1979 (11) TMI 115 - HC - Central Excise

Summary

Issues Involved:
1. Validity of the demand for refund of excess rebate on excise duty.
2. Interpretation of the notification dated 12-10-1974 regarding excise duty rebate.
3. Calculation method for excise duty rebate.
4. Compliance with procedural requirements under rule 10.
5. Withholding of a portion of the rebate claim.

Issue-wise Detailed Analysis:

1. Validity of the Demand for Refund of Excess Rebate on Excise Duty:
The petitioner, a sugar manufacturer, challenged the demand made by the Excise authorities to refund Rs. 3,84,537.23, claiming that there was an excess allowance of rebate on excise duty. The demand was based on the assertion that the rebate granted was not in accordance with the notification dated 12-10-1974.

2. Interpretation of the Notification Dated 12-10-1974:
The notification granted certain exemptions in regard to sugar produced in excess of the average production of the preceding five sugar years. The contention of the petitioner was that the notification was clear and explicit in granting rebate on the excess production over the average production of the previous five years. The department argued that the rebate should be calculated on the average production for the previous five years, not on the excess production.

3. Calculation Method for Excise Duty Rebate:
The petitioner calculated the rebate based on the actual excess production over the average production for the previous five years, resulting in a claim of Rs. 6,93,249.62. The department initially accepted this calculation provisionally but later demanded a refund, arguing that the rebate should be calculated on the average production. The court found that the notification's plain language supported the petitioner's method, stating that the excess production during the relevant year was entitled to relief without reference to the average production of the previous five years.

4. Compliance with Procedural Requirements under Rule 10:
The petitioner contended that the demand was not in accordance with rule 10 as no show cause notice had been issued, and the demand was barred by limitation. The court deemed it unnecessary to address these procedural issues given the favorable decision on the main contention regarding the interpretation of the notification.

5. Withholding of a Portion of the Rebate Claim:
The petitioner also sought the release of Rs. 60,555.19, which had been withheld by the respondents. The court indicated that this matter required further calculation by the department to ascertain the correctness of the total claim. The petitioner was granted liberty to pursue this matter with the department.

Judgment:
The court ruled in favor of the petitioner, quashing the demand made as per Exhibit 'D' dated 14-11-1975. Consequently, the liability under the bank guarantee given in compliance with the interim order of the court lapsed. The petitioner was allowed to pursue the matter of the withheld amount with the department. Each party was ordered to bear its own costs.