Central excise rebate under a production-based notification remains available despite nil base-year production, with recovery demand rejected.

A rebate notification under central excise was construed to allow rebate on subsequent production even where the corresponding base-year period showed nil production. The Tribunal followed settled High Court interpretations and rejected the revenue's contrary view, holding that nil base-year production did not by itself defeat entitlement where the notification's scheme supported relief. On that construction, the show cause notice and recovery demand for withdrawal of the sanctioned rebate were unsustainable, and the assessee remained entitled to protection against recovery and consequential refund.

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Issues: Whether rebate of central excise duty under Notification No. 189/73-C.E., as amended, was admissible on production during the relevant period even where there was nil production in the corresponding base-year period, and whether the consequent recovery of rebate was valid.

Analysis: The notification had already been interpreted by several High Courts to mean that where a sugar factory had worked in the base year but had nil production in the corresponding period, the manufacturer was still entitled to rebate on the subsequent production achieved in the sugar year. The Tribunal followed that consistent line of authority and rejected the contrary view previously adopted by the revenue authorities. On that construction, the show cause notice proposing withdrawal of the rebate was misconceived and the adjudication demanding recovery could not stand.

Conclusion: The rebate was admissible notwithstanding nil production in the corresponding base-year period, and the demand for recovery of the sanctioned rebate was unsustainable and in favour of the assessee.

Final Conclusion: The appeal succeeded, the recovery demand was set aside, and the assessee was held entitled to the consequential refund or protection against recovery of the disputed rebate.

Ratio Decidendi: A rebate notification granting relief by reference to production in a corresponding period must be construed in accordance with the settled judicial interpretation that nil production in the base-year period does not by itself defeat entitlement to rebate on subsequent production where the notification's scheme otherwise supports such relief.

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