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TMI Blog2025 (3) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... , the appellants use SKO, MS, HSD in a sequence to clean the pipes before another product is pumped; the mixture is known as Interface; the Interface received at Sanganer is pumped to refinery at Panipat to be refined along with the crude; the appellants avail CENVAT credit on this interface; by a Trade Notice No. 2-CE/2008 dated 12.08.2008, Commissioner of Central Excise clarified that the Interface is to be treated as input under Rule 16 of the Central Excise Rules and that the lowest duty of the contents of the Interface will be accepted as credit subject to maintenance of records and certification. During the conduct of audit of the appellants, Revenue was of the view that the CENVAT credit availed on Interface should also be included while calculating the proportionate credit to be reversed as per Rule 6(3A) of CENVAT Credit Rules, 2004. Accordingly, show cause notices dated 30.05.2016, 26.04.2017, 26.04.2018 & 23.04.2019 were issued to the appellants, covering the period April 2012 to June 2017, demanding amount of Rs.6,45,94,620/-; Rs.3,65,40,409/-; Rs.2,60,98,650/- & Rs. 58,71,773/- respectively. The show cause notices were confirmed along with interest and equal penalty vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CENVAT credit shall not be allowed on such quantity of input; as "Interface" does not qualify to be an input, Rule 6 is also not invited. Learned Counsel submits that as per the Trade Notice, the appellant has availed CENVAT credit of the lowest of the duty on the contents of the Interface which amounts to 19.15%; Revenue requires that the appellant reversed 10.15% under Rule 6(3) which is less than the reversal made by the appellant; the appellant has taken less credit than it is required to reverse and hence, there is no revenue loss. Learned Counsel further submits that Commissioner issued the Trade Notice after personally visiting Sanganer and on examining the records and test reports maintained by the appellants; Department failed to adduce evidence of any positive act of the appellant with intent to evade tax; therefore, the extended period cannot be invoked; Revenue was aware of the activities of the appellants and the show cause notice for the period 2012-15 was issued invoking extended period. Extended period was also invoked in the subsequent show cause notices which are not permissible; moreover, the appellant is a Public Sector Undertaking and as held in their own case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the same. He submits that Rule 16 has been specially made for utilization of credit on goods which are brought in to the factory for whatever reason; a deeming fiction has been created to treat these goods as inputs to the extent of enabling the availment of CENVAT credit; a deeming fiction created for a specific purpose should be strictly constructed and cannot be extended to encompass everything in the Rules. We find force in the argument of the learned Counsel. We find that Hon'ble Supreme Court held in the case of Mancheri Puthusseri Ahmed & Others (supra) that: 7. ------ In interpreting a provision creating a legal fiction the court is to ascertain for what purpose the fiction is created, and after ascertaining this, the court is to assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction. But in so construing the fiction it is not to be extended beyond the purpose for which it is created, or beyond the language of the section by which it is created. It cannot also be extended by importing another fiction. ---- The question here is one of interpretation only and that interpretation must be based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees working in their branches can by no stretch of imagination be equated to any service rendered to them by the respective branches. We find that in the case of Kusum Healthcare Pvt. Ltd. (supra), it was held that the legal fiction created in proviso to Section 66A for consideration of branch as a separate establishment is certainly not for the purposes of demanding service tax on the services alleged to have been rendered by the branch to the head office. In fact, going through the records of the case, we find that the payments made by the appellants are none other than the recurring expenses like salary, travelling allowance, rent, telephone charge etc. It has not been brought on record if any other payments for any other service alleged to have been rendered were made----- 10. The unmissable proposition of the above cases cited is that a deeming fiction should be understood and constructed for the purposes it is intended. We find that if Rule 16 of the CENVAT Credit Rules 2004 provides for availing credit on goods brought into the factory for whatever purpose, it should be interpreted in a constricting manner without expanding the purposes for which a deeming fiction has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back final products for repair, re-conditioning etc. As the duty on the same has been discharged, legislature in their wisdom has permitted availment of CENVAT credit on the same. For this reason, the goods cannot be equated to be inputs for the purpose of Rule 3 of CENVAT Credit Rules as they were never been inputs. We also find that Rule 6 (3A) speaks of payment of the amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, either proportionately or as per a formula. As Rule 16 does not deem the impugned goods "Interface" as inputs for the purpose of Rule 3 of CENVAT Credit Rules, the value of the same need not be considered for the purpose of calculation of the amount envisaged under Rule 6(3A). Therefore, we find that the findings of the impugned order are not sustainable on this count. We find that the appellant has correctly not included the amount of CENVAT credit in the value of inputs for the purpose of reversal of CENVAT credit in terms of Rule 6(3A) in respect of exempted and dutiable goods manufactured by them. 12. We also find that series of show cause notices have been issued invoking extended period and proposing to l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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