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TMI Blog1983 (10) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that there had been steep increase in the cost of plant and machinery required for sugar projects and it was found that the new projects were not proving economically viable units. By the aforesaid G.O the Government gave certain incentives to new sugar factories which commenced production on or after the 1st of April, 1974. The incentive consisted of certain concessions in excise duty and additional excise duty as well as higher percentage of levy free sugar quota. It was also indicated in the above G.O. that in regard to excise duty necessary notification would be issued by the Ministry of Agriculture and Irrigation, Department of Food, Directorate of Sugar Vanaspati, Krishi Bhawan, New Delhi separately. In pursuance of this the Government issued a Notification No. 35/76-C.E., dated 26th April, 1976. By this notification the sugar produced in excess of 35% of its production would be subjected to excise duty and additional excise duty at the rate of 15% and 5% respectively on the price determined by the Government from time to time in respect of sugar which was required to be sold under sec. 3(2) (f) of the Essential Commodities Act, known as levy sugar. 4. It may be stated he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice dated the 18th May, 1979 asking the petitioner to pay the sum of Rs. 6,25,973.63 paise was issued. The petitioner thereafter by a letter dated 2-6-1979 intimated the Respondents 3, 4 & 5 that Respondent No. 2 was not in a position to issue a final incentive entitlement certificate as the latter was busy in finalising the incentive scheme for the years 1977-78 and 1978-79. The petitioner received another notice on 14th June, 1979 from the Superintendent, Central Excise, Mau, District Azamgarh that the demand of short levy of Central Excise duty has been correctly made. The petitioner in his reply pointed out that he was under no liability to pay the basic and additional Excise duty at the rate of 15% and 5%. The petitioner pointed out that he had charged basic and additional Excise duty from the Food Corporation of India at the prescribed rates fixed by the Government of India on levy sugar and paid to respondents 3 to 5. It was further stated that the levy sugar attracted Excise duty @ 10% and 5%, 71/2 and 5% and 6% and 5% for different years and such sugar could not be subjected to higher rate of basic and additional Excise Duty, for the amount of 38% of the production of sug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification no. 223/76 dated 3rd August, 1976 copies of the other notifications were applied to the Court by the learned counsel. We have perused the notification dated 3rd August, 1976 as published on page 528 in the book, "Cooperative Sugar Directory and year Book, 1977" issued by the National Federation of Cooperative Sugar Factories Ltd., New Delhi. 11. It will be necessary in this case to refer to the G.O. dated 6th December, 1975 and to the various notifications to find out what exactly was intended by the Government in regard to the payment of basic excise duty and the additional Excise Duty. By the G.O. No. F. 27 (6)/75-ST/Government of India, Ministry of Agriculture and Irrigation, Department of Food, Directorate of Sugar Vanaspati, Krishi Bhawan, New Delhi dated the 6th December, 1975, addressed to all the sugar factories and expansion projects established at high cost to make them economically viable units". In this letter it was made clear that in order to achieve the targeted production envisaged in the 5th Five Year Plan period licences had been issued for the establishment of new sugar factories and for effecting substantial expansion in the existing sugar factories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale quotas allowed the new sugar factories will be required to pay excise duty in accordance with the normal rates applicable to the existing units on the basis of 65 to 35 ratio of levy and free sale sugar." The remaining part of the letter dealt with incentives for expansion schemes in respect of existing sugar factory which has commenced production after the 1st April, 1974. 12. Paragraph 6 of the letter is relevant and may be reproduced : "6. In regard to the excise duty concessions available under this. scheme, the necessary Notification would be issued by the Ministry of Finance (Department of Revenue & Insurance) separately." A reference may be made to appendix I to the above letter which indicated the percentage of free quota for different slabs of plant and machinery cost. Admittedly the cost of the plant and machinery f.o.r. of the petitioner's factory was between Rs. 220 to 240 lakhs. Percentage of free quota sugar (Medium recovery zone) 1st Year 2nd Year 3rd Year 4th Year 5th Year For a factory the cost of Plant & Machinery f.o.r. was between Rs. 220 to 240 Lakhs. 73 73 73 57 45 This indicates the amount of sugar that was to be tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, then existing. But it was specifically not made applicable to the Sugar factories covered by the Notification No. 35/76. 15. Reference may now be made to the above mentioned Notification "No. 35/76. It will be better to reproduce the contents, as its interpretation was the subject of much arguments. "G.S.R. 94 (E) : In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government hereby exempts sugar, falling under sub-item (1) of item No. 1 of the first Schedule to the Central Excises & Salt Act, 1944 (1 of 1944) and produced by a Sugar Factory, commences production for the first time on or after the 1st day of April, 1974, and which is in excess of thirty-five per cent of its production in a sugar year, from so much of the duty of excise leviable thereon as is in excess of duty calculated at 15 per cent and 5 per cent, respectively, on the basis of price determined by the Central Government, from time to time, under sub-section (3c) of Section 3 of the Essential Commodities Act, 1955 (10 of 1955 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by the Government. 17. There is no dispute that the percentage of sugar produced in a sugar year which had to be sold to the Central Government under section 3(2) (f) of the Essential Commodities Act during relevant period, was 27 per cent. In other words, the quantity of sugar which had to be sold to the Central Government was 27% of the production. It would be obvious from the above that after selling the Levy sugar to the Central Government and 35% of the production as free sale sugar, mentioned above, there would be the balance of 38% of the production. Under Notification No. 35/76-CE, 38% of the sugar produced in the relevant sugar year was available for sale by the factory in the free market. Thus a sugar factory which commenced production after 1st April, 1974 could dispose of in open market 73 per cent of its total production in a sugar year. Thirty five per cent of this could be sold by the sugar factory after paying normal Excise duty and additional Excise duty. The remaining 38%, however, was entitled, under this notification, to certain benefits. The benefit was that Excise duty and additional Excise duty on this quantity could be calculated @ 15% and 5% respectively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Government, the petitioner was not liable to pay excise duty and additional excise duty at 15% and 5%. He urged that the intendment was to reduce the rate of excise duty and additional excise duty on Levy sugar and the petitioner was entitled to the same benefit. 18. We are unable to accept this contention. The Notification No. 35/76 specifically provided some reliefs to a particular class of sugar factories in order to enable them to increase their production of sugar in a sugar year. The Notification provided a consolidated scheme for such sugar factories. Presumably, the Government did not intend to give any more benefits to such factories. Threefold benefits included larger quantum of free sale sugar to the sugar factory lesser rate of excise and Additional Excise Duty on a part of the free sale sugar and thirdly, the realisation of excise duty on such sugar at a price which was fixed by the Government for Levy sugar. The Notification made it clear that the excise duty and additional excise duty would be based on the price, which the Government would fix for sugar, which was required to be sold to the Government, i.e., levy sugar. This price would vary from time to time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... superseded in respect of the sugar produced on or after the commencement of the notification dated the 6th of August, 1976, but before the first day of October, 1976, and the rate of Excise duty and Additional Excise duty on Levy sugar was fixed at 10% and 5% respectively. The same observations as regards the previous notification will be applicable to this notification as well. 23. The next notification is numbered 251/76 and is dated the 14th September, 1976. This notification superseded the previous Notification No. 226/76. This notification is in the same lines as the previous notifications, but its period was from 1st October, 1975 to 30th September, 1976 and the rate of Excise duty and additional Excise duty was fixed at 10% and 5% respectively. The same observations would be applicable to this notification as in the case of Notification No. 223/76. 24. Seven days later the Central Government issued, yet another Notification No. 254/76 on the same lines. The Central Government once again revised the rates of Excise duty and additional Excise duty leviable on sugar required to be sold to the Central Government as Levy sugar. The rate of Excise duty and additional Excise duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27. Another Notification No. 153/78 dated the 16th August, 1978 was issued subsequently. This Notification amended the rate of Excise duty and additional Excise duty to 11|% and 6% respectively on Levy sugar. As seen above, all these Notification Nos. 223/76, 226/76, 251/76, 254/76, 279/76, 317/77, 81/78 and 153/78 purported to amend the rate of Excise duty and Additional Excise duty on Levy sugar from time to time. All these notifications purported to cover the same field as was covered by the Notification No. 210/78. In none of these notifications any attempt or effort was made to modify or supersede the Notification No. 35/76. As a matter of fact, it has been seen in the proviso to Notification No. 35/76 that the terms in the Notification No. 210/78 were not made applicable to the later Notification No. 35/76. Since none of these Notifications from 223/76 to 153/78 refer at all to the Notification No. 35/76, none of these Notifications therefore have any effect on the Notification No. 35/76. 28. As already indicated earlier in this judgment that the Notification No. 35/76 provided a consolidated scheme of benefits for sugar factories which had commenced production on or afte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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