TaxTMI 
TaxTMI 
1993 (3) TMI 94
X X X X Extracts X X X X
X X X X Extracts X X X X
....n and with 1st October and ending with the 30th of September of the following year. The interpretation of these notifications is involved in this batch of appeals. 2. In so far as it is material, the notification dated 28-9-1972 and the notification dated 4-10-1973 are similar. So are the notifications dated 12-10-1974 and 30-9-1976. It would be appropriate if we set out the notification dated 28-9-1972 in its entirety: "Notification No. 203/72 dated 28-9-1972 In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts sugar, described in column (2) of the Table below and falling under sub-item (1) of Item No. l of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944), from so much of the duty of excise leviable thereon as is specified in the corresponding entry in column (3) of the said Table. TABLE S. No. Description of sugar Duty of Excise (1) (2) (3) 1. Sugar produced in a factory during the period commencing from the 1st day of October, 1972 forty per and ending with the 30th day of November, quintal 1972 which is in excess of the quant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uration of the season in the State in which the factory is situated. Explanation II. - In this notification, the expression, 'base period', means the period commencing from the 1st day of October, 1971 and ending with the 30th day of September, 1972." Though the Sugar Year extends over a period of twelve months commencing from 1st of October, the period commencing with 1st December and ending with 30th April is said to be the peak production period. Most of the sugar factories were commencing their operations only in the month of December. Either with a view to induce these sugar factories to produce more or with a view to induce them to commence their operations early in the sugar year, the rebate provided for producing sugar in the months of October and November in excess of the corresponding period in the previous sugar year was kept relatively high. The scheme of the notification dated 28-9-1972 appears to be this: (1) if during the months of October and November 1972 (in the Sugar Year 1972-73), a factory produced sugar in excess of the quantity of sugar produced by it during the months of October-November 1971, such factory was granted rebate in the Excise Duty at th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the controversy actually arose between the parties, the Committee of the Sugar Mill Owners' Association addressed a letter to the Ministry of Finance, Government of India seeking a clarification as to the meaning and purport of the aforesaid notification. The letter written by the Committee read as follows : "I am to refer to the Notification No. G.S.R. dated 28th September, 1972, issued by the Union Ministry of Finance (Department of Revenue & Insurance), New Delhi, on the above subject (copy enclosed for ready reference). In this connection, the Government had issued a similar Notification on 13th Oct. 1971, on the same subject. On this Notification, in response to an enquiry made by the Committee of the Association, the Board had clarified as per their letter No. F. No. 14/33-71/CX. 1 dated 26th November, 1971, that a factory which had worked during the base period i.e. during the period commencing from 1st day of October, 1970 and ending with 30th day of September, 1971, though it had not worked during the period from 1st October, 1970 to 30th November, 1970, and the production during this period was nil, would be entitled to the excise rebate at the notified rate on its e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ame as indicated hereinabove. The factory has produced a certain quantity of sugar in block- period (i) (or, for that matter, any other block-period) in the sugar year 1972-73, but had not produced any sugar whatsoever in the corresponding period in the base year (previous sugar year) - but has produced some quantity of sugar during the base year as such; whether such factory is entitled to the rebate prescribed in clause (i) (or such other clause, as may be applicable) of the said Notification? Since the Notifications for 1972-73 and 1973-74 are more or less similar, disputes raised before High Courts pertained to both these years. (Indeed, the said issue is common to the other two notifications concerned herein as well, with some difference, as we shall indicate at the proper stage). It appears that almost all the High Courts except Karnataka have held in favour of the factories. In Patna high Court, there appears to be a conflict of opinion. Karnataka High Court has, however, held in favour of the Union of India. 10. The first of the reported decisions is of the Andhra Pradesh High Court (Chinnappa Reddy, J., as he then was) in Etikoppaka Co-operative Agricultural Society v. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the very same quantity again during the period 1st December, 1972 to 30th April, 1973; such a factory would not be entitled to any rebate under clause (2) of the said notification; but another factory which had produced, say, just 1000 quintals during the period December 1, 1971 to April 30, 1972 but produces five thousand quintals during the period December 1, 1972 to April 30, 1973 would get the benefit of rebate on 4000 quintals. This again amounts to, says the counsel, rewarding the inefficient and indolent and punishing the efficient. The learned counsel seeks to reinforce his argument by referring to clause (2). It relates to the period 1st December 1972 to 30th April, 1973. Rebate in the sugar produced during this period is available only if it is in excess of 115 per cent of the quantity of sugar produced during the period December 1, 1971 to April 30, 1972. If the production is nil during the corresponding period in the previous sugar year, asks the counsel, how is one to work out 115% of it. What is 115% of zero? asks he. For all these reasons counsel says, nil production cannot be equated to "the quantity of sugar produced....." in clause (1). Counsel also says that Cl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugar year, as the case may be. If this is the object there is nothing absurd in saying that a factory which has produced five thousand tons during December 1,1971 to April 30,1972 and produces the very same quantity during the period December 1,1972 to April 30,1973, does not qualify for rebate under clause (2). There is no reason or occasion for granting him any rebate. But where a factory has not produced any sugar or has produced a particular quantity of sugar during the said period in the previous sugar year but produces a larger quantity during the said period in the current sugar year, it must be rewarded. It may be remembered that no manufacturer produces sugar merely for the sake of rebate. Rebate is an inducement, an additional attraction. It is not as if without rebate provided by these notifications, no one would have produced sugar. We are also unable to see any difficulty in operating clause (2) of the said notification. There is no arithmetical difficulty in working out 115% of zero; it is zero. What applies to clause (1) applies equally to clauses (2), (3) and (4). Our understanding is reinforced and supported by clause (a) of the first proviso. It says that the bene....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s by the majority of the High Courts is the correct one. We do not agree with the view taken by the Karnataka High Court in its Judgment under appeal in Civil Appeal Nos. 3831-32 of 1988. For the same reason, we do not also agree with the view taken by the Patna High Court in Civil Writ Jurisdiction Case No. 865 of 1966. 17. Now coming to the Notifications for the years 1974-75 and 1976-77, the concept of base year is not to be found here; otherwise they are similar to those relating to 1972-73 and 1973-74. In the notification dated 12-10-1974 (relating to the sugar year 1974-75) the sugar year is divided into two blocks/periods. The first block comprises October and November 1974 whereas the second block takes in December 1974 to September 1975. Here too, the question is identical to that arising in the years 1972-73 and 1973-74. The answer too will naturally be the same. 18. In view of the aforesaid conclusion, it is not necessary for us to go into the other questions raised by the factory-owners except the following : 19. There is a minor controversy with respect to the working of Clause (2) in Notification No. 146/74 dated 12-10-1974 relating to the sugar year 1974-75.....