Proposals were submitted last year for the plant site on Jerusalem Farm, which is given the unfortunate nickname of “Smelly Skelly” by residents.
The plans were lodged by DS Developing, which is owned by The Leo Group, and would have seen the site demolished to make way for a new facility with upgraded odour filters.
The county council had the final decision on the plans which had attracted objection from North Kesteven District Council.
As well as a new facility, the plans would have seen three affordable homes built and a manager’s house.
A community hub which was included in the original plans was removed in the resubmitted proposal.
But, council officers had raised concerns over odour, “adverse noise impact” and the lack of need for affordable homes and a manager’s house.
Councillors on the authority’s planning committee said the proposal was “disappointing” and that it was not in line with the authority’s planning policies.
Councillor Marianne Overton said she was “deeply disappointed” with the plan.
“What I am disappointed about is that many of the things we have expected to be clear did not seem to be,” she said.
Meanwhile, vice-chair of the committee, Councillor Tom Ashton, said the site “was not a suitable location”.
“It comes down to residential amenity,” he said.
“It is located next to possibly the most offensive form of industrial processes that there is to have.”