2019 (1) TMI 365 - AT - Central Excise

CENVAT Credit - input - Cement - Respondent used cement for treatment and disposal of the hazardous industrial waste generated, i.e. Jarofix, by mixing cement and lime into said Jarofix at secured land fill during the zinc smelting operations - denial of credit on account of nexus - Rule 2(k) of Cenvat Credit Rules, 2004 - Held that - The cement is used for treating the waste generated during the process of manufacture. Thus, though it is used at post manufacture stage but apparently this activity is a statutory mandate of Ministry of Environment and a precondition for the operation of plant. Thus, it becomes clear that manufacture of final product cannot take place unless the plant is operational. Admittedly, in this case, the appellant has used cement for stabilization of hazardous waste jarofix as toxic effluent at secured land fill which is part and parcel of their manufacturing activity - treatment of effluents from a plant is an essential and integral part of the process of manufacture in the plant. The cement herein had admittedly been used to treat the affluent/waste called Jerofix. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the use of cement for treatment and disposal of hazardous waste qualifies for Cenvat credit under Rule 2(k) of Cenvat Credit Rules, 2004.

Analysis:
The Department challenged the order-in-Appeal regarding the use of cement by the Respondent for treating hazardous waste generated during manufacturing activities. The Department contended that since cement was used post-manufacture and not directly related to the manufacturing of final products, it did not qualify as an input under Rule 2(k) of the Cenvat Credit Rules. However, the Commissioner (Appeals) ruled in favor of the Respondent, leading to the Department's appeal.

The Tribunal observed that although cement was used post-manufacture, it was a statutory requirement by the Ministry of Environment to treat waste generated during the manufacturing process. Referring to previous judgments, the Tribunal highlighted the importance of processes integral to the ultimate production of goods, emphasizing that activities essential for environmental protection are part of the manufacturing process. The Tribunal cited cases where the treatment of effluents was considered a crucial aspect of manufacturing, entitling the use of certain substances for such treatment to Cenvat credit.

Furthermore, the Tribunal referenced the Madras High Court's decision, emphasizing the significance of activities related to waste treatment in the manufacturing process. Citing another Tribunal case, the Tribunal reiterated that the treatment of hazardous waste was an essential part of manufacturing activities, allowing for the use of certain substances, like cement, to be considered for Cenvat credit. The Tribunal concluded that the Respondent had rightly availed Cenvat credit for using cement in treating hazardous waste, which was integral to their manufacturing process, and dismissed the Department's appeal accordingly.