Kothari Sugars And Chemicals Limited vs. The Commissioner Of CGST And Central Excise

Held

The High Court allowed the review petitions and consequently quashed the show cause notices. The Court found that the User Test Certificate was not demanded in the impugned show cause notices, nor was it brought to the Court's notice during the initial hearing of the writ petitions. The Court noted that the order dated 28.06.2023 was passed based on joint submissions where the User Test Certificate was not mentioned. The Court also held that the show cause notices were issued on a new ground and that the period for adjudication under Section 11A(11) of the Central Excise Act had long expired, making the notices unsustainable on grounds of delay. The Court rejected the revenue's contention that the writ petition challenging a show cause notice is not maintainable, given the time-barred nature of the notices and the revival of earlier demands on new grounds. The Court also noted that the petitioner was not pressing their argument with reference to input credit as payments had already been made. Therefore, the Court concluded that the review petitions and the writ petitions had to be allowed.

Facts

The petitioner, Kothari Sugars and Chemicals Limited, filed writ petitions challenging 12 show cause notices issued by various GST and Central Excise authorities between 2009 and 2015. These notices proposed recovery of CENVAT credit availed on capital goods used in their co-generation power plant, on the grounds that electricity is an exempted product and Rule 6(4) of the CENVAT Credit Rules, 2004, disentitles them to such credit. The writ petitions were initially disposed of by the High Court on 28.06.2023, based on an oral representation that a similar case involving M/s. EID Parry (India) Limited had been decided in favour of the assessee. However, the petitioner later sought review of this order, arguing that the necessity of producing a User Test Certificate, which was insisted upon by the revenue, was not brought to their notice or the Court's attention during the initial hearing. The petitioner contended that the User Test Certificate was not required in their case and that the show cause notices were issued on grounds that had already reached finality or were time-barred under Section 11A(11) of the Central Excise Act.

Key Issues

1. Whether the High Court's common order dated 28.06.2023, passed in the writ petitions, should be reviewed and recalled on the grounds that a crucial aspect, namely the requirement of a User Test Certificate, was not brought to the petitioner's notice or the Court's attention, and that the revenue's representation regarding the EID Parry case was incomplete. 2. Whether the show cause notices issued between 2009 and 2015, proposing recovery of CENVAT credit on capital goods used in a co-generation power plant, are sustainable, considering the petitioner's argument that the issue of CENVAT credit had reached finality and that the adjudication period under Section 11A(11) of the Central Excise Act had expired. Petitioner's arguments: The petitioner argued that the User Test Certificate was not a mandatory requirement and was not raised in the original show cause notices. They contended that the order in the EID Parry case was misrepresented as the User Test Certificate was a basis for that decision, which was not communicated to the petitioner. Furthermore, they argued that the show cause notices were time-barred under Section 11A(11) of the Central Excise Act, as the adjudication period had expired long ago. The petitioner also argued that the very basis of the show cause notices was to revive earlier demands on new grounds, which is impermissible. Revenue's arguments: The revenue justified the necessity of the User Test Certificate, stating that no prejudice would be caused to the petitioner if it were produced. They also argued that the writ petition challenging a show cause notice is not maintainable.