In Hindu religion, cow dung is holy because it is believed
that Goddess Lakshmi resides in it. Legend has it that once Goddess Lakshmi was
passing through a grassy meadow and happened to see thousands of cows grazing.
Goddess Lakshmi was pleased with the sight and offered them
a boon.
The cows were content and they themselves were manifestation
of prosperity. Therefore, they did not ask any boon.
But Goddess Lakshmi was adamant.
The cows then thought for a while and told Goddess that they
should have prosperity in their dung also.
Goddess Lakshmi granted the boon.
From that day onwards, cow dung became holy.
This story is found in the Anusasana Parva of Mahabharata.