2018 (8) TMI 1277 - HC - Central Excise

CENVAT credit - inputs attributable to manufacture of exempted final products - reversal of CENVAT credit - Rule 6 of Cenvat Credit Rules 2004 - Held that - Since the assessee had reversed the cenvat credit with interest no further adverse consequence should follow - This Court in case of Commissioner v. Ashima Dyecot Ltd 2008 (9) TMI 87 - HIGH COURT GUJARAT has observed that reversal of credit amounts to non-availment - tax appeal dismissed.

Summary

Issues:

1. Interpretation of Cenvat Credit Rules, 2004 regarding reversal of credit on exempted final products.
2. Whether reversal of cenvat credit with interest amounts to non-availment.

Analysis:

1. The appeals in question revolve around the interpretation of the Cenvat Credit Rules, 2004, specifically concerning the reversal of credit on exempted final products. The department challenged the judgment of the Customs Excise and Service Tax Appellate Tribunal, questioning the reliance on a previous decision by the Ahmedabad Tribunal in a similar case. The central issue was whether the Tribunal was correct in law to rely on the decision in the case of M/s. Swiss Parenterals Pvt. Ltd vs. CCE & Service Tax Ahmedabad-2014, where the matter was remanded for verification of the appellant's claim of reversal of Cenvat credit on inputs attributable to the manufacture of exempted final products under Rule 6 of the Cenvat Credit Rules, 2004.

2. The facts of the case revealed that the assessee, a manufacturer of ceramic products, had initially availed cenvat credit on exempt products without maintaining separate accounts. Subsequently, the assessee reversed the credit with interest, but the department objected to this procedure. The appellate authority and the Tribunal held that since the assessee had reversed the cenvat credit with interest, no further adverse consequences should follow. Citing a precedent in the case of Commissioner v. Ashima Dyecot Ltd, the Court noted that reversal of credit amounts to non-availment. Ultimately, the Court found no error in the Tribunal's view and dismissed the Tax Appeals.

In conclusion, the judgment by the Gujarat High Court affirmed the decision of the Tribunal regarding the reversal of cenvat credit on exempted final products under the Cenvat Credit Rules, 2004. The Court upheld that the reversal of credit with interest constituted non-availment, thereby rejecting the department's objections.