CENVAT Credit of Service Tax Allowable on Effluent Treatment Service in Relation to Manufacture of Final product covered under Input Service: CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the effluent treatment service received by the assessee is in or in relation to the manufacture of the final product was admissible as input service and CENVAT credit must be allowed. 

UPL Ltd, the appellant assessee was engaged in waste treatment services received from Bharuch Enviro Infrastructure Limited, Ankleshwar for the treatment of their factory’s waste which arose out of the manufacture of the final product. 

The assessee appealed against the order passed by the adjudicating authority involving the issue of whether the assessee was entitled to CENVAT credit with respect to waste treatment services received from Bharuch Enviro Infrastructure Limited, Ankleshwar for the treatment of their factory’s waste which arises out of the manufacture of the final product. 

Prakash Shah, the counsel for the assessee contended that the treatment of the waste arising out of the manufacture was mandatory as per the Gujarat Pollution Control Board and without complying with the order regarding the treatment of the factory waste the assessee cannot carry out their manufacturing activity, therefore, the effluent treatment service received by the assessee was in or with the manufacture of the final product and the same was an admissible input service and credit must be allowed. 

R.R. Kurup, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee was not entitled to get the CENVAT credit on the waste treatment services. 

The Bench observed that in the case of Indian farmer Fertiliser, the court held that effluent treatment activity was essential with the manufacture of the final product and the entire case of the department was that the effluent treatment activity was not with the manufacture of the final product which was contrary to the decision of this case. 

The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) held that effluent treatment activity was indeed in or in relation to the manufacture of the final product, therefore the CENVAT credit cannot be denied while allowing the appeal filed by the assessee. 

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