CENVAT Credit Can't Be Denied Merely On Non-Submission Of User Test Certificate: Madras High Court

The Division Bench of Justices R. Suresh Kumar and G. Arul Murugan opined that show cause notices cannot be adjudicated merely on the ground that the User Test Certificate has not been produced by the assessee.

In this case, the respondent/assessee is a manufacturer of sugar and molasses. The assessee has availed CENVAT Credit for the capital goods used in establishing a captive power plant of the assessee.

According to the revenue the said availing of Cenvat Credit was wrongly availed by the assessee, thereby show cause notices were issued covering from the period 2008 to 2015.

The assessee has challenged the show cause notice before the High Court. The Court disposed of the petition directing the Commissioner of CGST and Central Excise to follow the order passed in a similar matter, allowing the CENVAT Credit in respect of the machineries that the assessee used in their co-generation captive power plant.

The revenue insisted upon the assessee to produce the User Test Certificate (UTC) as in the earlier case, the officer concerned had passed orders on behalf of the Revenue only on the basis of User Test Certificate.

Aggrieved over this demand made on behalf of the Revenue seeking the production of the User Test Certificate by the assessee, the assessee had filed a batch of Review Applications seeking to review the order passed by the writ court.

The revenue submitted that the assessee has claimed to have used machineries, capital goods in the co-generation plant or captive unit in the factory premises but no certification to that effect has been filed by the assessee and therefore in order to ascertain or assess such usage of capital goods in the cogent plant of the assessee, either inspection has to be undertaken or a User Test Certificate issued by the Chartered Engineer to be produced.

The assessee submitted that User Test Certificate is not a mandatory one or as a pre-requisite one before starting with the adjudication process or completing the same. If at all there has been any doubt over the usage of such capital machineries in the co-gen plant or the captive plant, then only the question of production of certificate would arise.

The bench observed that nowhere in the show notice it has been stated by the Revenue that, the assessee has claimed to have used the capital goods and availed CENVAT Credit, however, in order to satisfy the Revenue that those capital goods were really used in the captive plant or the co-gent plant necessary documents or certification including the User Test Certificate shall be produced.

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 a User Test Theory need not be adopted, added the bench.

In view of the above, the bench dismissed the appeal.

Case Title: The Commissioner of CGST & Central Excise v. Kothari Sugars and Chemicals Ltd.

Citation: 2025 LiveLaw (Mad) 133

Case Number: W.A.(MD). Nos. 557 to 568 of 2024

Counsel for Appellant/ Department: N. Dilipkumar

Counsel for Respondent/ Assessee: Joseph Kodianthara

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