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Balasaheb Desai Sahakari Sakhar Karkhana Ltd. Vs. Union of India and Others - Court Judgment

LegalCrystal Citation
SubjectExcise
CourtMumbai High Court
Decided On
Case NumberWrit Petition No. 1069 of 1979
Judge
Reported in1982(10)ELT866(Bom)
ActsCentral Excise Rules, 1944 - Rule 8(1)
AppellantBalasaheb Desai Sahakari Sakhar Karkhana Ltd.
RespondentUnion of India and Others
Excerpt:
.....turned down petitioners claim for rebate on ground that sugar was not produced in preceding five years - notification did not provide that advantage available only if factory was in existence during preceding five years - petitioners entitled to benefit of notification - authority was at fault - authority accepted that benefit would be granted if sugar was produced during any of the three years - held, advantage could not be denied to petitioner on ground of delay in filing petition. - - 5. shri sawant, the learned counsel appearing in support of the petition, submitted that the excise authorities have clearly misread the notification and have erroneously denied the advantage of the rebate assured under the notification. the plain reading of clause 3 clearly establishes that it is..........which is in excess ofthe average production ofthe corresponding period ofthe preceding three sugaryears.------------------------------------------------------------------------explanation. - in this notification(a) 'average production', in relation to sugar produced in a period in a factory, means the average production during the corresponding period of each of the preceding five sugar years or three sugar years, as the case may be;(b) 'free sale sugar' 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 (10 of 1955);(d) 'sugar year' means the period of twelve months commencing on the 1st day of october and ending with.....
Judgment:

Pendse, J.

1. By this petition filed under Article 226 of the Constitution of India, the petitioners, a co-operative sugar factory is challenging the legality of the order dated July 29, 1978 passed by the Government of India in exercise of its revisional jurisdiction, confirming the order passed by the Superintendent of Central Excise and by the Appellate Collector, Customs and Central Excise, Bombay.

2. The petitioners are carrying on business of manufacturing sugar falling under Tariff Item 1(1) of the First Schedule to the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act). The petitioners secured licence to establish factory on September 19, 1970 and commenced production at their factory situated at Daulatnagar in Patan Taluka of Satara District in the year 1973. The Government of India, Ministry of Finance, published Notification No. 257/76-Central Excise, on September 30, 1976 in exercise of the powers conferred by sub-rule (8) of the Central Excise Rules, 1944 giving rebate of excise duty for the excess sugar produced in the Sugar Year 1976-77 to the sugar manufacturers. As the controversy in this petition turns round on the exact import of this Notification, it would be convenient to set out the relevant portion of this Notification at this juncture :

Rebate on excess production during 1976-77 Season

Notification No. 257/76-CE dt. 30-9-76

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 column (3) and (4) of the said Table.

TABLE------------------------------------------------------------------------Duty of ExciseSr. No. Description of Sugar ------------------------------Free Sale LevySugar Sugar------------------------------------------------------------------------(1) (2) (3) (4)------------------------------------------------------------------------1. Sugar produced in a factory Rs. 84.40 Rs. 12.60during the period commencing per peron the 1st day of October 1976 quintal quintaland ending with the 30th dayof November 1976, which isin excess of the averageproduction of thecorresponding period of thepreceding five sugar years.2. Sugar produced in a factory Rs. 28.10 Rs. 4.20during the period commencing per peron the 1st day of December, quintal quintal1976 and and ending withthe 30th day of September,1977, which is in excess ofthe average production ofthe corresponding period ofthe preceding three sugaryears.------------------------------------------------------------------------Explanation. - In this notification

(a) 'average production', in relation to sugar produced in a period in a factory, means the average production during the corresponding period of each of the preceding five sugar years or three sugar years, as the case may be;

(b) 'free sale sugar' 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 (10 of 1955);

(d) 'Sugar year' means the period of twelve months commencing on the 1st day of October and ending with the 30th day of September next following.

3. Where production in one or more periods of the preceding sugar years corresponding to the period specified in S. No. 1 or as the case may be, S. No. 2 of the said Table was nil, the average production shall be determined as under :

(i) for the period commencing on the 1st day of October, 1976 and ending with the 30th day of November, 1976, the average shall be the average of the corresponding periods among the preceding five sugar years in which the factory had actually worked and the period or periods in which it did not work during the said five sugar years shall be ignored while arriving at the average;

(ii) for the period commencing on the 1st day of December, 1976 and ending with the 30th day of September, 1977, the average shall be the average of the corresponding period among the preceding three sugar years in which the factory had actually worked and the period or periods in which it did not work during the said three sugar years shall be ignored while arriving at the average.

4. Notwithstanding anything contained in Serial No. 1 of the said Table, a sugar factory whose over-all production during the 1976-77, sugar year does not exceed the average production of the preceding three sugar years shall not be entitled to the exemption of duty of excise for the period commencing on the 1st day of October, 1976 and ending with the 30th day of November, 1976. * * * *'

3. In accordance with the Notification, the petitioner Karkhana submitted the claim for excise duty rebate to the Superintendent of Central Excise, Karad by their letter dated December 10, 1976. The petitioners claimed the rebate of the value of Rs. 12,64,898.25. The break-up of the claim mentioned in the letter is annexed as Exh. A to the petition.

4. The Superintendent of Central Excise by his order dated December 30, 1976 communicated to the Karkhana turn down the claim for rebate of duty on the ground that the factory was licenced for production of sugar only for the year 1973 and therefore has not produced sugar in the preceding five sugar years, and therefore, does not fulfil the condition laid down in paragraph 1 of the Table of Notification. The order passed by the Superintendent of Central Excise was confirmed in appeal by the Appellate Collector, Customs and Excise by order dated May 25, 1977. The revision application preferred by the petitioners before the Government of India ended in dismissal by the order dated July 29, 1978 passed by the Additional Secretary to the Government of India. While concurring with the view taken by the two authorities below, the Government felt that for the purpose of availing of the exemption under the notification the condition precedent is that the factory must have actually worked during the preceding five sugar years. The orders of the authorities below are under challenge in this petition.

5. Shri Sawant, the learned counsel appearing in support of the petition, submitted that the Excise authorities have clearly misread the notification and have erroneously denied the advantage of the rebate assured under the notification. Shri Sawant submits that the object of the notification was to give incentive to the sugar manufacturers to produce more sugar, and the plain reading of clause 3 of the notification makes it clear that the average production for the corresponding period, i.e. from October 1, 1976 and ending with November 30, 1976 is to be ascertained by taking into consideration the production of the years in which the factory had actually worked. In our judgment, the submission of the learned counsel is correct and deserves acceptance. The notification provides that certain rebate of duty of excise is available in respect of the sugar produced in a factory during the period commencing from October 1, 1976 and ending with November 30, 1976 and which is in excess of the average production of the corresponding period to the preceding five sugar years. The expression 'average production' has been defined as the average production during the corresponding period of preceding five sugar years. The expression 'sugar year' has been defined as the period of 12 months commencing from 1st October and ending with September 30 of the next following year. Clause 3 of the notification provides for cases where during the block of five preceding years on one or more occasions the production of the factory was nil. Clause 3, inter alia, provides that when production in one or more periods of the preceding five years was nil, then the average production shall be determined by taking into account the production of the years in which the factory had actually worked. The plain reading of Clause 3 clearly establishes that it is not necessary that the factory must have produced sugar in each and every preceding five years. It also indicates that the advantage of the notification is available to a sugar factory which has not produced sugar during any of the preceding five years. The intent of Clause 3 is to ascertain the average production for the purpose of determining on what quantum of sugar rebate would be available to the manufacturer of sugar in the year 1976-77. The ascertainment of average production is relevant only for that purpose and that average production can be ascertained even if the factory has not produced any sugar during any one of the preceding five years. In our judgment, the construction put by the Department that the factory must produce the sugar in each and every preceding five years cannot be accepted. The stand taken by the Department and by the authorities which turned down the claim of the petitioners that as the production of the petitioner factory commenced only in the year 1973, that is after the block of preceding five years had already commenced, and therefore, the petitioners are not entitled to the advantage of the notification, cannot be accepted. The notification nowhere provides that the advantage is available only if the factory is in existence during the preceding five years and has produced sugar in each year of the preceding five years. We are unable to accept the interpretation suggested by the Department and accepted by the authorities below. In our judgment, the petitioners are entitled to the advantage of the notification and the Superintendent of Central Excise was clearly in error in denying the rebate of duty sought by the petitioners.

6. There is one more aspect of the matter which cannot be overlooked. Shri Sawant invited our attention to a letter dated June 17,1978 issued by the Department and wherein the Department has accepted that a factory producing sugar during any of the preceding three years will be eligible to the grant of rebate on the excess production as contemplated by the notification. The reliance on this letter is for the purpose that even the Department subsequent to the impugned order has accepted that the manufacturer is entitled to the advantage even if the manufacturer has not produced sugar during each of the preceding five years. In our judgment, the subsequent interpretation of the Department is correct and the initial orders passed by the authorities below cannot be sustained.

7. Shri Agarwal, the learned counsel appearing on behalf of the Department, made a faint submission that the petitioners should be denied the relief in this petition because the petitioners have approached this Court after a considerable delay. We find no merit in the submission of the learned counsel. The order under challenge was passed on July 29, 1978 and the petition has been lodged in this Court on March 29, 1979. In our judgment, the period taken by the petitioner to lodge the petition cannot be stated to be so gross as to deprive the petitioners of the relief sought in the petition. It is also required to be stated that the respondents filed their return to this petition only after the hearing had commenced in this Court, and therefore it is futile for the department to complain of delay.

8. Accordingly, the petition succeeds and the rule is made absolute in terms of prayer (a). The Superintendent of Central Excise is directed to assess the claim of rebate sought by the petitioners and pass appropriate orders within a period of three months from today. In the circumstances of the case, there will be no orders as to costs.


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