CENVAT Credit denial on co-generation power plant machinery quashed for raising new unpleaded issues under Rule 6(4)

The Madras HC allowed writ petitions challenging show cause notices issued between 2009-2015 regarding CENVAT Credit denial on machineries used in co-generation power plants. Revenue contended electricity is exempted commodity under Rule 6(4) of CENVAT Credit Rules 2004, disallowing credit on capital goods used exclusively for exempted goods manufacture. The court found Revenue raised new issues not pleaded in earlier finalized proceedings and improperly demanded User Test Certificates not mentioned in show cause notices. The HC quashed the show cause notices, ruling the CENVAT Credit matter had reached finality and subsequent notices were based on new grounds improperly raised.

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Issues Involved:
1. Validity of the Review Applications.
2. Requirement and relevance of the User Test Certificate.
3. Challenge to the Show Cause Notices.
4. Delay in adjudication of Show Cause Notices.

Summary:

1. Validity of the Review Applications:
The Review Applications were filed to review the common order dated 28.06.2023, based on the oral representation that the issue was similar to the case of M/s. EID Parry (India) Limited, where CENVAT Credit was allowed. The petitioner argued that the requirement of the User Test Certificate was not communicated during the initial proceedings, and thus the review was necessary.

2. Requirement and Relevance of the User Test Certificate:
The petitioner contended that the User Test Certificate was not mentioned in the original order and was only brought up later. The respondents justified the need for the certificate to verify the actual use of machinery in the captive power plant, citing the judgments of the Supreme Court in Commissioner of Central Excise v. Jawahar Mills Ltd. and Commissioner of Central Excise, Jaipur v. Rajasthan Spinning & Weaving Mills.

3. Challenge to the Show Cause Notices:
The petitioner challenged 12 Show Cause Notices issued between 2009 and 2015, arguing that the issue had attained finality with previous orders, and the respondents could not revive it. The petitioner also cited Section 11A(11) of the Central Excise Rules, arguing that the time limit for adjudication had expired.

4. Delay in Adjudication of Show Cause Notices:
The court noted that the show cause notices were issued between 2009 and 2015, and no action had been taken to adjudicate them. The court held that the respondents' demand for the User Test Certificate was not maintainable as it was not raised in the original or impugned show cause notices. The court also found that the judgments cited by the respondents did not mandate the production of a User Test Certificate.

Conclusion:
The court allowed the review petitions, quashed the show cause notices, and held that the issue of CENVAT Credit had reached finality. The court also noted that the petitioners were not pressing their argument regarding input credit as they had already made the payments.

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