1986 (8) TMI 73 - HC - Central Excise

Summary

Issues:
Challenge to legality of demand notice for excise duty recovery based on exemption notification dated 28th September, 1972.
Interpretation of proviso in exemption notification regarding eligibility for excise rebate based on production during the base period.
Impact of subsequent notification dated 4-10-1973 on excise rebate entitlement.
Validity of demand notice for refund of excise rebate previously allowed to the petitioner.

Analysis:
The petitioners, sugar manufacturers, contested the legality of a demand notice issued by the Assistant Collector, Central Excise, for recovery of Rs. 7,21,827. The demand was made on the premise that excise rebate granted to the petitioners under a notification dated 28th September, 1972 was erroneous. The notification provided exemptions to sugar factories based on production quantities during specific periods, with a proviso stating that factories not operational during the base year were ineligible for the rebate.

The crux of the issue revolved around the interpretation of the proviso in the exemption notification, which defined the base year as the period from 1st October, 1971, to 30th September, 1972. The petitioners had produced sugar during most of the base period, except for October and November 1971. A similar scenario was addressed in a previous case, where it was held that partial non-production during the base year did not automatically disqualify a factory from claiming excise rebate under the notification.

The respondents conceded that a portion of the rebate was rightfully granted to the petitioners. However, they contended that a subsequent notification from 4-10-1973 limited the rebate eligibility to factories with zero production during a specific period. The court dismissed this argument, emphasizing that the relevant notification for the dispute was the one from 28th September, 1972. The incorrect interpretation of the proviso by the Department led to the unjust demand for refund of the excise rebate previously sanctioned to the petitioners.

Ultimately, the court ruled in favor of the petitioners, quashing the demand notice dated 24th March, 1977. The petitioners were awarded costs from the respondents. The judgment reaffirmed the petitioners' entitlement to the excise rebate as per the notification in question, highlighting the importance of accurate interpretation of legal provisions in excise matters.