Important point
Once application u/s 35G of Central Excise Act is dismissed by CEGAT not on merits but on ground that it was not maintainable as no reference could be made in light of provisions then in force, High Court could not have disposed of writ petition on ground that it was not maintainable.

Headnote:(i) Central Excise and Salt Act, 1944 — Notification No. 132/82 dt. 21-4-1982 issued as “Incentive Scheme” for excess production of sugar to encourage production of sugar during “lean crushing period”—Rebate claim by appellant Society for excess production of 66,717.33 quintals of sugar produced during 1-5-1982 to 30-9-1982—Appellant Society had produced 33.029 quintals of sugar in 1978-79 and there was nil production in next two years i.e. 1979-80 and 1980-81—Sugar production for year 1981-82 was 77,727 quintals and taking average production of earlier three years at 11,009.67 quintals, appellant calculated excess production at 66,717.33 quintals and claimed the rebate—Rebate was allowed on 44,698 quintals on a view that period in which there was “nil” production was required to be ignored—Whether action of authorities in ignoring “nil” production for two years in 1979-80 and 1980-81 by appellant society and granting rebate claim on basis of average production of sugar of 33.029 quintals for year 1978-79 was legal? Yes.
       Held : To us, the language used in the notification and in particular Clause 3 thereof is clear, explicit and unambiguous. It unequivocally states that the average shall be the average of corresponding periods among the preceding three years in which the factory had actually produced and the period or periods in which it did not produce during the said three years shall be ignored. The intention of issuance of the notification by the authority is thus abundantly clear and it is that if the factory does not produce sugar during the entire year or years, the said period should be ignored. It is, therefore, not open to the appellant-society to divide sugar production of one year alone, i.e. 1978-79 as of three years and claim rebate for the year 1981-82 on that basis. (Para 17)
       In our opinion, the argument on behalf of the Revenue is well-founded that the intention of the Government was to grant rebate to those sugar factories which had produced sugar in lean months of the previous year or years and not to grant such benefit to factory or factories which had not produced sugar at all during lean months of the previous year or years. The said intention is also clear if one reads Clause 3 of the notification closely and carefully. It is expressly stated that the average shall be the average of corresponding periods among the preceding three sugar years in which the factory had actually produced sugar and the period or periods in which it did not produce sugar during the said three years shall be ignored. It is, therefore, clear that if a factory does not produce sugar at all in the preceding year or years, it is not entitled to benefit of the notification as the said period cannot be counted and has to be ignored. It is an admitted fact that for two years, i.e. 1979-80 and 1980-81 there was no production of sugar by the appellant-society and hence, as per the notification, the said period of two years had to be ignored. Production of one year of 1978-79 alone was, therefore, relevant and material and since the appellant had been granted rebate on that basis on additional production for the year 1981-82, the action cannot be held illegal or objectionable. In our view, the language of notification is clear. It has only one interpretation and the effect must be given to such language. (Para 20)
       (ii) Central Excise Act, 1944—Section 35G—Application for reference—If CEGAT dismissed the application not on merits but on ground that it was not maintainable in light of provisions then in force, High Court could not have disposed of writ petition as not maintainable. (Para 13)

Judgment

Thakker, J.—The present appeal is filed against the action of the respondents of not granting rebate in excise duty in accordance with the Notification No 132/82 issued by the Government of India on April 21, 1982. The case of the appellant is that it is a co-operative society registered under the Maharashtra Co-operative Societies Act, 1960. It is situated at Raghunath Nagar, Taluka Gangapur, District Aurangabad. The appellant is carrying on business of manufacturing sugar falling under Tariff Item No. 1(1) of the First Schedule (then stood) to the Central Excise and Salt Act, 1944, (hereinafter referred to as “the Act”). It is having a valid licence under the Act and the Central Excise Rules, 1944 (hereinafter referred to as “the Rules”). The Directors of the appellant are Indian nationals and citizens. According to the appellant-society, in exercise of the power conferred by sub-rule (i) of Rule 8 of the Rules read with Clause 50(4) of the Finance Bill, 1982, the Central Government granted exemption to sugar from excise duty in certain cases. For that purpose, Notification No. 132/82 was issued on April 21, 1982 as “Incentive Scheme” for excess production of sugar in order to encourage sugar manufacturers and to produce optimum quantity of sugar during “lean crushing period” from May, 1982 to September, 1982. According to the appellant, under the said notification, the appellant-society was entitled to rebate in excise duty. The appellant, therefore, submitted a rebate claim for Rs. 19,96,516.17 ps. for the excess production of 66,717.33 quintals of sugar produced during 1st May, 1982 to 30th September, 1982. According to the appellant, it had produced 33,029 quintals of sugar in the year 1978-79. There was `nil’ production for two years thereafter, i.e. 1979-80 and 1980-81. As per the notification, average production of three years had to be taken into account for claiming benefit of excess quantity of sugar. Since sugar production of the appellant-society was 33,029 quintals in three years of 1978-79, 1979-80 and 1980-81, the average production was 11,009.67 quintals per year. Sugar production of the appellant-society for the year 1981-82 (from 1st May 1982 to 30th September, 1982) was 77,727 quintals. Hence, there was excess production of 66,717.33 quintals and on that basis, the appellant-society was entitled to rebate in excise duty.

2. The respondent-authority, however, considering the average production of the appellant-society as 33,029 quintals of sugar, allowed rebate claim on the remaining production, namely, 44,698.00 quintals and granted provisional rebate of Rs. 11,10,820.62 ps. The said action was illegal, contrary to law and not in consonance with notification. The appellant, therefore, submitted a claim on July 28, 1982 vide a communication to the Superintendent, Central Excise, Range II (Rural), Aurangabad with necessary details claiming for Rs. 19,96,516.17 ps. The Office of the Assistant Collector of Central Excise and Customs, Aurangabad, on the other hand, issued a notice dated June 30, 1983 to the appellant-society to show cause why the claim put forward by the appellant-society for Rs. 19,96,516.17 ps. should not be restricted to the extent of Rs. 11,10,820.62 ps. by treating the provisional rebate as final. In the show cause notice, it was stated that the production of sugar by the appellant-society was 66,717.33 quintals for the year 1981-82. There was ‘nil’ production during 1979-80 and 1980-81. The appellant-society had actually produced 33,029 quintals sugar during May, 1979 to July, 1979. As per para 3 of Notification No. 132/82, the period or periods during which the factory had not produced sugar during the corresponding period of last three sugar years was required to be ignored while arriving at the average. Accordingly, the sugar quantity of 33,029 quintals could not be divided by three and considering the production of sugar during May, 1982 to September, 1982 as 77,727 quintals

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2005 Supreme(SC) 334

Cases Referred (2)