2003 (2) TMI 69 - SC - Central Excise

Court clarifies calculation method for sugar production under Central Excise concessions.

The Supreme Court upheld the Tribunal's decision that the average production of sugar for Central Excise concessions should be calculated by considering ... Method of calculation of average production of sugar for the purpose of grant of Central Excise concession in terms of the exemption Notification No. 135/83-C.E., dated 30th April, 1983 Held that:- The Tribunal has correctly considered the rebate claim arising out of the three base years. Appellant had manufactured sugar between 1st May, 1979 to 30th September, 1979 only and since there was no production in the two periods, i.e., 1980-81 and 1981-82 the same are to be ignored and the sugar produced in the year 1979-80 would be taken to be the average for all the three years for determining the average production. In a case of factory where there was no production in any of the three years during the lean period then the sugar produced between 1st May, 1983 to 30th September, 1983 was to be taken as the average production for exemption from the payment of excise duty. In cases where there was a production in any of the three preceding years then the average had to be calculated by ignoring the periods in which there was no production. Since in this case there is no production in two out of the three years the average has to be the production in one year only. Appeal dismissed. Issues Involved:1. Method of calculation of average production of sugar for the purpose of Central Excise concession under Exemption Notification No. 135/83-C.E., dated 30th April, 1983.2. Interpretation of Clause (3) of the Notification regarding periods of 'nil production'.3. Applicability of Clause (4) of the Notification in cases of 'nil production' in all three base years.Detailed Analysis:1. Method of Calculation of Average Production:The dispute centers on how to calculate the average production of sugar for granting Central Excise concessions under Notification No. 135/83-C.E. The appellant, a registered co-operative society manufacturing sugar, argued that the average production should be calculated by dividing the total production of the base years by three, even if there was no production in some years. The department contended that only the years with production should be considered, ignoring the years with 'nil production'.2. Interpretation of Clause (3) of the Notification:Clause (3) of the notification specifies that if there was 'nil production' in any of the three preceding sugar years, the average production should be determined by considering only the periods when sugar was produced. The appellant argued that the average should be calculated over all three years, including those with 'nil production'. The Tribunal, however, interpreted Clause (3) to mean that only the years with production should be considered, ignoring the years with 'nil production'. This interpretation was upheld by the Supreme Court, which stated that the word 'any' in Clause (3) should be understood in context, meaning one or two years of production should be considered if there was 'nil production' in the other years.3. Applicability of Clause (4) of the Notification:Clause (4) applies when there is 'nil production' in all three base years, entitling the factory to exemption for all production during the incentive period. The appellant's case did not fall under this clause as there was production in one of the base years. The Supreme Court clarified that Clause (4) was not applicable since the factory had production in one of the three years.Conclusion:The Supreme Court upheld the Tribunal's decision that the average production should be calculated by ignoring the years with 'nil production' and considering only the years with actual production. The appellant's method of dividing the total production by three was rejected. The Court emphasized that the notification intended to incentivize production during the lean period, and the correct interpretation of Clause (3) required ignoring the periods of 'nil production' to arrive at a fair average. The appeals were dismissed with no order as to costs.