2024 (1) TMI 246 - AT - Central Excise

CENVAT Credit - input service or not - services related to effluent treatment of the waste generated at the appellant s factory and such effluent treatment service availed from the third party agency i.e. Narmada Clean Tech Ltd, Saurashtra Enviro Projects Pvt Ltd and Bharuch Enviro Infrastructure Ltd. The contention of the Revenue is that the effluent treatment of waste is not related to manufacture of final product, therefore, it does not have nexus with the manufacturing activity of the appellant. HELD THAT - This contention of the Revenue cannot be agreed for the reason that as per the pollution control act, it is mandatory for every industrial unit to treat the effluent waste generated during the manufacture of final product, therefore, the industrial unit cannot carry out the production without compliance of pollution control norms which includes effluent treatment of waste generated during the manufacturing activity. Therefore, the effluent treatment of waste is necessary for overall manufacturing activity of the industrial unit. This issue has been considered in the various judgments - reliance placed in the case of INDIAN FARMERS FERTILISER COOP. LTD. VERSUS CCE., AHMEDABAD 1996 (7) TMI 141 - SUPREME COURT where it was held that It is held that the raw naphtha used to produce ammonia which is used in the water treatment, steam generation, inert gas generation and effluent treatment plants of the urea plant of the appellants is entitled to the exemption provided by the Exemption Notification No. 187/61 as amended from time to time. The revenue s claim that since the service was availed beyond the place of removal, credit is not admissible completely fails and, on that ground, credit cannot be denied. The appellant is legally entitled for availment of Cenvat credit in respect of effluent treatment service - Hence, the impugned order is set aside - Appeal is allowed.

Summary

Issues Involved:
1. Entitlement of Cenvat credit on effluent treatment services.
2. Nexus between effluent treatment and manufacturing activity.
3. Admissibility of credit for services availed beyond the place of removal.

Summary:

1. Entitlement of Cenvat Credit on Effluent Treatment Services:
The primary issue was whether the appellant was entitled to Cenvat credit on services related to effluent treatment of waste generated at their factory, availed from third-party agencies. The appellant argued that this issue was no longer res-integra, citing various judgments where such services were considered admissible input services, thus allowing credit. The Tribunal upheld this view, referencing several precedents, including *Cheminova India Ltd vs. CCE & ST, Surat -II* and *Adroit Pharmachem Pvt Ltd vs. Commissioner of C.Ex. & ST., Vadodara*, which confirmed that effluent treatment services are admissible input services.

2. Nexus Between Effluent Treatment and Manufacturing Activity:
The Revenue contended that effluent treatment did not relate to the manufacture of the final product and thus lacked a nexus with the manufacturing activity. The Tribunal disagreed, stating that compliance with pollution control norms, including effluent treatment, is mandatory under the Pollution Control Act. This compliance is integral to the manufacturing process, as non-compliance would halt production. The Tribunal cited *Indian Farmers Fertilizer Cooperative Ltd vs. Collector* and other cases, concluding that effluent treatment is an essential part of the manufacturing process, making the related services admissible for credit.

3. Admissibility of Credit for Services Availed Beyond the Place of Removal:
The Revenue also argued that credit should be denied as the effluent treatment services were availed beyond the place of removal. The Tribunal rejected this, referencing the *Deepak Fertilizers & Petrochemicals Corpn. Ltd vs. C.C.Ex., Belapur* case, which clarified that input services used by the manufacturer, directly or indirectly, in or in relation to the manufacture of final products, are admissible for credit, regardless of their location. This interpretation was supported by multiple judgments, including *C.C.E & Cus., Aurangabad vs. Endurance Technology Pvt Ltd* and *Huhtamaki PPL Ltd vs. Commissioner of C.Ex. & ST., Surat -I*.

Conclusion:
The Tribunal concluded that the appellant is legally entitled to avail Cenvat credit on effluent treatment services. The impugned order was set aside, and the appeal was allowed with consequential relief. The judgment was pronounced in the open court on 04.01.2024.