Paragraph 4 of the Explanation to Notification No. 146/74-C.E., which excludes production during nil sugar years, does not apply to sugar factories which commenced production prior to 1967-68.

Headnote:
CENTRAL EXCISES AND SALT ACT, 1944 - NOTIFICATION NO. 146/74-C.E. - INTERPRETATION - SUGAR FACTORY - AVERAGE PRODUCTION - CALCULATION - PARAGRAPH 4 OF EXPLANATION NOT APPLICABLE - PARAGRAPH 1(A) OF EXPLANATION APPLIES - REBATE OF EXCISE DUTY - ENTITLEMENT.
Fact of the Case:

The respondent, a sugar mill established in 1956 and commenced production in 1960, claimed a rebate of excise duty under Notification No. 146/74-C.E. issued by the Government of India. The Assistant Collector of Central Excise, Pondicherry, disputed the calculation of the rebate, contending that the production of sugar during October-November in certain years should be excluded while calculating the average production. The respondent filed a writ petition challenging the Assistant Collector's calculation.
Finding of the Court:

The court held that paragraph 4 of the Explanation to the notification, which excludes production during nil sugar years, did not apply to the respondent's case because the production was not nil during the entire sugar year. The court also rejected the appellant's contention that paragraph 4 should be read as referring to production during relevant months or corresponding periods, as this would require introducing words that were not present in the paragraph. The court concluded that paragraph 1(a) of the Explanation, which provides for dividing the total production by the number of sugar years, applied to the respondent, and therefore, the respondent's calculation of the rebate was correct.
Issues: 1. Whether paragraph 4 of the Explanation to Notification No. 146/74-C.E. applies to sugar factories which started production prior to 1967-68. 2. Whether the production of sugar during October-November in certain years should be excluded while calculating the average production for the purpose of rebate of excise duty.
Ratio Decidendi: 1. Paragraph 4 of the Explanation applies only to sugar mills which started production in 1967-68 and subsequent years, and not to sugar factories which commenced production prior to 1967-68. 2. The production of sugar during October-November in certain years cannot be excluded while calculating the average production for the purpose of rebate of excise duty, as paragraph 4 of the Explanation does not apply to the respondent's case.
Final Decision: The court dismissed the appeal and upheld the judgment of the lower court, which had allowed the respondent's writ petition and directed the appellants to grant the respondent a rebate of Rs. 6, 59, 104.

Judgment :-

Ismail J.

This is an appeal preferred against the order of Gokulakrishnan J. dated 19-8-1978, allowing W.P. No. 7257 of 1975 filed by the respondent herein. The matter lies in a very narrow compass. The respondentherein is a Sugar Mill having been established in or about the year 1956. It went into production of sugar for the first time in 1960. Sugar is a commodity coming under the Central Excises and Salt Act, 1944 (1 of 1944) and excise duty is leviable thereon under item 1 of the First Schedule to the Act. However, Rule 8 of the Central Excise Rules, 1944. enables the Government to exempt excisable Articles from the payment of duty either wholly or in part. In this case the Government of India issued a notification No. 146/74-C.E., dated 12-10-1974, which reads as follows :-

"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-items (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.

Explanation :-In this notification -

(a) 'Average production' in relation to sugar produced in the period by a factory which had gone into production for the first time in 1967-68 or earlier, means the simple average production during the corresponding period of the preceding five sugar years;

(b) 'free sugar sale' means sugar other than levy sugar;

(c) 'levy sugar' means sugar required by the Central Government to be sold under an order made under clause (f) of sub-section (2) of Section 3 of the Essential Commodities Act, 1955 (X of 1955);(d) 'sugar year' means the period of 12 months beginning with the 1st day of October and ending with the 30th day of September next following.

2.In computing the production of sugar during the periods mentioned in column (2) of the said Table-

(a) in respect of a factory mentioned in the said Table -

(i) the date, as furnished in form R.G. 1 prescribed in appendix I to the Central Excise Rules, 1944 or in such other record as the Collector may prescribe under Rule 53 or rule 173G of the said Rules shall be adopted, and

(ii) any sugar obtained by refining sugar or khandsari sugar shall not be taken into account;

(b) in respect of a factory mentioned in serial numbers 1 and 2 of the said Table -

(i) any sugar obtained by reprocessing of sugar house products left over in process at the end of the base period or earlier shall be taken into account; and

(ii) any sugar obtained by reprocessing of defective or damaged sugar or brown sugar, if the same has already been included in the quantity of sugar produced, shall not be taken into account.

3.In the case of a factory which had gone to production for the first time after 19-7-1968, the first two years of production shall not be taken into account while computing average production of the preceding five sugar years. Where production in one or more sugar years among five sugar years was nil, the production in such sugar year or sugar years shall be ignored and the average production shall be the average of the production of the corresponding period of the remaining sugar years.

4.Nothing contained in this notification shall apply to a factory which has been producing sugar only for three years or less.

2. Subsequently, the Government of India issued a corrigendum to this notification on 14-7-1975. The purpose of the corrigendum was to take away the second sentence in paragraph 3 of the said notification and read it as a separate paragraph, namely, paragraph 4 and renumber the existing paragraph 4 as paragraph 5.The respondent's production of sugar for five years, viz., 1969-70 to 1973-74, was as follow

3.With reference to this production as well as the notification of the Government of India, the respondent submitted its claim for refund of e

Click Here to Read the rest of this document