1985 (6) TMI 35 - HC - Central Excise

Summary

Issues Involved:
1. Entitlement to rebate of excise duty on sugar produced in April 1974.
2. Applicability of Rule 10 vs. Rule 10A of the Central Excise Rules, 1944.
3. Validity of the Government's demand for refund of the rebate amount.

Detailed Analysis:

1. Entitlement to Rebate of Excise Duty on Sugar Produced in April 1974:
The primary issue revolves around whether the petitioner company is entitled to a rebate of excise duty for sugar produced in April 1974, given that there was no production in the corresponding month of the previous year (April 1973). The petitioner claimed a rebate of Rs. 1,51,830/- based on a notification issued on 4-10-1973 (Annexure-1) and amended on 20-4-1974 (Annexure-2), which provided incentives for sugar production exceeding 180% of the quantity produced in the corresponding period of the previous year. The government initially allowed the rebate but later retracted, stating that the rebate was inadmissible as there was no production in April 1973.

The court examined the object of the notification, which was to incentivize sugar production. It was argued by the opposite parties that a manufacturer must have produced some sugar in the base year to qualify for the rebate. However, the court found this interpretation unreasonable and supported the view that if no sugar was produced in the base year, the production should be considered nil, and any production in the subsequent year should be eligible for the rebate. This view was supported by the Andhra Pradesh High Court in Etikoppaka Co-operative Agricultural Society Ltd. v. Union of India, and the Madras High Court in a similar case, rejecting the contrary view of the Patna High Court.

The court concluded that the petitioner is entitled to claim the rebate for the sugar produced in April 1974.

2. Applicability of Rule 10 vs. Rule 10A of the Central Excise Rules, 1944:
The petitioner contended that the claim for refund by the government was barred by limitation under Rule 10 of the Central Excise Rules, 1944, and that Rule 10A was not applicable. The opposite parties argued that Rule 10A, which deals with recovery of duties or charges erroneously refunded, was applicable.

The court, aligning with the views of the Andhra Pradesh and Madras High Courts, held that Rule 10 was applicable to the case and not Rule 10A. Given the court's conclusion that the petitioner was entitled to the rebate, this issue became largely academic but was resolved in favor of the petitioner.

3. Validity of the Government's Demand for Refund of the Rebate Amount:
The government's demand for the refund of the rebate amount was based on the assertion that the rebate was erroneously granted. The petitioner argued that the government was estopped by the principle of equitable and promissory estoppel from retracting its earlier decision to grant the rebate.

The court quashed the government's demand for a refund, holding that the petitioner was rightfully entitled to the rebate. The orders in Annexures 6, 7, 8, 9, and 10, which demanded the refund and initiated recovery proceedings, were quashed.

Conclusion:
The writ petition was allowed, and the court quashed the demands and orders for refund of the rebate amount. The petitioner was entitled to the rebate for the sugar produced in April 1974, and Rule 10 of the Central Excise Rules, 1944, was applicable, not Rule 10A. The hearing fee was assessed at Rs. 100/-.