Union Of INDIA vs. M/S Hindustan Zinc LTD.

Held

The Court held that the interpretation of 'input' by CESTAT, which covers all goods used in the factory by a manufacturer of any final product, aligns with the intention of the rule-making authority to expand the definition. This expansion provides the benefit of input credit even for processes not intrinsically covered or not having a direct link with the manufacture of the final product. The Court found this aspect significant, especially since the input (cement) was used to stabilize a hazardous by-product, which is legally mandated to be stabilized before handling and transport. Therefore, the use of cement as a stabilizing agent in the factory at the stage of treating hazardous waste can be considered as goods used in the factory by the assessee/manufacturer of a final product. The Court found no merit in the appeal and no substantial question of law arose.

Facts

The Revenue is appealing an order by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). For the period April 2013 to September 2013, M/s Hindustan Zinc Limited (the respondent assessee) availed Cenvat credit for cement used as an input to stabilize hazardous waste generated during the manufacture of zinc and lead. This stabilization was necessary to render the waste into Jarofix for placement at a Secured Land Fill, as per environmental regulations. The Commissioner disallowed this credit, demanding payment of Rs. 56,94,393/- along with interest and a penalty of Rs. 20 lakhs. The assessee appealed to CESTAT, which set aside the Commissioner's order, relying on a previous ruling and considering amendments to the Cenvat Credit Rules, 2004.

Key Issues

1. Whether cement used as a stabilization agent for hazardous waste generated during the manufacture of final products (zinc and lead) qualifies as an 'input' for the purpose of Cenvat credit under the Cenvat Credit Rules, 2004, as amended, particularly considering the definition of 'input' in Rule 2(k)? The Revenue argued that a one-to-one link between the input goods and the final output is essential, and cement used for waste stabilization does not meet this criterion. The Revenue relied on the definition of 'Input' in Rule 2(k). The Respondent assessee contended that amendments to Rule 2(k) of the Cenvat Credit Rules, 2004, specifically the 2011 amendment, expanded the scope of 'input' to include all goods used in the factory by the manufacturer of the final product. They relied on the CESTAT's previous ruling in Indian Farmer Fertilizer Cooperative Limited vs. Collector of Central Excise Ahmedabad and the Supreme Court's decision in the same case, which held that effluent treatment is an integral part of the manufacturing process.