2023 (3) TMI 1465 - AT - Central Excise

CENVAT credit of service tax paid on charges collected for treatment by M/s.TPL - Department has denied the credit alleging that the activity of effluent treatment is a post-manufacturing activity and therefore not eligible for credit - HELD THAT - Undisputedly the effluent treatment of the waste water (hazardous waste) is necessary in order to manufacture the goods. The appellant cannot continue manufacturing of the goods without taking steps for effluent treatment of the waste. The department has denied the credit alleging that the activity carried out by the appellant is an activity which is after the manufacture of goods. The decision of M/S. MARUTI SUZUKI LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE DELHI-III 2009 (8) TMI 14 - SUPREME COURT is with regard to the eligibility of credit availed on inputs and not on input services. It is not possible for the assessee to avail all types of input services within the factory premises. The decision of Maruti Suzuki Ltd. is not applicable to the facts of this case. Moreover the activity of waste water treatment is part of manufacturing activity and any activity which is directly or indirectly in relation to manufacture would be eligible for credit - the credit has been denied without valid reasons. The appellant is eligible for credit. The impugned order disallowing the credit as well as confirming the demand and imposing penalty is set aside. Appeal allowed.

Summary

Issues:
1. Eligibility of cenvat credit on service tax paid for effluent treatment services provided by a third party.

Analysis:
The appellant, engaged in manufacturing Epoxy Resins and Hardeners, availed cenvat credit on service tax paid for effluent treatment services provided by M/s.Tamil Nadu Petro Products Ltd. (TPL) under Business Auxiliary Service. The department contended that since the effluent treatment was post-manufacturing, the credit was not eligible. The appellant argued that effluent treatment was essential for manufacturing goods due to the hazardous waste involved. The Ld. Consultant highlighted that there was no restriction on availing input services within the factory premises, citing a Tribunal decision in M/s.Cheminova India Ltd. Vs CCE & ST Surat. The department relied on the Maruti Suzuki Ltd. case, emphasizing that services availed outside the factory were not creditable.

The Tribunal deliberated on whether the appellant was entitled to credit for the service tax paid on effluent treatment services. It was acknowledged that effluent treatment was crucial for manufacturing the goods, and the appellant could not continue production without proper waste treatment. The department's argument that the activity was post-manufacturing was countered by the fact that the effluent treatment was an integral part of the manufacturing process. The Tribunal differentiated between credit on inputs and input services, noting that the Maruti Suzuki Ltd. case pertained to inputs, not services. It was emphasized that any activity directly or indirectly related to manufacturing should be creditable. The Tribunal concluded that the appellant was eligible for the credit, overturning the impugned order disallowing the credit and imposing penalties. The appeal was allowed with consequential relief, if any.

In summary, the judgment addressed the eligibility of cenvat credit on service tax paid for effluent treatment services, emphasizing the necessity of waste treatment for manufacturing activities. The Tribunal ruled in favor of the appellant, highlighting that activities related to manufacturing, including waste water treatment, should be creditable. The decision differentiated between credit on inputs and input services, ultimately allowing the appeal and setting aside the penalties imposed by the original authority.