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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
M.K. Srinivasa Iyengar, J.
India Sugars and Refineries Ltd., Hospet —Appellant
Vs.
Union of India and others —Respondent
Writ Petition No. 5731 of 1976
Decided on : 08-11-1979
Excise Duty Rebate - Sugar Manufacturing - Central Excises and Salt Act 1944, Rule 8 - The court discussed the interpretation of the notification dated 12-10-74, which granted exemption in regard to sugar production. The key legal provisions discussed were the Central Excises and Salt Act 1944 and the notification dated 12-10-74. The court emphasized that the relief would have to be granted in regard to certain percentages of the excess production during the relevant year over the average production for the previous five years.
Fact of the Case:
The petitioner, a sugar manufacturer, challenged the demand made by the Excise authorities to refund an alleged excess allowance of rebate in excise duty. The petitioner claimed that the excess production during the relevant year entitled them to the rebate as per the notification dated 12-10-74. The department contended that the rebate should be calculated on the average production for the previous five years, not on the basis of the percentage of excess production over the average of the previous years.
Finding of the Court:
The court found in favor of the petitioner, stating that the notification was clear and explicit in regard to the relief to be granted. The court held that the relief would have to be granted in regard to certain percentages of the excess production during the relevant year over the average production for the previous five years.
Issues: The main issue was the interpretation of the notification dated 12-10-74 and whether the rebate should be calculated based on the excess production during the relevant year or on the average production for the previous five years.
Ratio Decidendi: The court emphasized that the relief would have to be granted in regard to certain percentages of the excess production during the relevant year over the average production for the previous five years. The court also cited a judgment of the Supreme Court to support the interpretation of the exemption provision under the Central Excises and Salt Act 1944.
Final Decision: The court made the rule absolute and quashed the demand made by the Excise authorities. The liability under the bank guarantee given in compliance of the interim order of the court also lapsed. Each party was ordered to bear their own costs.
1. In this writ petition the demand made by the Excise authorities to refund a sum of Rs. 3,84,537.23 by a communication dated 14-11-75 (Exhibit 'D') on the ground that there was an excess allowance of rebate in regard to excise duty and further proceedings to enforce the same are challenged.
2. The petitioner is a manufacturer of sugar. By a notification dated 12-10-74, a copy of which has been filed as Exhibit 'A', the Government of India, in exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, granted certain exemption in regard to sugar. The notification is as follows :
NOTIFICATION
CENTRAL EXCISE
G.S.R. In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts sugar, described in column (2) of the Table below and falling under sub-item (1) of Item No. 1 of the First Schedule to the Central Excises and Salt Act 1944 (1 of 1944), from so much of the duty of excise leviable thereon as is specified in the corresponding entry in columns (3) and (4) of the said Table.
Sl.
Description of Sugar
Duty of Excise
Free Sale Sugar
Levy Sugar
1
2
3
4
1.
Sugar produced in a factory during the period commencing on the first day of Oct., 1974 and ending with the 30th day of November, 1974 in excess of the average production of the corresponding period of the preceding five sugar years in respect of which :
(a)
The overall production of the factory for the entire year sugar year does not equal the average production of the preceding five sugar years.
Rs. 60/- per quintal
Rs. 16/- per quintal
(b)
The overall production of the factory for the entire sugar year equals or exceeds the average production of the preceding five sugar years.
Rs. 82/- per quintal
Rs. 22/- per quintal
2.
Sugar produced in a factory during the period commencing on the 1st day of December, 1974, and ending with the 30th day of September 1975, which is in excess of the average production of the corresponding period of the preceding five sugar years, that is :
(a)
On excess production upto 7.5%
Rs. 20/- per quintal
Rs. 5/- per quintal
(b)
On excess production on the next 10%
Rs. 40/- per quintal
Rs. 10/- per quintal
(c)
On excess production on the next 10%
Rs. 50/- per quintal
Rs. 14/- per quintal
(d)
On excess production on the next 10%
Rs. 60/- per quintal
Rs. 18/- per quintal
(e)
On excess production beyond 37.5%
Rs. 82/- per quintal
Rs. 22/- per quintal
3. The Petitioner sent up a claim as per Exhibit 'B' dated 5-8-1975 claiming in all a rebate of Rs. 6,93,249.62. According to the petitioner, this is the correct amount of excise duty rebate that they were entitled so far as the production season from December 1974 to the end of September 1975 was concerned. As is clear from the notification two factors entered into the calculation of the rebate that can be allowed. One is the average production for the previous five years and the other is the net production for the period concerned, namely, December 1974 to September 1975. The quantity of sugar produced by the petitioner's factory for the period December 1974 to the end of April 1975 was, 2,05,102 quintals but of which 242 quintals had been taken for reprocessing the sugar that had been produced in the earlier period and accordingly, the net production amounted to 2,04,860 quintals. Working on the same basis, the total production for the five previous seasons 1969-70 to 1973-74 worked out to 1,85,775.6 quintals. Thus the excess production during the relevant period was calculated at 19,084.4 quintals. The rebate allowable was calculated taking into account 7.5 per cent of this excess and the next three successive 10 per cent of such excess and thereafter the balance of the excess, i.e. over and above 37.5 per cent of such excess. The rebate was calculated on the basis of the quantity of sugar allowed for free sale and by way of levy sale. The amounts so calculated were respectively Rs. 4,61,907.66 and Rs. 2,31,341.96 totalling to Rs. 6,93
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