2013 (3) TMI 320 - AT - Central Excise

Cenvat Credit - Input - Cement used for treatment of toxic effluent generated during the manufacture of final product to meet the pollution control obligation - whether or not this amounts to use for or in relation to the manufacture of final product ? - Held that - As decided in Collector of Central Excise, Calcutta-II v. Eastend Paper Industries Ltd. (1989 (8) TMI 81 - SUPREME COURT OF INDIA) any particular process so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, articles required in that process, would fall within the expression in the manufacture of goods . The expression in the manufacture takes in within its compass, all processes which are directly related to the actual production. It is too late in the day to take the view that the treatment of effluents from a plant is not an essential and integral part of the process of manufacture in the plant. The emphasis that has rightly been laid in recent years upon the environment and pollution control requires that all plants which emit effluents should be so equipped as to rid the effluents of dangerous properties. The apparatus used for such treatment of effluents in a plant manufacturing a particular end-product is part and parcel of the manufacturing process of that end-product. The ammonia used in the treatment of effluents from the urea plant of the appellants has, therefore, to be held to be used in the manufacture of urea and the raw naphtha used in the manufacture of such ammonia to be entitled to the said exemption. From the above enunciation of law it is clear that use of cement for treatment of effluent generated during manufacture of zinc, lead and sulphuric acid has to be taken as used in the manufacture of those final products. Thus appellant has been able to make out a prima facie case for waiver of condition of pre-deposit. Stay application allowed - in favour of assessee.

Summary

Issues:
- Whether the appellant is entitled to waiver of pre-deposit of duty for hearing the appeal.
- Whether the appellant's use of cement for treating toxic effluent generated during the manufacture of final products qualifies for Cenvat credit.

Analysis:
1. The appellant, engaged in manufacturing lead, zinc, and sulfuric acid subject to excise duty, generated toxic effluent 'Jarosite' during production. The appellant treated this effluent with cement and lime before disposal to comply with Pollution Control norms. The Department disallowed Cenvat credit on the cement used, contending it was not directly related to the final product's manufacture. The Commissioner upheld this decision, ordering recovery of disallowed credit and imposing a penalty.

2. The appellant argued that treating effluent was essential to comply with legal obligations, constituting a step in the final product's manufacture. Citing a Supreme Court judgment, the appellant contended that effluent treatment apparatus is integral to the manufacturing process. The Revenue opposed, claiming the cement use had no connection to the final product's manufacture.

3. The Tribunal examined whether using cement for effluent treatment qualifies as part of the final product's manufacture. Referring to the Supreme Court's interpretation in a previous case, the Tribunal found that effluent treatment is an essential part of the manufacturing process. Consequently, the Tribunal held that the appellant's use of cement for effluent treatment justified Cenvat credit, allowing waiver of the pre-deposit condition for duty, interest, and penalty.

4. The Tribunal's decision was based on the understanding that effluent treatment is a crucial aspect of manufacturing processes, aligning with environmental and pollution control requirements. Following the Supreme Court's guidance, the Tribunal concluded that the appellant's use of cement for effluent treatment was directly related to the manufacture of lead, zinc, and sulfuric acid. Therefore, the Tribunal allowed the appeal, waiving the pre-deposit condition and permitting further proceedings.

5. In summary, the Tribunal's judgment recognized the significance of effluent treatment in manufacturing processes, allowing the appellant's claim for Cenvat credit on cement used for treating toxic effluent. By aligning with legal obligations and environmental standards, the Tribunal granted the waiver of pre-deposit conditions, facilitating the continuation of the appeal process for the appellant.