Factory existence and production average under rebate notification confirmed for excess sugar rebate eligibility.

For Notification No. 257/76, a factory was not required to have been in existence for the full preceding five years where average production could be computed from the years it actually worked; the existence condition was therefore not rigidly confined to five years. The production condition under Clause 4 was also met because 1976-77 output exceeded the average production of 1974-75 and 1975-76. On both points, the assessee qualified for rebate on excess production sugar, and the adverse order was set aside.

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Issues: (i) Whether, for Clause 3(i) of Notification No. 257/76 dated 30th September, 1976, the factory had to be in existence for the preceding five years; and (ii) whether the appellants satisfied Clause 4 of the notification requiring the production in 1976-77 to exceed the average production of 1974-75 and 1975-76.

Issue (i): Whether, for Clause 3(i) of Notification No. 257/76 dated 30th September, 1976, the factory had to be in existence for the preceding five years.

Analysis: The relevant notification was interpreted in the light of the binding view already taken by the Bombay High Court, which held that continuous existence of the factory for all five years was not a prerequisite for computing the average. The existence period was therefore not confined to a rigid five-year requirement where the factory had operated for a shorter span.

Conclusion: The requirement of existence for all five years was not mandatory, and this issue was decided in favour of the assessee.

Issue (ii): Whether the appellants satisfied Clause 4 of the notification requiring the production in 1976-77 to exceed the average production of 1974-75 and 1975-76.

Analysis: On the figures contained in the Order-in-Original, the production in 1976-77 was 2,22,491 quintals, while the average production for 1974-75 and 1975-76 was 1,32,027 quintals. The production in 1976-77 was thus higher than the relevant average, bringing the appellants within Clause 4.

Conclusion: The appellants satisfied Clause 4, and this issue was decided in favour of the assessee.

Final Conclusion: The appellants were held entitled to rebate on excess production sugar for the relevant period, and the impugned order was set aside.

Ratio Decidendi: For the purpose of the notification, a factory need not have been in existence for the full five-year period if the average production can otherwise be computed from the years in which it actually worked, and eligibility under the production condition is established where the current year's output exceeds that average.

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