1994 (11) TMI 134 - SC - Central Excise

Whether sugar described in column (2) of the Table to the Notification No. 146/74 dated 12-10-1974 was exempted from so much of the duty of excise leviable thereon as is specified in the corresponding entry in columns (3) and (4) of the Table? Held that - On the language of the Notification, we have to agree with Shri Sanghi, because rebate being made relatable on the excess production, it is this production (beyond the average) which has to be looked into. This reading of the Notification would not defeat the object of granting of rebate, as the same would be ₹ 20 or ₹ 5 per quintal, as the case may be, where the excess is only 7.5%; but on that slab of excess production which is beyond 7.5%, upto 17.5%, the rebate available would be ₹ 40 or ₹ 10, as the case may be; and so on. The quantum of rebate would thus increase with the rate of excess production going higher and higher. So, the manufacturer would have impetus to produce more and more, as higher the percentage of excess, more would be the quantum of rebate.

Summary

Issues: Interpretation of Notification No. 146/74 regarding calculation of rebate on excess sugar production.

The Supreme Court was tasked with determining the correct interpretation of Notification No. 146/74 issued by the Department of Revenue and Insurance, Ministry of Finance, concerning the calculation of rebate on excess sugar production. The Notification exempted sugar from excise duty based on specific criteria outlined in the Table within the Notification. The key issue revolved around whether the percentage mentioned in the Notification was to be calculated based on the excess production or the average production of the preceding five sugar years.

In a previous case, the Court had accepted the interpretation that the percentage should apply to the average production rather than the excess production. However, in the current appeals, the factory owners disputed this interpretation. The disagreement centered on whether the rebate percentages should be calculated on the excess production or the average production. The Court illustrated this with an example where the excess production was calculated based on the average production of the preceding years.

The Court considered the arguments presented by both sides. The factory owners contended that the percentages should be calculated on the excess production as mentioned in the sub-clauses of the Notification. On the other hand, the Addl. Solicitor General argued that the concept of excess production was linked to average production and supported the previous interpretation. He emphasized that the purpose of granting rebates was to encourage higher production levels.

After careful consideration, the Court sided with the factory owners' interpretation. They concluded that the rebate should be calculated based on the excess production, not the average production. This approach was deemed to align with the objective of incentivizing higher production levels by increasing the rebate amount as the excess production percentage rose.

The Court disagreed with the interpretation adopted in the previous case and emphasized that the true intent of the Notification was to provide increasing rebates for higher levels of excess production. The judgment clarified the calculation method for determining rebates on excess sugar production, ensuring that the rebate amount corresponded to the percentage of excess production achieved. The Court disposed of the appeals accordingly, with no orders regarding costs.