• Dated 26^th March, 2026

Hazardous Waste Disposal, Being an Inextricable Part of Manufacture, Qualifies as Input Service for CENVAT Credit: CESTAT

BRIEF FACTS:

The Assessee, was engaged in the manufacture of motor vehicle parts and, in the course of its manufacturing activities, generated hazardous chemical waste and effluents. In compliance with the statutory directions issued by the Maharashtra Pollution Control Board (MPCB) and the Central Pollution Control Board (CPCB), the Assessee was required to dispose of such hazardous waste through authorized agencies. For this purpose, the Assessee availed CENVAT credit of the service tax paid on services relating to the processing and disposal of such hazardous waste.

APPLICANT'S CONTENTION:

The Assessee contended that the services availed for processing and disposal of hazardous chemical waste were not optional or independent activities but were statutorily mandated by the directions of the Pollution Control Authorities, and therefore constituted an essential requirement for the continuation of manufacturing operations. It was argued that hazardous waste was generated directly in the course of manufacture of motor vehicle parts, and unless such waste was properly removed and disposed of through authorized agencies, the factory could not legally operate. Accordingly, the assessee submitted that the expenditure incurred on such services had a clear and direct nexus with the manufacturing process and fell within the wide ambit of the term "input service" as defined under Rule 2(l) of the CENVAT Credit Rules, 2004. The assessee also relied upon earlier judicial precedents, including decisions of the Tribunal in similar matters, to support the proposition that statutory waste-disposal activities form an integral part of manufacturing and therefore CENVAT credit of service tax paid on such services is admissible.

DEPARTMENT'S CONTENTION:

The Department contended that the activity relating to processing and disposal of hazardous waste was not directly connected with the manufacture of final products and therefore did not qualify as an eligible "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004. According to the Revenue, such waste-disposal services were undertaken after completion of the manufacturing process and were in the nature of post-manufacturing or ancillary activities having no nexus with the production or clearance of excisable goods. On this basis, the Department argued that the assessee had wrongly availed CENVAT credit of the service tax paid on such services, and consequently the adjudicating authority was justified in disallowing the credit and confirming recovery along with interest and penalty in accordance with the provisions of the CENVAT Credit Rules, 2004.

DECISION:

The Tribunal held that removal and disposal of hazardous waste arising during the manufacturing process is a statutory obligation and an essential part of factory operations. It observed that no manufacturing activity can be carried out without complying with environmental regulations governing waste disposal.

The Tribunal rejected the view that such activity is unrelated to manufacture and held that it is inextricably linked to the manufacturing process. Accordingly, the services used for disposal of hazardous waste fall within the definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004. The impugned order disallowing the credit was set aside and the appeal was allowed in favour of the Applicant.

BTA's COMMENT:

This decision affirms that activities which are statutorily mandated and intrinsically connected with manufacturing operations cannot be excluded from the scope of input services. Disposal of hazardous waste, being a necessary consequence of the manufacturing process and a precondition for its continuation, bears a direct nexus with manufacture. The ruling reinforces the principle that input service credit cannot be denied on a narrow interpretation where the activity forms an integral part of industrial operations.

Case Reference- Endurance Technologies Ltd. v. Commissioner of Central Tax, Pune-I, Final Order No. 86757/2025 in Appeal No. E/87935/2017, decided on 03.11.2025.

Author- Shristy Pathak

Edited by- Madhurima Bose