Factory commencement, not ownership change, governs rebate eligibility and preserves recovery of wrongly granted excise rebate.

Rebate under the 1973 excise notification was confined to sugar produced by a factory that commenced production for the first time on or after 1 October 1973. A change in ownership or a fresh licence did not make an already functioning unit a new factory, so an establishment that had manufactured sugar since 1933-34 did not qualify. Recovery of an erroneously granted rebate also survived substitution of the recovery rules because accrued liabilities and pending proceedings are preserved absent a contrary intention under the General Clauses Act. The recovery notice was therefore valid, and the demand was sustained.

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Issues: (i) Whether the petitioners' unit could be treated as a "factory which commenced production for the first time" so as to qualify for rebate under Notification No. 189/73-C.E. dated 4.10.1973. (ii) Whether recovery proceedings for an erroneously granted rebate survived the substitution of Rules 10 and 10A of the Central Excise Rules, 1944 and whether invocation of Rule 10A vitiated the demand.

Issue (i): Whether the petitioners' unit could be treated as a "factory which commenced production for the first time" so as to qualify for rebate under Notification No. 189/73-C.E. dated 4.10.1973.

Analysis: The rebate under serial No. 6 of the notification was confined to sugar produced by a factory that commenced production for the first time on or after 1.10.1973. The notification referred to the factory, not the manufacturer. A fresh L-4 licence or a change in ownership did not convert an already existing and functioning factory into a new factory. The unit had been manufacturing sugar since 1933-34 and only its ownership had been reconstituted. Since the factory itself had not commenced production for the first time after 1.10.1973, the conditions of the notification were not satisfied.

Conclusion: The claim to rebate as a new factory was not sustainable and was against the assessee.

Issue (ii): Whether recovery proceedings for an erroneously granted rebate survived the substitution of Rules 10 and 10A of the Central Excise Rules, 1944 and whether invocation of Rule 10A vitiated the demand.

Analysis: The rebate had been granted erroneously, and the liability to recover it had already arisen while the earlier rules were in force. On the principles embodied in Section 6 of the General Clauses Act, 1897, repeal or substitution does not destroy accrued rights, liabilities, or pending proceedings unless a contrary intention appears. The later rule did not show an intention to extinguish recovery already initiated. The show cause notice was issued within limitation under the applicable recovery framework, and a mere reference to Rule 10A did not invalidate the proceedings where the substantive power to recover existed under Rule 10.

Conclusion: The recovery proceedings were valid and the challenge to them failed.

Final Conclusion: The petitioners were not entitled to the rebate claimed, and the demand for recovery of the erroneously sanctioned amount was lawfully sustained.

Ratio Decidendi: For rebate eligibility under an exemption notification, the relevant criterion is the existence and commencement of the factory itself, not merely a change in ownership or licensing; and accrued liabilities or pending recovery proceedings are preserved on repeal or substitution of recovery rules unless the later law manifests a contrary intention.

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