a) Tax paid on Capital Goods installed in or near factory for waste disposal.
b) Service tax paid on professional certification for pollution level required to be statutorily obtained.
c) Service tax paid on GTA service for transport of waste to waste disposal site.
d) Service tax paid on services provided by the agency to whom the job of waste disposal has been outsourced.
a) Definition of "Input Service" analysed
Ref: Order dated 25.10.2010 of Hon'ble Bombay High Court in the case of CCE Nagpur Vs Ultratech Cements Ltd - Bombay High Court - 2010-TIOL-745-HC-MUM-ST
It was held that -
(i) The definition of "input service" covers not only services which fall in the substantial part but also covers services which are covered under the inclusive part of the definition (para 27);
(ii) The substantive part of the definition of "input service" covers services used directly or indirectly in or in relation to the manufacture of final products, whereas the inclusive part of the definition of "input service" covers various services used in relation to the business of manufacturing the final products (para 28);
(iii) The definition of "input service" is very wide and covers not only services, which are directly or indirectly used in or in relation to the manufacture of final products but also includes various services used in relation to the business of manufacture of final products, be it prior to the manufacture of final products or after the manufacture of final products (para 28);
(iv) To put it differently, the definition of input service is not restricted to service used in or in relation to manufacture of final products, but extends to all services used in relation to the business of manufacturing the final product (para 28);
(v) Services having nexus or integral connection with the manufacture of final products as well as the business of manufacture of final product would qualify to be input service under Rule 2(1) of the CENVAT Credit Rules 2004 (para 29);
(vi) The definition of "input service" is not restricted to the services used in relation to the manufacture of final products because the definition of "input service" is wider than the definition of "input" (para 33); and
(vii) Where the input service used is integrally connected with the business of manufacturing the final product and the cost of that input service forms part of the cost of the final product, then credit of service tax paid on such input service would be allowable (para 38).
b) CENVAT credit on Inputs used for treating Effluents/Wastes:
(i) M/s Chemplast Sanmar Ltd - 2004-TIOL-532-CESTAT-MAD - held that MODVAT credit is admissible on Hydrochloric Acid and Aqua chem used by the appellant in the effluent treatment plant (para 4).
(ii) The Madras Aluminium Company Ltd. - 2008-TIOL-80-HC-MAD-CX - Held in para 2 of the Order, inter-alia, that Hydrochloric Acid (HCL) used to treat the effluent would qualify for the credit. According to the department, HCL was used to treat the effluent which was wastage obtained and hence it was not used in or in relation to the manufacturing process.
(iii) Hindustan Zinc Ltd - 2015-TIOL-2075-CESTAT-DEL - It was held, inter-alia, that during the manufacture of lead, zinc and sulphuric acid, toxic effluent "Jarosite" is generated; that as per pollution control norms, the appellant is treating the said "Jarosite" with cement and lime before discharging the said treated effluent as secured land fill; that usage of cement for this purpose is to be considered as a part and parcel of their manufacturing activity; and that credit is admissible on the said used inputs (paras 6 to 9). [relied in Hindustan Zinc Ltd (100% EOU) - 2016-TIOL-3043-CESTAT-DEL]
c) Credit of Service Tax paid on Certification of Pollution Level
In the following cases, credit of Service Tax paid on services availed in connection with certification etc. was allowed:
i. M/s Ultratech Cement Ltd - 2011-TIOL-182-CESTAT-MUM, CENVAT credit of Service Tax paid on service availed for certification of pollution level was allowed.
ii. M/s Agni Steels Pvt Ltd - 2016-TIOL-1352-CESTAT-MAD, Hon'ble CESTAT held that certification by Pollution Control Board is essential for the running of the factory and allowed CENVAT credit of Service Tax paid on such services (para 5).
iii. M/s Heidelberg Cement India Ltd in - 2016-TIOL-3117-CESTAT-BANG, Hon'ble CESTAT held that Service Tax paid for providing "Consultancy Services" in relation to 'greenhouse gas emission reduction' and 'carbon credit management services' as per guidelines under the Kyoto Protocol falls under the definition of 'input service' and the appellants are entitled to CENVAT credit and the impugned order denying the CENVAT credit on the said services on account of lack of nexus is wrong and not sustainable in law (Para 7).
d) CENVAT Credit of Service Tax paid on Transport Charges for Waste Disposal
In the following cases, credit of service tax paid on transport and clearing service availed to dispose of waste was allowed:
i. M/s Lupin Ltd - 2011-TIOL-954-CESTAT-MUM. It was held that transportation and clearance of waste is an activity of the appellant's manufacturing business; and that, therefore, the appellants are entitled to avail the CENVAT credit of service tax paid on transportation and clearance of waste generated during the course of manufacturing (para 6).
ii. Shree Khedut Sahakari Khand Udyog Mandli Ltd - 2011-TIOL-1735-CESTAT-AHM, it was held that activity of transportation of press mud and ash to the fields of farmers for disposal is an activity in or in relation to manufacture of sugar and molasses; that the question of place of removal will not come into picture in view of the fact that both press mud and ash are of no use to the appellant and these are required to be disposed of; that in the absence of sale it will not be appropriate to say that this is an activity beyond the place of removal; that disposal of press mud and ash is a statutory obligation and when there is a statutory obligation, then it is required to be fulfilled; that otherwise the appellant will not be allowed to continue to manufacture the goods; and that if pollution control law is not fulfilled there will not be any manufacture (para 7).
e) CENVAT credit on use of JCB for unloading of Waste and for service of digging of pits for storage of Press Mud with spent wash
i. M/s Chemplast Sanmar Ltd - 2011-TIOL-852-CESTAT-MAD. Held that use of JCB for the purpose of unloading of press mud required for converting the waste into bio compost is part of the activity in treating waste; and that therefore activities relating to use of JCB should be treated as input services in relation to their business (para 6).
ii. M/s Chemplast Sanmar Ltd - 2011-TIOL-891-CESTAT-MAD, it was held that CENVAT credit of Service Tax paid on services availed for digging pits in the plant for storage of Press Mud mixed with spent wash was allowed.
f) CENVAT credit of Service Tax paid on services availed to fulfil statutory obligations.
In the following case it was held that credit of service tax on services availed to meet statutory requirements without which manufacture cannot be carried on is allowed:
I. M/s Gateway Terminal (I) Pvt Ltd - 2015-TIOL-1471-CESTAT-MUM. It was held that garden maintenance service is essential in terms of consent to operate as directed by the Maharashtra State Pollution Control Board and that therefore it is essential input for business of the appellant and are allowed as input service (para 8).
II. M/s Kanoria Chemicals & Industries Ltd - 2015-TIOL-1934-CESTAT-AHM. pollution control services availed - the respondent was required to maintain certain standards of effluent from their factory under a statutory obligation then it cannot be said that the same is not in relation to the manufacture of finished goods in respondent's factory; and that this principle was settled by Hon'ble Supreme Court in the case of Indian Farmers Fertilizer Co-op Ltd Vs CCE Ahmedabad - 2002-TIOL-146-SC-CX]
III. In the following case, CENVAT credit on even garden maintenance service was allowed considering that it was a statutory obligation cast upon the factory owner under various pollution control laws - JBM Auto System Pvt Ltd - 2011-TIOL-1393-CESTAT-MAD.
g) CENVAT credit on Waste Management Service was allowed by Hon'ble CESTAT Mumbai in the case of CCE & ST LTU Vs M/s Lupin Ltd - 2012-TIOL-2099-CESTAT-MUM. It was held that Waste Management Service is a statutory requirement and to undertake this activity, they engage the services of persons to remove the waste from the factory premises and transport the same to their effluent plant. Since waste management is an integral part of manufacturing process, they are entitled for CENVAT credit.
h) CENVAT credit on Pollution Control Equipment
In the case of M/s Monarch Catalyst P Ltd Vs CCE Thane I - 2013-TIOL-780-CESTAT-MUM, CENVAT credit on equipment installed to control pollution was allowed on the ground that removal of waste was part of the process of manufacture.
HAZARDOUS waste is generated during manufacturing process in many industries which is required to be properly disposed of in terms of statutory obligations. The disposal can be done by the unit itself or it can be outsourced at a cost. Waste disposal is now an independent business vertical. It is a service liable to Service Tax which the agency providing the service charges in the bill raised on industrial units for the service charges and collects the Service Tax which it deposits with the Government. The service receiver i.e. the industrial unit avails CENVAT credit of the Service Tax so paid by it. However, the department is not keen in extending the credit and demand notices have started raining all over the country.
