinning and Weaving Mills Co. Ltd. Vs. Sales Tax Officer, Kanpur, which broadened the scope of "in or in relation to manufacture." These cases established that processes integrally connected with the ultimate production of goods, such as effluent treatment, are essential and fall within the definition of input services.

The Tribunal also cited its final order 56900/2017, which relied on the Supreme Court's decision in Fertilizer Cooperation Ltd. Vs. CCE Ahmedabad, emphasizing that effluent treatment is an integral part of the manufacturing process.

In the present case, the Tribunal observed that the services for secured landfill and jarofix storage pond are essential for pollution control, a statutory requirement for manufacturing units generating waste. Thus, these services qualify as input services under the Cenvat Credit Rules.

Conclusion:

The Tribunal concluded that the Commissioner (Appeals) erred in denying the cenvat credit for the periods March 2012 to June 2012 and January 2013 to September 2013. The Tribunal allowed the assessee's appeal and dismissed the Department's appeal. The contradictory decisions by the Commissioner (Appeals) were noted, and the Commissioner was directed to be more careful in future adjudications.

Pronouncement:

The judgment was pronounced in the open court on 06.12.2018.

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