Additional excise exemption for sugar applies where basic duty is fully neutralised by rebate under the exemption scheme.

Sugar manufactured under Notification No. 108/78 was treated as wholly exempt from basic excise duty where the rebate mechanism fully extinguished the duty otherwise payable on the relevant excess production. On that basis, Notification No. 84/69, which exempted sugar wholly exempt from basic excise duty from the whole of the additional excise duty, was held to cover the sugar in question. The separate exemption notifications for Palmyra sugar and Khandsari sugar did not limit Notification No. 84/69 to those products alone, because those notifications dealt independently with additional excise duty. The broader wording of Notification No. 84/69 therefore entitled the assessee to exemption from additional excise duty.

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Issues: Whether sugar manufactured under Notification No. 108/78, where the basic excise duty was fully exempted through a rebate mechanism, was entitled to exemption from additional excise duty under Notification No. 84/69.

Analysis: Notification No. 84/69 exempted varieties of sugar wholly exempt from basic excise duty from the whole of the additional duty of excise. The exemption under Notification No. 108/78, though expressed as a rebate on quantity basis, effectively extinguished the basic excise duty payable on the relevant excess production because the rebate exceeded the duty otherwise payable. The separate exemption notifications for Palmyra sugar and Khandsari sugar did not confine Notification No. 84/69 to those products alone, since those notifications independently dealt with additional excise duty. The broader language of Notification No. 84/69 therefore covered the sugar in question.

Conclusion: The appellants were entitled to the benefit of Notification No. 84/69 and to rebate of additional excise duty on the sugar concerned.

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