The Madras High Court has held that the Show Cause Notice was vitiated by self-defect as adjudication barred as sole ground is electricity generation—an exempt supply.
The bench of Justice R.Suresh Kumar and Justice G.Arul Murugan has observed that the the show cause notices has got self- defect in view of the only reason cited by the Revenue for issuing such show cause notice as if that the plant generate electricity which is a totally exempted product and therefore for that reasons since the show cause notice have been issued and the adjudication is not going to be conducted by the Revenue on that reason and if it is for the other reason of adopting the User Test Theory it cannot be accepted, as we have held above, the show cause notices for any other reason cannot be proceeded further for adjudication.
The respondent/assessee, 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 assessee 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 department was wrongly availed by the assessee, by show cause notices were issued covering from the period 2008 to 2015 on various dates.
The assessee submitted that the show cause notices have been issued asking the petitioner to show cause why CENVAT Credit availed on capital goods used in co-generation plant should not be demanded under the relevant provisions together with interest and penalty and the said issue since has already formed the subject matter of the order passed by the office of the Commissioner of CGST and the Central Excise in order-in-original dated 31.03.2023 relates to yet another similarly placed sugar factory with co-generation plant called M/s. EID Parry India Ltd., Pugalur and the order has become final, on the same line, the issue raised in the batch of writ petitions could be decided.
The department contended that 12 number of show cause notices had been issued from the year 2008 to 2015. At that time, the same issue was pending against the very same writ petitioner / assessee before the Hon’ble Supreme Court in its own matter, all the show cause notices issued by the Revenue were kept under the Call book. In fact, the assessee requested the transfer of the show cause notices to the call book as the earlier case was pending before the Supreme Court. It is inconsistent with the departmental procedures as per the Board’s Circular dated 10.03.2017 the show cause notices had been transferred and kept in the Call book.
The court while dismissing the appeal held that the department cannot insist upon a User Test Certificate issued by the Chartered Engineer by adopting the User Test Theory.
Case Details
Case Title: The Commissioner of CGST & Central Excise Versus Kothari Sugars and Chemicals Ltd.
Case No.: W.A.(MD).Nos.557 to 568 of 2024
Date: 03.04.2025
Counsel For Petitioner: N.Dilipkumar
Counsel For Respondent: Joseph Kodianthara
