Introduction:

In the case of The Commissioner of CGST & Central Excise v. Kothari Sugars and Chemicals Ltd. (W.A.(MD). Nos. 557 to 568 of 2024), the Madras High Court addressed the issue of whether a User Test Certificate (UTC) is a prerequisite for adjudicating show cause notices concerning the availing of CENVAT Credit. The Division Bench, comprising Justices R. Suresh Kumar and G. Arul Murugan, concluded that the absence of a UTC should not be the sole ground for denying CENVAT Credit, emphasizing that such certificates are not mandatory unless specifically required to resolve doubts about the use of capital goods.

Arguments:

Revenue’s Position:

The Revenue contended that Kothari Sugars and Chemicals Ltd. had wrongly availed CENVAT Credit on capital goods used in establishing a captive power plant between 2008 and 2015. They argued that, to substantiate the use of these goods in the cogeneration plant, the assessee should produce a UTC issued by a Chartered Engineer. The Revenue maintained that such certification was essential to verify the actual use of the capital goods in the manufacturing process.

Assessee’s Position:

Kothari Sugars and Chemicals Ltd. argued that the UTC is not a mandatory requirement for adjudication. They asserted that unless the Revenue specifically raises doubts about the use of capital goods, the demand for a UTC is unwarranted. The assessee emphasized that the capital goods were indeed used in the captive power plant, and the absence of a UTC should not invalidate their claim for CENVAT Credit.

Court’s Judgment:

The Madras High Court held that the production of a UTC is not a statutory requirement for adjudicating show cause notices related to CENVAT Credit. The Court observed that the Revenue’s insistence on a UTC, without any specific allegation or doubt about the use of capital goods, was unjustified. The Bench noted that in the show cause notices issued, there was no mention of the necessity for a UTC, and the Revenue’s reliance on such a certificate in other cases does not establish a mandatory precedent. The Court emphasized that each case should be adjudicated based on its own merits and evidence presented. Consequently, the appeal by the Revenue was dismissed, affirming the assessee’s entitlement to CENVAT Credit without the mandatory requirement of a UTC.