2026-VIL-1062-CESTAT-AHM-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Admissibility of Cenvat Credit on Services for Effluent Treatment Infrastructure – Appellant-cooperative sugar factory manufacturing excisable goods availed Cenvat Credit on civil construction and works contract services for construction of effluent treatment plant infrastructure, including bio-compost yard and storage lagoons, which are mandatory requirements under Pollution Control Act - Department disallowed the credit contending that construction and works contract services are excluded from the scope of input services under Rule 2(1) of Cenvat Credit Rules, 2004 - Whether Cenvat Credit on services used for construction/modernization of effluent treatment infrastructure is admissible under Rule 2(1) of the Cenvat Credit Rules, 2004 – HELD – The effluent treatment activity is an essential and integral part of the manufacturing process. The Supreme Court in Indian Farmers Fertilizers Cooperative Ltd. case, established that apparatus used for effluent treatment forms part of the manufacturing process. As per the Pollution Control Act, 1981, it is mandatory for every industrial unit to treat effluent waste generated during manufacture of final product, and without such treatment, the factory cannot legally operate - The amended definition of input service from 01.04.2011 excludes construction services relating to new construction or setting up of new factory, but expressly continues to include services relating to modernization, renovation or repairs of a factory in the inclusion clause. Since the effluent treatment plant was set up in the existing running factory, the activity constitutes modernization of the factory. Therefore, services availed for effluent treatment are admissible input services, and Cenvat Credit cannot be denied on hyper-technical grounds when the services are used for fulfilling statutory obligations of controlling environmental pollution and ensuring uninterrupted manufacturing activity - The impugned order is set aside and the appeal is allowed
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