1987 (3) TMI 210 - AT - Central Excise

Issues Involved:
1. Eligibility for incentive rebate under Notification No. 108/78.
2. Interpretation of Clause 5 of Notification No. 108/78.
3. Compliance with quasi-judicial process by the Superintendent.
4. Consideration of precedents from Bombay and Delhi High Courts.
5. Applicability of Clause 6 of Notification No. 108/78.

Issue-wise Detailed Analysis:

1. Eligibility for incentive rebate under Notification No. 108/78:
The respondents claimed an incentive rebate on excess production of sugar from May 1978 to September 1989 under Notification No. 108/78. The Superintendent rejected this claim on the grounds that the respondents did not fulfill the conditions of Clause 5 of the notification. However, the Appellate Collector overturned this decision, stating that the respondents did meet the conditions. The Central Government contested this, arguing that the factory was not in existence during all three preceding sugar years, making it ineligible for the rebate.

2. Interpretation of Clause 5 of Notification No. 108/78:
Clause 5 of Notification No. 108/78 states: "A factory whose overall production of sugar during the 1977-78 sugar year does not exceed the average production of the preceding three sugar years shall not be entitled to any exemption of duty of excise under this notification." The Central Government interpreted this as requiring the factory to have been in existence during all three preceding sugar years. However, the Tribunal noted that Clause 5 does not explicitly state that a factory must have been in existence during all three preceding years to be eligible for the rebate. The Tribunal found that the Superintendent's interpretation was guided by government instructions rather than an independent judicial assessment.

3. Compliance with quasi-judicial process by the Superintendent:
The Tribunal observed that the Superintendent did not provide reasons for rejecting the rebate claim and appeared to have followed instructions from higher authorities without independent consideration. This lack of reasoning and independent judgment rendered the Superintendent's order procedurally deficient, justifying its overturn by the Appellate Collector.

4. Consideration of precedents from Bombay and Delhi High Courts:
The Tribunal considered conflicting judgments from the Bombay and Delhi High Courts. The Bombay High Court, in a similar case, held that a factory need not have been in existence during all preceding years to claim a rebate. Conversely, the Delhi High Court maintained that the factory must have been in existence. The Tribunal favored the Bombay High Court's interpretation, which aligned with previous Tribunal decisions, and found that the absence of explicit stipulations in the notification supported this view.

5. Applicability of Clause 6 of Notification No. 108/78:
The Central Government also argued that Clause 6 of the notification barred the respondents from claiming the rebate. However, the review notice did not provide details on how Clause 6 applied to the respondents' factory. The Tribunal found this assertion unsubstantiated and dismissed it as a ground for setting aside the Appellate Collector's order.

Conclusion:
The Tribunal concluded that the grounds cited by the Central Government for setting aside the Appellate Collector's order were not acceptable. The interpretation that the factory must have been in existence during all three preceding sugar years was found to be illogical and unreasonable. The appeal was dismissed, and the review notice dated 5-6-1981 was discharged.

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