2023 (7) TMI 1317 - AT - Central Excise

CENVAT Credit - input services - services related to treatment of effluent and waste arising during the manufacture of Agro Chemical Product - denial on the ground that the ETP service do not qualify as input service as the same were not used in or in relation of finished goods whether directly or indirectly - HELD THAT - The activity of treatment of effluent/ waste arising during the course of manufacture of finished product of the appellant, the said effluent/ waste is required to be mandatorily treated as per the statutory provision of the Pollution Control Board as it is not an option for manufacturer not to treat the effluent/waste accordingly, the expenses incurred on account of effluent treatment is absolutely in the overall expenditure of the appellant s activity of production. Therefore, the activity of treatment of effluent/ waste is part of the overall manufacturing activity. At the relevant time all the services are included in the inclusion clause of services related to business is also admissible input services. Therefore, the activity of treatment of effluent/ waste is undoubtedly part of overall business activity of the appellant. In absence of this activity the business cannot be run as mandated under Pollution Control Law, therefore, the services of effluent/ waste is indeed an input services and cenvat credit is admissible. As regard the issue that the treatment plant are located outside the appellant s factory, we find that the location of provision of service is immaterial for allowing the credit on input services, the credit is admissible so long the service activity is in or in relation to the manufacture of finished product and the overall business activity. The appellant is entitled for the cenvat credit on the services of effluent treatment - the impugned order is set aside - Appeal is allowed.

Summary

Issues involved:
The issue involved in the present case is whether the cenvat credit is admissible on the services related to treatment of effluent and waste arising during the manufacture of Agro Chemical Product.

Judgment Details:

Issue 1 - Admissibility of Cenvat Credit on Effluent Treatment Services:
During the period of April 2011 to June 2014, the appellant availed cenvat credit based on invoices from Effluent Treatment Plants (ETP) located outside their factory premises. The Show Cause Notice proposed to disallow the credit on the grounds that ETP services did not qualify as input services under Rule 2(l) of Cenvat Credit Rules, 2004. The Adjudicating Authority confirmed the demand, imposed penalties, and ordered interest recovery. The appellant argued that effluent treatment is mandatory as per Pollution Control Board directives and integral to their production process. They cited various judgments supporting their claim. The Tribunal observed that effluent treatment is a mandatory part of the manufacturing process as per Pollution Control Board regulations, making it an essential part of the overall business activity. The Tribunal referred to previous judgments to support the admissibility of such services as input services. The Tribunal also noted that the disposal of effluents is crucial for environmental protection and falls within the definition of input services. The Tribunal allowed the appeal, setting aside the impugned order.

Separate Judgment:
In a separate judgment, the Tribunal discussed a similar case involving the availing of Cenvat credit on effluent treatment services. The appellant had availed credit for effluent treatment services provided by an external agency. The audit found irregular credit utilization, leading to a show cause notice. The Commissioner (Appeals) upheld the order-in-original, which was challenged in the present appeal. The Tribunal noted that effluent treatment is an integral part of the manufacturing process and falls within the definition of input services. The disposal of effluents is crucial for environmental protection and is connected to the manufacturing process, making it eligible for credit. The appeal was allowed with consequential relief.

Conclusion:
The Tribunal ruled in favor of the appellants in both cases, allowing the cenvat credit on effluent treatment services. The judgments emphasized the mandatory nature of effluent treatment in manufacturing processes and its relevance to environmental protection laws. The decisions reaffirmed the admissibility of services related to effluent treatment as input services, crucial for the overall business activity and production process.