1985 (8) TMI 75 - HC - Central Excise

Summary

Issues Involved:
1. Entitlement to excise duty rebate under the notification dated 12-10-1974.
2. Calculation of average production for rebate purposes.
3. Application of the principle of promissory estoppel.
4. Limitation period for demands under Rule 10 of the Central Excise Rules.

Issue-wise Detailed Analysis:

1. Entitlement to Excise Duty Rebate:
The petitioners, sugar manufacturers, challenged the demand for repayment of excise duty rebates granted under Item 1(a) of the notification dated 12-10-1974. The notification exempts sugar produced during the specified period from excise duty if it exceeds the average production of the corresponding period of the preceding five sugar years. The department argued that no rebate was due since there was no production during the corresponding period in the preceding five years.

2. Calculation of Average Production:
The court analyzed the method for calculating average production, noting the definition in the notification that "average production" means the simple average production during the corresponding period of the preceding five sugar years. The department contended that if there was no production during any of the corresponding periods, the average should be calculated by dividing the total production by the number of years with production. However, the court upheld the view that the absence of production should be treated as a period of nil production, meaning the average production is zero, thus entitling the petitioners to the rebate.

3. Principle of Promissory Estoppel:
The court considered the principle of promissory estoppel, referring to correspondence between the Indian Sugar Merchants' Association and the Union Government regarding a similar notification. The government had previously clarified that factories with nil production during the base period were still entitled to rebates. The court held that the principle of promissory estoppel applied, preventing the respondents from denying the rebate based on the absence of production during the base period.

4. Limitation Period for Demands:
The petitioners argued that the demands were barred by Rule 10 of the Central Excise Rules, which limits the time for making demands for repayment of excise duty to one year. The court agreed, holding that the demands constituted cases of short-levy and were therefore governed by Rule 10. Consequently, any demand made more than one year after the credit was given was barred by limitation.

Conclusion:
The court dismissed both appeals, affirming the petitioners' entitlement to the excise duty rebate despite nil production during the corresponding periods in the preceding five years. The court also upheld the application of the principle of promissory estoppel and confirmed that the demands were barred by limitation under Rule 10. The writ appeals were dismissed with costs, and an oral application for leave to appeal to the Supreme Court was rejected.