2013 (6) TMI 344 - AT - Central Excise

CENVAT credit on sulphuric acid used for treating the effluents in the effluent treatment plant - denial of claim on the premise that the effluent treatment has taken place after the completion of the manufacturing activity and same does not have nexus with the final product - Held that - As per Central Pollution Control Board, a manufacturer of these chemicals is essentially required to install effluent treatment plant at their unit. Without installing effluent treatment plant and treating the gases effluents which emerges during the manufacture of these chemicals, the manufacturing process cannot take place. Therefore, treatment of gases effluents is essential part of manufacturing of these chemicals. As appellant has used sulphuric acid as input for treatment of these gases effluents in the effluent treatment plant, which is a process of manufacturing of final product (directly or indirectly), therefore, same is entitled for input credit as per Rule 2(K) of the CENVAT Credit Rules, 2004. In favour of assessee.

Summary

Issues:
- Denial of CENVAT credit on sulphuric acid used for treating effluents in the effluent treatment plant.
- Whether treatment of gases effluents is an essential part of manufacturing of chemicals.
- Entitlement to input credit on sulphuric acid under Rule 2(K) of the CENVAT Credit Rules, 2004.

Analysis:
1. The appellants appealed against the denial of CENVAT credit on sulphuric acid used in treating effluents in the effluent treatment plant. The impugned order stated that the treatment of effluents did not have a nexus with the final product, leading to the denial of credit.

2. The judge dismissed the application for early hearing as the stay application was listed on the same day, rendering it infructuous. The judge then waived the requirement of pre-deposit due to the issue's narrow scope and proceeded with the appeal for disposal.

3. The appellants, as manufacturers of various chemicals, were required by the Central Pollution Control Board to install an effluent treatment plant to treat harmful gases emitted during the manufacturing process. The treatment of these gases was deemed an essential part of the manufacturing process, without which production could not take place.

4. The judge noted that the use of sulphuric acid for treating effluents in the effluent treatment plant was directly related to the manufacturing process of the final products, such as Nickel Catalyst and Noble Metal Catalyst. Therefore, the appellants were entitled to input credit on sulphuric acid under Rule 2(K) of the CENVAT Credit Rules, 2004.

5. Consequently, the judge set aside the impugned order and allowed the appeal, granting the appellants consequential relief. The stay application was also disposed of accordingly, in favor of the appellants.