2018 (7) TMI 682 - AT - Central Excise

CENVAT Credit - input services - services received by them for raising the height of tailing Dam for disposal of Industrial Waste - Rule 2(1) and 3 of CCR 2004 - Whether the services received for raising of height of tailing dam can be treated as input service in terms of Rule 2(l) of the CCR? Held that - It is an admitted fact that the services in question availed by the respondent in relation to the raising height of tailing dam are used essentially for the purposes of disposal of hazardous waste, in compliance with the Environmental laws. Without complying with the said environmental laws, the respondent couldn t carry out the manufacturing process and cannot run the factory. Therefore the services received for raising the height of tailing dam for disposal of industrial waste are integrally connected with the manufacturing of finished products by the respondent. There is no allegation that the services received for raising the height of tailing dam were being used for other purpose than collecting the waste generated during the manufacturing process. The tailing dam is used for collecting residue of plant generated during the beneficiation process and the same is an integral part of process of manufacture. Therefore the service received for rising of height of tailing dam falls under the scope of input service as defined under Rule 2(l) of the Cenvat Credit Rules, 2004 and as per Rule 3 of the Cenvat Credit Rules, 2004, a manufacturer or producer of final product is allowed to take credit of service tax paid on any input service received by them. On an identical issue in respondent s own case, M/S HINDUSTAN ZINC LIMITED VERSUS CCE, JAIPUR-II 2017 (7) TMI 387 - CESTAT NEW DELHI , this Tribunal has held that the cenvat credit received on the services for raising the height of tailing dam and maintenance service for pipeline work of tailing dam, used for disposal of industrial waste and polluted water in compliance with Environmental laws is an input service within the meaning of Rule 2(1) of Cenvat Credit Rules, 2004 used by the manufacturer indirectly in or in relation to the manufacture of final products and clearance of final products from the place of removal. Credit allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
Admissibility of Cenvat credit on services for raising height of tailing dam for disposal of industrial waste.

Analysis:
The appeal was filed against an order passed by the Commissioner, CGST, Jodhpur, regarding the admissibility of Cenvat credit on services received for raising the height of a tailing dam for industrial waste disposal. The respondent, engaged in manufacturing Lead and Zinc products, availed Cenvat credit for service tax paid on services related to environmental compliance. The department contended that these services did not qualify as input services under Cenvat Credit Rules, 2004. The Adjudicating Authority disallowed the credit and ordered recovery, along with interest and penalties. On appeal, the Commissioner allowed the respondent's appeal, setting aside the original order.

The main issue revolved around whether the services for raising the height of the tailing dam could be considered "input services" as per Rule 2(l) of the Cenvat Credit Rules, 2004. The department argued that post-2011, construction services were excluded from the definition of input services, thus the credit was inadmissible. They claimed that the services were not directly or indirectly related to the manufacturing process but were for waste disposal compliance. Conversely, the respondent argued that the services were integral to the manufacturing process, essential for environmental compliance, and aligned with previous Tribunal decisions allowing similar credits for related services.

It was established that the services for raising the height of the tailing dam were crucial for hazardous waste disposal in compliance with environmental laws. Failure to comply would hinder manufacturing operations. The Tribunal referred to previous decisions where similar credits were allowed for services related to environmental compliance. These services were deemed essential for the manufacturing process, falling within the definition of "input services" under Rule 2(l) of the Cenvat Credit Rules, 2004. Therefore, the appeal filed by the department was dismissed, upholding the admissibility of the Cenvat credit for the services in question.

In conclusion, the judgment clarified the admissibility of Cenvat credit on services for raising the height of a tailing dam for industrial waste disposal, emphasizing the integral connection of these services to the manufacturing process and environmental compliance. The decision aligned with previous Tribunal rulings and upheld the respondent's right to avail the credit, dismissing the department's appeal.