M/S Dhanalakshmi Srinivasan Sugars Private Limited vs. Commissioner Of GST And Central Excise

Facts

The petitioner, M/s. Dhanalakshmi Srinivasan Sugars Private Limited, filed a writ petition challenging a show cause notice dated 08.12.2010 issued by the Commissioner of Central Excise and Service Tax. The notice proposed to demand CENVAT credit availed on capital goods used in a co-generation plant, along with interest and penalty, on the grounds that electricity is an exempted product and the co-generation plant is a turn-key project not covered under 'capital goods'. The petitioner argued that similar issues had been decided in their favour in earlier proceedings and that the current show cause notice was barred by limitation. The present review application seeks to review an earlier order dated 28.06.2023, which was passed based on the respondents' representation that a similar case involving M/s. EID Parry (India) Limited was decided in favour of the assessee. The petitioner contends the earlier order failed to address the non-conformity of the call book procedure with Section 37B of the Central Excise Act and the fresh disallowance of Rs.12,52,625/- for not submitting a User Test Certificate.

Held

The Court allowed the review petition and consequently the writ petition, quashing the show cause notice. Regarding the first issue, the Court held that the show cause notice dated 08.12.2010 was unsustainable due to the expiry of the adjudication period under Section 11A(11) of the Central Excise Act, 1944. The Court noted that nearly 12 years had passed since the issuance of the notice, and no action was taken by the respondents until the writ petition was filed. On the second issue, the Court found that the question of CENVAT credit had reached finality due to earlier favourable orders and the revenue's withdrawal of appeals before the Supreme Court, making it impermissible to revive the demand on new grounds. Concerning the third issue, the Court held that the demand for a User Test Certificate was not justified. It was not specifically demanded in the impugned show cause notice, and the precedents cited by the revenue, such as Rajasthan Spinning & Weaving Mills, did not establish it as a mandatory requirement. The Court noted that in the case of EID Parry, the show cause notice itself required EID Parry to show usage, whereas in the present case, the denial was based on electricity being an exempted product. The Court also observed that the earlier order was passed on joint submissions without reference to the User Test Certificate. The Court directed that the show cause notice be quashed.

Key Issues

1. Whether the impugned show cause notice dated 08.12.2010, issued under Section 11A(1) of the Central Excise Act, 1944, is sustainable given that the period for adjudication under Section 11A(11) has expired. 2. Whether the issue of CENVAT credit on capital goods used in the co-generation plant has attained finality in light of previous orders and the respondents' withdrawal of appeals before the Supreme Court. 3. Whether the respondents are justified in demanding a User Test Certificate for the capital goods used in the co-generation plant, particularly when it was not specifically demanded in the show cause notice and the earlier order was passed on joint submissions. Petitioner's arguments: The petitioner argued that the show cause notice is barred by limitation under Section 11A(11) of the Central Excise Act, as the adjudication period had expired. They also contended that the issue of CENVAT credit had attained finality due to earlier favourable orders and the revenue's withdrawal of appeals. Furthermore, the demand for a User Test Certificate was unjustified as it was not raised in the show cause notice and was not a mandatory requirement based on cited precedents like M/s. EID Parry (India) Limited. The petitioner relied on Section 11A(11) of the Central Excise Act and previous favourable decisions. Revenue's arguments: The revenue argued that the production of a User Test Certificate would not cause prejudice to the petitioner and justified its necessity. They relied on Supreme Court judgments in cases like Rajasthan Spinning & Weaving Mills to support the application of a 'User Test'.