Production computation under sugar exemption notification cannot import a monthly levy-free sale ratio not found in the text.

Under Notification No. 135/83, the same computation method for production applied to both incentive-period production and average base-year production, so brown sugar already counted in statutory records could not be counted again after reprocessing. The text states that reprocessing loss was not to be deducted in computing either excess production or average production, although the loss quantity itself was not eligible for rebate because it was not cleared on payment of duty. It also states that no month-wise 65:35 levy/free-sale ratio could be imported into clearances of excess production, as the notification contained no such requirement and only linked exemption to the duty applicable to the relevant consignment.

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Issues: (i) Whether reprocessing loss of brown sugar was to be deducted while computing both excess production and average production under Notification No. 135/83 dated 30.4.83. (ii) Whether the ratio of 65:35 between levy sugar and free sale sugar could be applied month-wise to clearances of excess production.

Issue (i): Whether reprocessing loss of brown sugar was to be deducted while computing both excess production and average production under Notification No. 135/83 dated 30.4.83.

Analysis: The method of computation in paragraph 2 of the notification applied to production during the incentive period as well as to average production during the base years. Brown sugar had already been accounted for in the statutory records when first produced, and therefore it could not be counted again after reprocessing. On the common facts, reprocessing loss was not to be deducted in computing either excess production or average production, though the quantity representing such loss was not eligible for rebate because it was not cleared on payment of duty.

Conclusion: The issue was decided against the assessee.

Issue (ii): Whether the ratio of 65:35 between levy sugar and free sale sugar could be applied month-wise to clearances of excess production.

Analysis: The notification did not prescribe any month-wise 65:35 ratio. The ratio was a matter for the sugar authorities, and the proviso to paragraph 1 only limited the exemption by reference to the duty applicable to levy sugar or free sale sugar in the particular consignment. No basis existed for applying the ratio to each month's clearances of excess production.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The demand required revision by giving effect to the assessee's success on the second issue while maintaining the adverse finding on the first issue.

Ratio Decidendi: Where a notification provides a method for computing production without distinguishing between incentive-period production and base-period production, the same computation principle must govern both, and an exemption cannot be restricted by importing a monthly levy/free-sale ratio not found in the notification.

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