Rebate notification for sugar production cannot be denied merely because the factory had nil output in some preceding years.

A rebate notification for sugar production was construed as turning on the method of computing average production over the preceding five sugar years, including cases where some corresponding periods had nil production. Because Clause 3 expressly dealt with nil production by ignoring periods when the factory had not worked, eligibility could not be denied merely because the factory had not produced sugar in every one of the preceding five years. The delay-and-laches objection also failed, as the challenge was not shown to be grossly delayed or prejudicial. The rebate denial was unsustainable, the petition was allowed, and reassessment was directed under the notification.

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Issues: (i) Whether a sugar factory that had not produced sugar in each of the preceding five sugar years was nevertheless entitled to rebate under Notification No. 257/76-Central Excise dated 30.09.1976; (ii) Whether the petition was liable to be rejected on the ground of delay and laches.

Issue (i): Whether a sugar factory that had not produced sugar in each of the preceding five sugar years was nevertheless entitled to rebate under Notification No. 257/76-Central Excise dated 30.09.1976.

Analysis: The notification granted rebate on sugar produced in excess of the average production of the corresponding period of the preceding five sugar years. Clause 3 provided the method for computing average production where production in one or more corresponding periods of the preceding sugar years was nil, by ignoring the periods in which the factory had not worked. The relevant condition was therefore computation of average production and not proof of production in every one of the preceding five years. The notification did not require that the factory must have existed and produced sugar throughout the entire five-year block.

Conclusion: The rebate was admissible, and the denial of rebate was and unsustainable; this issue is decided in favour of the assessee.

Issue (ii): Whether the petition was liable to be rejected on the ground of delay and laches.

Analysis: The challenge was filed within a period that was not considered gross or unreasonable, and the respondents themselves filed their return only after the hearing had commenced. No sufficient prejudice or ground to deny relief on delay was made out.

Conclusion: The objection based on delay and laches was rejected; this issue is decided in favour of the assessee.

Final Conclusion: The petition was allowed, the impugned orders were set aside, and the excise authorities were directed to reassess the rebate claim in accordance with the notification.

Ratio Decidendi: Where an exemption or rebate notification prescribes a method for computing average production and expressly provides for periods of nil production, eligibility cannot be denied on the assumption that the manufacturer must have produced goods in each of the preceding years unless the notification so states.

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