CENVAT credit notices cannot be revived on a new factual basis after the statutory adjudication period expires.

A concluded CENVAT credit dispute concerning machinery used in a co-generation plant could not be reopened on a new factual basis not contained in the original show cause notices. The Court noted that the notices had proceeded only on the footing that electricity generated was an exempted product, while the later insistence on a User Test Certificate introduced a different premise. It further held that the proceedings were unsustainable because the statutory period for adjudication had expired after prolonged delay. The notices were therefore quashed, with the Court emphasising that a settled tax controversy cannot be revived through a fresh basis outside the notice and beyond the prescribed time limit.

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Issues: (i) Whether the impugned show cause notices could be sustained on a new ground requiring production of a User Test Certificate when that requirement was not part of the notices or the earlier final proceedings. (ii) Whether the impugned show cause notices were liable to be quashed for delay and expiry of the adjudication period.

Issue (i): Whether the impugned show cause notices could be sustained on a new ground requiring production of a User Test Certificate when that requirement was not part of the notices or the earlier final proceedings.

Analysis: The earlier proceedings between the parties had already attained finality on the core issue concerning CENVAT credit for machinery used in the co-generation plant. The impugned notices did not allege any deficiency as to actual use of the capital goods in the plant; instead, they proceeded on the footing that electricity generated was an exempted product and credit was therefore inadmissible. The demand for a User Test Certificate was introduced only later and was not founded on the language of the show cause notices. The authorities could not shift to a different factual premise to reopen a concluded controversy. The references to user-based reasoning in earlier Supreme Court decisions did not create a mandatory requirement to produce such a certificate in every case.

Conclusion: The demand for a User Test Certificate was not a valid basis to sustain the impugned notices and the issue was decided in favour of the assessee.

Issue (ii): Whether the impugned show cause notices were liable to be quashed for delay and expiry of the adjudication period.

Analysis: The notices were issued over a long span of years, but no adjudication had been completed within the period prescribed for determining duty under the governing provision. The Court held that the statutory time for further action had long expired. In that situation, continuation of the proceedings was unsustainable, particularly when the notices sought to revive an already settled dispute on a different footing.

Conclusion: The notices were barred by delay and expiry of the adjudication period and this issue was decided in favour of the assessee.

Final Conclusion: The review was allowed, the writ petitions were allowed, and the impugned show cause notices were quashed because the attempted revival of the demand on a new basis could not be sustained and the proceedings had become time-barred.

Ratio Decidendi: A concluded tax dispute cannot be reopened through show cause notices on a new factual premise that was not part of the original notice, and proceedings must also conform to the statutory time limit for adjudication.

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