Commissioner Central GST And Cx vs. M/S Himmat Glazed Tiles

Held

The Court held that it found no error in the view taken by the Tribunal. The reasoning was based on the principle that reversal of credit amounts to non-availment of credit. The Court cited its own decision in the case of Commissioner v. Ashima Dyecot Ltd reported in 232 ELT 580, which observed that reversal of credit amounts to non-availment. Therefore, the Tribunal's conclusion that no further adverse consequences should follow after the assessee reversed the CENVAT credit with interest was upheld. The ratio decidendi is that a proper reversal of CENVAT credit with interest rectifies the initial lapse and effectively means the credit was not utilized, thereby absolving the assessee of further liability under Rule 6 of the CENVAT Credit Rules, 2004.

Facts

The petitioner, Commissioner Central GST and CX, challenged a judgment of the Customs Excise and Service Tax Appellate Tribunal (CESTAT). The assessee, M/s Himmat Glazed Tiles, manufactures ceramic products, including a byproduct called body clay powder, which attracts a nil rate of duty. The assessee initially availed CENVAT credit on inputs used for manufacturing this exempted product but subsequently reversed the credit along with interest. The department objected to this procedure. The CESTAT and the lower appellate authority held that since the credit was reversed with interest, no further adverse consequences should follow.

Key Issues

1. Whether, in the facts and circumstances of the case, the Tribunal was right in law to rely upon the decision of the Ahmedabad Tribunal in the case of M/s. Swiss Parenterals Pvt. Ltd vs. CCE & Service Tax Ahmedabad-2014 (308) ELT 81 (Tri. Ahmd), 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 CENVAT Credit Rules, 2004? The petitioner (Revenue) argued that the Tribunal erred by relying on the Swiss Parenterals case, which involved a remand for verification, whereas the present case involved a final decision by the Tribunal. The petitioner contended that the reversal of credit with interest should not absolve the assessee of all consequences. The respondent (assessee) argued that since the CENVAT credit was reversed with interest, it amounted to non-availment of credit, and therefore, no further penalty or demand should be raised. They relied on the principle that reversal of credit is equivalent to not having taken the credit in the first place.