CENVAT credit allowed for waste treatment services as they are integral to manufacturing process

CESTAT Ahmedabad allowed the appeal regarding CENVAT credit for waste treatment services. The department denied credit for effluent treatment services received from a third party, arguing it was not related to manufacture of final products. Following SC precedent in Indian Farmers Fertiliser Coop. Ltd. case, the tribunal held that effluent treatment activity is essential and directly related to manufacturing process. The tribunal ruled that CENVAT credit cannot be denied for such services as they are integral to production, setting aside the impugned order favoring the assessee.

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Issues involved:
1. Whether the appellant is entitled to cenvat credit for waste treatment services received for treating factory waste arising from the manufacture of the final product.

Summary:

Entitlement to Cenvat Credit for Waste Treatment Services:

The primary issue in this case is whether the appellant is entitled to cenvat credit for waste treatment services received from Bharuch Enviro Infrastructure Limited for treating factory waste generated during the manufacture of their final product. The appellant argued that the treatment of factory waste is mandated by the Gujarat Pollution Control Board (GPCB) as per their order dated 27.05.2008. Compliance with GPCB's rules for the disposal of trade effluents and emissions is necessary for the appellant to continue their manufacturing activities. Therefore, the effluent treatment service should be considered an admissible input service, and credit must be allowed.

The appellant relied on several judgments to support their claim, including:
- Cheminova India Ltd. (Final order dated 28.06.2023)
- Kanoria Chemicals & Industries Ltd. (2015 (7) TMI 970 CESTAT (AHM))
- Wipro Enterprises (P) Ltd. (2018 (12) TMI 1167 CESTAT Chennai)
- Anar Chemicals Pvt. Ltd. (2011 (24) STR 32)
- Indian Farmer Fertiliser Cooperative Ltd. (1996 (86) ELT 177 (SC))
- UOI vs Hindustan Zinc Ltd. (2019 (367) ELT 616 (Raj.))
- CCE vs Eastend Paper Industries Ltd. (1989 (43) RLT 201 (SC))
- Deepak Fertilizers & Petrochemicals Corpn. Ltd. (2013 (32) STR 532 (Bom.))

The Revenue, represented by Shri R.R. Kurup, reiterated the findings of the impugned order, arguing that the effluent treatment activity is post-manufacture and not directly connected with the manufacture of the final product.

Upon careful consideration, the Tribunal found that although the effluent treatment is not directly connected with the manufacture of the final product, it is a mandatory requirement under the Pollution Control Act. Without treating the industrial waste generated during manufacturing, the appellant cannot legally operate their factory. Thus, the effluent treatment activity is essential for uninterrupted production and is a vital part of the overall manufacturing process. Consequently, the input services used for effluent treatment are admissible input services, and cenvat credit should be allowed.

The Tribunal referred to various judgments, including:
- M/S KANORIA CHEMICALS & INDUSTRIES LTD.
- M/S. WIPRO ENTERPRISES (P) LTD.
- ANAR CHEMICALS PVT. LTD.
- INDIAN FARMERS FERTILIZERS CO-OPERATIVE LTD.
- CCE vs Kanoria Chemicals & Industries Ltd.
- Indian Farmers Fertiliser Cooperative Ltd.

All these judgments consistently held that services related to effluent treatment are admissible input services, and cenvat credit should be allowed. The Tribunal concluded that the issue is no longer res-integra and decided in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential relief.

Conclusion:
The Tribunal held that the waste treatment services received by the appellant are admissible input services used in or in relation to the manufacture of their excisable goods. The appeal was allowed, and the impugned order was set aside, granting the appellant the cenvat credit for the waste treatment services.

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