TaxTMI 
TaxTMI 
2025 (4) TMI 369
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....ised in all these writ appeals arise out of the common order passed in Rev.Appln.(MD).Nos.139 to 150 of 2023 in W.P. (MD).Nos.6895 to 6906 of 2022 by the writ court, these writ appeals were heard together and are disposed of by this common order. 2. The respondent Kothari Sugars and Chemicals Ltd., is a manufacturer of sugar and molasses falling under Chapter sub-heading 1701-1190, 1703-1000 of the Central Excise Tariff Act 1985. The respondent has availed CENVAT Credit for the capital goods used in establishing a captive power plant of the respondent and the said availing of Cenvat Credit, according to the Revenue was wrongly availed by the respondent / assessee, thereby show cause notices were issued covering from the period 2008 to 2015 on various dates. 3. The first show cause notice is dated 16.06.2009 for the period between February 2008 and January 2009 and the remaining show cause notices were issued in the year 2010, 2011, 2012, 2013, 2014 and 2015 and the last show cause notice is dated 09.11.2015 for the period from October 2014 to March 2015. 4. These show cause notices, in fact were under challenge in a batch of writ petition in W.P.(MD).Nos.6895 to 6906 of 20....
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....rit petitioner approached the officer concerned as directed by the writ court. However, during the hearing, the Revenue, i.e., the first respondent in the writ petitions insisted upon the petitioner to produce the User Test Certificate, in short (UTC), as in the earlier case in respect of M/s.EID Parry (India) Ltd., the officer concerned had passed orders on behalf of the Revenue only on the basis of User Test Certificate, therefore, the User Test Certificate shall also be filed by the present writ petitioner. 10. Aggrieved over this demand made on behalf of the Revenue seeking the production of the User Test Certificate by the assessee / writ petitioner, the assessee had filed a batch of Review Applications in Rev.Appln.(MD).Nos.139 to 150 of 2023 seeking to review the order passed by the writ court dated 28.06.2023. 11. Those Review Applications had been heard by the writ court, where it is not only the issue as to whether the UTC was required to be produced as a mandatory one or not but also the learned writ court since had heard the matter in full on merits submitted by both sides, had decided the matter on merits. By thus, the Review Applications as well as the Writ Peti....
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....he Hon'ble Supreme Court in the decision in Commissioner of C.Ex., Coimbatore v. Jawahat Mills Ltd., reported in 2001 (132) E.L.T.3 (S.C.) and Commr. of C.Ex., Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., reported in 2010 (255) E.L.T.481 (S.C.) and had allowed the proceedings in respect of M/s.EID Parry (India) Ltd., to have the benefit of CENVAT Credit only on the basis of the user test for which the necessary certification had been produced by the M/s.EID Parry (India) Ltd. Therefore since the present assessee / writ petitioner, namely Kothari Sugars also is similarly placed, in order to complete the adjudication as directed by the Court, by order, dated 28.06.2023, the Adjudicating Authority required the assessee to produce the User Test Certificate (UTC). 16. Therefore it cannot be stated that, it was an after thought or new invention or only now demanded on behalf of the Revenue to file the User Test Certificate and therefore the very Review Applications filed by the writ petitioner ought not to have been entertained by the writ court, however, the learned writ court having entertained the Review Applications in fact had allowed the same by allowing the writ petit....
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....of testing as to whether the assessee has used those capital goods or not does not arise, hence, such an insistment of User Test Certificate is an unwarranted demand and superfluous one as it is not a mandated one even according to the two decisions mainly relied upon by the Revenue and therefore the learned Senior Counsel appearing for the Assessee / Respondent would contend that, such an insistment of User Test Certificate by the Adjudicating Authority before deciding the claim of the assessee to avail the CENVAT Credit was unjustifiable. 19. The learned Senior counsel also would submit that, not only on the basis of the User Test Certificate but also on the basis of merits, arguments were advanced by both sides in the writ court in the Review Applications, where the point of delay also had been raised on behalf of the assessee and on merits as well on the point of delay, the learned writ court has considered the issue at length and ultimately concluded that on merits as well as on the ground of delay, the show cause notices which were originally impugned before the writ court under the writ petitions would not be sustained and therefore, the learned writ court has allowed the....
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....roduct to the tune of Rs. 3,20,880/- during the period from February, 2008 to January, 2009, which is ineligible under the provision of Rule 6(1) of COR ... ... ... 7. Now, therefore, M/ Kothari Sugars and Chemicals Ltd., Kattur are required to show cause to the Deputy Commissioner of Central Excise, Central Excise Division, No.1 Williams Road, Cantonment, Trichy -01 with in 30 days from the receipt of this notice, an to why; 1. the cenvat credit Rs. 3,20,880/- (Rupees Three lakhs twenty thousand eight hundred and eighty only) (BED Rs. 3,11,535/- Ed. Cess Rs. 6,231/-and SHE.Cess Rs. 3,114/-) availed on capital goods used in co-generation plant during the period from February, 2008 to January, 2009 should not be demanded under Rule 14 of CCR read with proviso to section 11A(1) of the Central Excise Act, 1944 as ineligible credit; ii. interest at appropriate rate on the above said amount should not be collected under Rule 14 of CCR read with section 11AB of the Central Excise Act, 1944 from the date of availment of such ineligible credit to till the date of either reversal or recovery; iii. penalty should not be imposed o....
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....notice dated 16.06.2009 and it appears that, the assessee had availed CENVAT Credit on the capital goods used in the co-generation plant which generates electricity, it is an exempted product and therefore show cause notice now had been issued as to why the CENVAT Credit availed on capital goods used in co-generation plant during the period should not be demanded under Rule 14 of CCR r/w proviso to Section 11(A)(1) of the Central Excise Act, 1944. 26. In the notice dated 24.02.2010 as extracted herein above, the Revenue has stated that, the assessee has used the above capital goods in the co-generation plant installed in their factory premises for the manufacture of electricity which is an exempted product. 27. Therefore from the content of the show cause notices, we can easily ascertain that, it is the definite case on the part of the Revenue that, the assessee has used the capital goods or machineries in the co-generation plant which generates the electricity which is the main product. Electricity being an exempted product, the assessee is not entailed to avail the CENVAT Credit, however the assessee since has availed the CENVAT Credit, it become necessitated to recover the....
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....s the process of electrifying polish, now pressed into service by the Revenue, it is trite law that unless the foundation of the case is laid in the show- cause notice, the revenue cannot be permitted to build up a new case against the assessee. (See:Commissioner of Customs, Mumbai Vs. Toyo Engineering India Ltd, Commissioner of Central Excise, Nagpur Vs. Ballarpur Industries Ltd and Commissioner of Central Excise, Bhubaneshwar-I Vs. Champdany Industries Limited). Admittedly, in the instant case, no such objection was raised by the adjudicating authority in the show cause notice dated 22nd June 2001 relating to the assessment year 1988-89 to 2000-01. However, in the show cause notice dated 12th December 2000, the process of electrifying polish finds a brief mention. Therefore, in light of the settled legal position, the plea of the learned counsel for the Revenue in that behalf cannot be entertained as the revenue cannot be allowed to raise a fresh plea, which has not been raised in the Show Cause notice nor can it be allowed to take contradictory stands in relation to the same assessee." (ii) Techno Prints v. Chhattisgarh Textbook Corporation and Ors., reported in MANU/SC....
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....ch fall under the chapter numbers mentioned in the definition of capital goods. In this regard, I have gone through the definition of Capital Goods, which clearly states that the goods mentioned under Rule 2(a)(A) ibid are to be used in the factory of the manufacture of the final products. It is immaterial whether they are erected/installed in a plant, they will fall under the definition and eligible for CENVAT credit. Thus, to fall under the scope of the definition of Capital Goods (as applicable to the case on hand)-1) They should fall under the Chapter Heading mentioned under Rule 2(a)(A)(i) ibid; 2)It should be Pollution Control Equipments; 3)Components, Spares and accessories of the above said goods/equipment. 13. The moot question in respect of captive power plant remained legally disputed because of the doubtful nature of tax liability on capital power plants and the consequential credit eligibility in respect of goods used as inputs for the assembly or the manufacture of such captive power plants. The second issue involved is in case of any inputs that are used for the manufacture of electricity whether credit availed on such inputs is legal or otherwise in view of....
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....be eligible for credit unless it is proved that they were not used in the factory of manufacture by the assessee in the instant case. Similarly, if it is in the nature of Pollution Control Equipment also it is extendable. In respect of the goods which neither fall under Rule 2(a)(A)(i) & Rule 2(a)(A)(ii) ibid it has to be examined whether they are covered under Rule 2(a)(A)(iii) ibid. The Apex Court in the ease of Commissioner of Central Excise, Jaipur vs. Rajasthan Spinning & Weaving Mills Ltd. reported in 2010 (255) ELT 481 (SC) has allowed the credit in respect of steel plates and M.S. Channels, used in the fabrication of chimney in the case of Commnr. of Central Excise, Jaipur vs. M/S. Rajasthan Spinn. & Weaving... on 9 July, 2010 by applying the user test. The relevant portion of the order is reproduced below ... ... ... 21. It has to be determine as to whether the aforementioned materials/components/services form integral part of the Captive Power Plant and further whether the aforementioned materials/components/services satisfy the user test propounded by the Hon'ble Supreme Court in the case of M/s. Rajasthan Spinning & Weaving Mills ....
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....thority, if so, whether the same treatment can be meted out by the present assessee, if it is asked. The same can be availed by the present assessee in the similar fashion as has been adopted in the case of M/s.EID Parry (India) Ltd., i.e., on satisfaction of the User Test Certificate or User Test Theory. In support of this contention, the learned Standing counsel relied upon the said two decisions, namely Jawahar Mills Ltd., case and Rajasthan Spinning and Weaving Mills Ltd., case cited supra. 37. This issue in fact has been considered by the learned writ court in the order impugned, where the learned writ court has discussed the import of the two decisions, namely Jawahar Mills Ltd., case and Rajasthan Spinning and Weaving Mills Ltd., case and has decided as follows : "23. The show cause notices which are the subject matter of these writ petitions have been issued between the period 2009 to 2015 on the ground that the machineries/components which are used in the cogeneration plant is being used for generating electricity which is an exempted commodity and therefore the petitioners are not entitled to CENVAT Credit. This conclusion has been arrived at by applying the p....
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....stances for manufacturing of the final products qualifying for availing a MODVAT Credit. In the said case, the Hon'ble Supreme Court had observed that at no point in time before the authorities had the revenue raised a case that the items do not satisfy the requirements of capital goods within the meaning of the Rule 57-Q, on the ground of User Test and it was only before the Hon'ble Supreme Court that the same has been urged. Therefore, the learned Judges had refused to remand the matter for fresh decision. The learned Judges had simply given its concurrence to an argument advanced by the learned Additional Solicitor General that the user of a particular component would determine whether or not it qualifies the requirement of clause 1A of the definition of capital goods as given in the explanation to Section 57-Q of the Central Excise Rules. This is only a reference in the passing. In fact, a reading of the said judgement nowhere indicates that the Hon'ble Supreme Court had directed the production of a User Test Certificate. 26. This Judgement has been followed by the Supreme Court once again in the case of Rajasthan Spinning & Weaving Mills which is the other judgeme....
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....#39;. The main contention of Mr. Rohtagi, however, is that the question whether an item falls within the definition of `Capital goods' would depend upon the user it is put to. The submission is that parts of the items in respect whereof availing of Modvat credit has been allowed by the Tribunal could not be treated as 'Capital goods' as the manufacturer could not establish that the entire item was used in the manufacture of final product. To illustrate his point, Mr. Rohtagi submitted that part of a cable may go into the machine used by the manufacturer and, thus, may qualify the requirement of clause 1(a) and, at the same time, another part of the cable which is used only for lights and fans would not so qualify. We have no difficulty in accepting the contention of the learned Additional Solicitor General that, under these circumstances, user will determine whether an item qualifies or not the requirement of clause 1(a). However, in the present cases this aspect has no relevance. It was not the case of the revenue at any stage before the authorities that an item does not satisfy the requirement of `Capital goods' within the meaning of the Rule on the ground of its ....
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....nt and further whether the aforementioned materials / components / services satisfy the user test propounded by the Hon'ble Supreme Court as in the case of M/s.Rajasthan Spinning & Weaving Mills Ltd. In order to ascertain the usage of impugned goods, the jurisdictional Assistant Commissioner of GST and Central Excise, was directed to cause factual verification so as to determine as to whether the aforementioned materials/components satisfy the 'user test' and fall under the ambit of capital goods or otherwise. ... ... ... 34.(b). I disallow the CENVAT credit on Items, where no proof is rendered by the assessee that item was used as goods specified in Rule2(a)(A) (i)&(ii) of CCR, 2004 as indicated in Table B (out of materials listed in Annexure-I of Chartered Engineer Certificate)." 44. By citing this order, the learned Standing counsel has submitted that, whether those materials, i.e., capital goods or machineries have been used or utilised in the captive plant or co-gent plant by any assessee, that has to be tested to the satisfaction of the Adjudicating Authority, then only the assessee would be allowed to avail the CENVAT Credit....
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....otices by the Revenue is that, in the co-generation plant capital goods were used, for which CENVAT Credit was availed, however the co-generation plant generates electricity, which is an exempted product. Being the exempted product, the assessee since could not get or avail the CENVAT Credit and that basis only or on that premises only, the show cause notices since have been issued and in any of the show cause notices, other than this reason, no other reasons have been given doubting the usage of the very capital goods of the assessee, that case cannot be improved or modified by the Revenue at a later point of time when it comes for adjudication before the court of law. 51. Therefore merely because in respect of some other assessees, such a User Test Certificate was sought for or produced voluntarily or the User Test Theory has been adopted by the Adjudicating Authority, in each and every case, such an User Test Theory need not be adopted, as that kind of proposition has not been propounded in those two cases, i.e., in Jawahar Mills Ltd., case and Rajasthan Spinning and Weaving Mills Ltd., case. cited supra. 52. The law that has emanated from all these decisions after having ....