Full Judgment Text
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PETITIONER:
COLLECTOR OF CENTRAL EXCISE ETC. ETC.
Vs.
RESPONDENT:
NEOLI SUGAR FACTORY ETC. ETC.
DATE OF JUDGMENT30/03/1993
BENCH:
JEEVAN REDDY, B.P. (J)
BENCH:
JEEVAN REDDY, B.P. (J)
VENKATACHALA N. (J)
CITATION:
1993 AIR 1921 1993 SCR (2) 758
1993 SCC Supl. (3) 69 JT 1993 (2) 587
1993 SCALE (2)295
ACT:
Central Excise Rules, 1944: Rule 8(1)--Notifications dated
28.9-1972, 4.10.1973, 12.10.1974 and
30.9.1976--Construction--Rebate provided in clause (1) of
Table of the Notifications--Whether sugar factories entitled
to though they did not produce any sugar in the base year
but produced certain quantity of sugar during current sugar
year--Method to work out clause (2) of Notification dated
12-10-74.
HEADNOTE:
In a Notification dated 28.9.1972, with a view to induce the
sugar factories (respondents) to produce more and also to
commence their operations early in the sugar year (the year
commencing on and with 1st October and ending with the 30th
of September of the following year) a rebate was provided.
The scheme of the Notification was
(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, suchfactory was granted rebate in the
Excise Duty at the rate of rupees forty per quintal in so
far as the excess production is concerned.
(2)Rebate for the period 1st December 1972 to 30th April,
1973 was available at the rate of rupees twenty per quintal
provided the production of sugar during the said period was
in excess of 115% of the quantity of sugar produced by the
said factory during the corresponding period in the previous
Sugar Year, in so far as the excess production is concerned.
(3)For the months of May and June 1973 rebate at the rate
of rupees twenty per quintal was available provided the
factory produced more sugar than it produced during the
corresponding months in the previous Sugar Year. The said
rebate was available again only with respect to the excess
production.
759
(4)For the period commencing from 1st July, 1973 and
ending with 30th of September, 1973, rebate was available at
the rate of rupees twently per quintal provided the factory
produced sugar in excess of the quantity produced during the
corresponding period in the previous Sugar Year. This
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rebate too was confined to the excess production.
However, the benefit of the rebate mentioned in any of the
clauses aforesaid was not available to a factory which inter
alia did not work during the ’base pariod’.
The other three Notifications dated 4.10.73, 12.10.74 and
30.9.76 were similar. All the four Notifications were
applicable to the Sugar years 1972-73, 1973-74, 1974-75 and
1976-77, respectively.
The respondents sugar factories did not produce any sugar
in one or the other of the four blocks (mentioned in the
Table contained in the Notification) in the base year
(previous sugar year). During the current sugar year, they
produced certain quantity of sugar during that block period.
The respondents contended that they were entitled to the
benefit of rebate provided in clause (1) of the Table
contained in the Notification, whereas the Revenue submitted
that they were not entitled to the benefit of rebate.
The claim for rebate made by the respondnets was allowed in
the first instance, but later proceedings were initiated to
recover back, or re-adjust, the benefit already allowed.
These disputes were carried to the High Courts.
Almost all the High Courts except Karnataka held in favour
of the respondents. In Patna High Court, there was a
conflict of opinion.
Hence this batch of appeals by the Revenue contending that
the benefit of rebate was available only where the "sugar
produced in a factory during the period commencing from the
1st day of October, 1972 and ending with the 30th day of
November, 1972 which is in excess of the quantity of
sugarproduced during the corresponding "period in 1971";
that nil production could not be equated to "the quantity of
sugarproduced" in clause (1); that clause (1) of the first
proviso in the 1972 Notification has
760
to be harmonised with the several clauses in the table; and
that no interpretation should be adopted which rendered any
part of the Notification superfluous.
Dismissing all. the civil appeals, except Civil Appeal Nos.
3831-32 of 1988, this Court,
HELD : 1.01. The several clauses in the Notification must be
read together, harmonised and reasonably understood without
ignoring the underlying object and purpose of the
notification. An interpretation which leads to absurd
consequences should be avoided. [770 E]
1.02.The object behind the notification was evidently not
only to induce the factories to produce more sugar but also
to induce them to start their production early in the sugar
year. The object appears to be also to induce the factories
to keep on producing the sugar all the year-round, which
they may perhaps not have done otherwise. Running the
factories during the off-season (off-season means October-
November period and then again the period from May June to
September), may have its own problems which may increase the
cost of production. [770 F]
1.03.The main issue is whether the words "the quantity of
sugar produced during the corresponding period.." do not
take in the case of a factory which has not produced any
sugar whatsoever during the relevant corresponding period?
It does take in. Holding otherwise would have this absurd
consequence: a factory which has produced, say, just one
quintal of sugar during the relevant corresponding period
and has produced 1000 quintals during October-November, 1972
would qualify for the rebate on 999 quintals while another
factory which has not produced any sugar nil production
but has produced 1000 quintals during October- November,
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1972, would not qualify. [770 G-H]
1.04.The Idea behind the notification is to induce the
manufacturers to produce more in the current sugar year than
what they have produced in the previous sugar year or during
the previous corresponding period in the previous sugar
year, as the case may be. Where a factor; 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. [771 B-D]
761
1.05.The case of October-November appears to be rather an
exception. Normally, it appears, no factory owner commenced
the production of sugar in these months because of several
unfavorable factors. Indeed, these unfavorable factors
appear to be present to a large extent even during the
’months June to September. The notifications were evidently
meant to compensate the factory-owners for producing during
these months as well. 1772 C-D]
1.06.One must proceed on the assumption that every
industrialist and businessman would, ordinarily, like to
produce as much more as possible, since, normally speaking,
more production means more profits. [772 E]
1.07.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. [771 D]
1.08.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). It is only that the
factory need not necessarily have worked during each of the
corresponding periods in the base year; it is enough if it
has worked in the base year. [771 E-F]
1.09.The interpretation placed upon the said notifications
by the majority of the High Courts is the correct one. The
view taken by the Karnataka High Court in its Judgment under
appeal in Civil Appeal Nos. 3831-32 of 1988 and the view
taken by the Patna High Court in ill Civil Writ Jurisdiction
Case No. 865 of 1966 are not correct. [772 F]
1.10.The basis for the percentages prescribed in the
Notification dated 12th October. 1974 the average production
of the previous five years and not the excess production.
By way of illustrates, take a factory which produces 2500
tons during the period Dec.1, 1974 to Sept. 30, 1975 as
against the average production of 1000 tons during the
corresponding periods in the five previous sugar years. Out
of 2,500 quintals produced during the said period in the
current sugar year (December 1, 1974 to September 30, 1975),
the average of the corresponding periods of the five
previous sugar years ie., 1000 quintals should be deducted
first, which means the excess production during the said
period during the current year is 1500 quintals. 7.5% of
1000 quintals is 75 quintals. On this quantity
762
of 75 quintals, the rate of rebate as per sub-clause (a)
will be Rs. per quintal in the case of free sale sugar and
Rs. 5 per quintal in the case of levy Sugar. Next 10% of
excess production means 100 quintals which would be eligible
for rebate under sub-clause (b) at the rate of Rs. 40 per
quintal In the case of free sale sugar and Rs. 10 per
quintal in the case of levy sugar. The next 100 quintals
would be eligible for rebate under sub-clause (c) at the
rate of Rs. 50 per quintal in the case of free sale sugar
and Rs. 14 per quintal in the case of levy sugar. Then
again the next 100 quintals would be eligible for rebate
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under sub-clause (d) at the rate of Rs. 60 per quintall in
the case of free sale sugar and Rs. 18 per quintal in the
case of levy sugr. The balance of 1125 quintals would
qualify for rebate under sub-clause (e) at the rate of Rs.
82 per quintal in the case of free sale sugar and Rs. 22 per
quintal in the case of levy sugar. [774 B-E]
Etikoppaka Co-operative Agricultural Society v. Union of
India, 1982 E.L.T. 19 (A.P.); 1986 (26) E.L.T. 904 (Bombay);
1982 (59) E.L.T. 409 (Allahabad); 1982 E.L.T. 19 (Punjab &
Haryana); 1986 (24) E.L.T. 259 (Madras) and 1987 (30) E.L.T.
260 (Orissa), approved. [768 H, 769 A]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1718 of 1984.
From the Order dated 17.11.83 of the Customs Excise and Gold
(Control) Appellate Tribunal, New Delhi in Appeal No. ED
(SB) (T) 338/78-D (Order No. 698/83-D).
A.K. Ganguli, B. Sen, A.K. Chitale, B.R.L. Iyengar J.
Ramamurti, Mrs. Radha Rangaswami, P. Parmeswaran, C.V. Subba
Rao, C. Ramesh, Virender Kaushal, Praveen Kumar, Vivek
Gambhir, S.K. Gambhir, P.H. Parekh, B.N. Agarwal, A.V.
Phadnis, Kh. Nobin Singh, M. Veerappa, Ashok Sagar,
Ravinder Narain, D.N. Misra (For JBD & Co.,) E.C. Vidyasagar
for L.R. Singh, R. Vaigai and R.K. Maheshwari for the
appearing parties.
The Judgment of the Court was delivered by
B.P. JEEVAN REDDY, J. With a view to induce the Sugar
Factories in the country to produce more and also to
commence their operations early in the year, the Government
of India have been issuing notifications, from time to time,
providing for rebate in the Excise Duty in certain
circumstances. These notifications were issued by the
Central Government
763
in exercise of the power conferred by Sub-Rule (1) of Rule 8
of the Central Excise Rules, 1944. We are concerned in
these appeals with four such notifications namely (1) the
Notification dated 28.9.72 (applicable to the Sugar Year
1972-73), (2) Notification dated 4.10.73 (applicable to the
Sugar Year 1973-74), (3) Notification dated 12.10.74
(applicable to the Sugar Year 1974-75) and (4) the
Notification dated 30.9.76 (applicable to the Sugar Year
1976-77). ’Sugar year’ means the year commencing on 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.
In so far as it is material, the notification dated 28.9.72
and the notification dated 4.10.73 are similar. So are the
notifications dated 12.10.74 and 30.9.76. It would be
appropriate if we set out the notification dated 28.9.72 in
its entirety
"Notification No. 203172 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 failing under sub-item (1) of
Item No.1 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
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------------------------------------------------------------
S. No. Description of Sugar Duty of Excise
(1) (2) (3)
------------------------------------------------------------
1. Sugar produced in a factory during the Rupees
period commencing from the 1st day of forty per
October, 1972 and ending with the 30th quintal
day of November, 1972 which is in excess
of the quantity of sugar produced during
the corresponding period in 1971.
764
2.Sugar produced in a factory during the period
commencing from the 1st day of December, 1972
and ending with the 30th day of April, 1973 Rupees
which is in excess of 115% of the quantity twenty
of suggar produced during the period commencing per
from the 1st day of Decmber, 1971 and ending with quintal
the 30th day of April, 1972.
3.Sugar produced in a factory during the period
commencing from the 1st day of May, 1973 and Rupees
ending with 30th day of June, 1973 which is in twenty
excess of the quantity of sugar produced per
during the corresponding period in 1972. quintal
4.Sugar produced in factory during the period
commencing from the 1st day of July 1973 and
ending with the 30th day of September, 1973 Rupees
which is in excess of the quantity of sugar twenty
produced during the corresponding period in 1972. per
quintal
-----------------------------------------------------------
Provided that the exemption under this
notification shall not be admissible to a
factory
(a) which did not work during the base
period, or
(b) which had only a trial run in the base
period, or
(c) which commences production for the first
time on or after the 1st day of October, 1972
:
Provided further that in computing the
production of sugar during the periods
mentioned in column (2) of the said Table,
(a) the data, as furnished in Form R.G. 1
prescribed in Appendix I to the Central Excise
Rules, 1944, or in such other record as the
Collector may prescribed under rule 53 or rule
173G of the said rules, shall be adopted :
765
(b) any sugar obtained from reprocessing of
sugarhouse products left over in process at
that end of the base period or earlier shall b
e
taken into account ; and
(c) any sugar obtained by refining gur or
Khandasari sugar, or any sugar obtained by
reprocessing of defective or damaged sugar or
brown sugar, if the same has already been
included in the quantity of sugar produced,
shall not be taken into account.
Explanation I- A factory shall be deemed to
have had a trial run during the base period
only if, on first going into production, the
period during which actual crushing was done
during the base period was less than 40 per
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cent of the average duration of the-season in
the State in which the factory is situated.
Explanation 11 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
operation 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 28.9.72 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 the rate of rupees forty per quintal in
so far as the excess production is concerned.
(2) Rebate for the period 1st December 1972 to 30th April,
1973 was
766
available at the rate of rupees twenty per quintal provided
the production of sugar during the said period was in excess
of 115% of the quantity of sugar produced by the said
factory during the corresponding period in the previous
Sugar Year, in so far as the excess production is concerned.
(3) For the months of May and June 1973 rebate at the rate
of rupees twenty per quintal was available provided the
factory produced more sugar than it produced during the
corresponding months in the previous Sugar Year. The said
rebate was available again only with respect to the excess
production.
(4) For the period commencing from 1st July, 1973 and
ending with 30th of September, 1973, rebate was available at
the rate of rupees twenty per quintal provided the factory
produced sugar in excess of the quantity produced during the
corresponding period in the previous Sugar Year. This
rebate too was confined to the excess production.
However, the benefit of the rebate mentioned in any of the
clauses aforesaid was not available to a factory which inter
alia did not work during the ’base period’. The expression
’base period’ was defined in Explanation 11. It meant the
period commencing from the 1st day of october 1971 and
ending with the 30th day of September, 1972 (Previous Sugar
Year).
The sugar factories (concerned with the sugar year 1972-73)
did not produce any sugar in one or the other of the four
blocks (mentioned in the table contained in the
Notification) in the base year (previous sugar year).
During the current sugar year, however, they produced
certain quantity of sugar during that block-period. To be
more precise, take factory A. It produced 1000 quintals of
sugar in the months of October-November, 1972 (Block-period
(1) but had not produced any sugar whatsoever in the
corresponding period (October-November,’ 1971) in the base
year. The question arose whether in such a situation,
Factory A was entitled to the benefit of rebate provided in
Clause (1) of the Table contained in the aforesaid
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notification with respect to the said 1,000 quintals ? The
contention of the factory was that it was so entitled,
whereas according to the Revenue, it was not.
It is brought to our notice that even before 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
767
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
entire production achieved during the month of
October and November, 1971. As th
e
Notification issued this year is also on
similar lines, the Committee presume that the
clarification given by the Board last year
will apply to the Notification issued this
year also, i.e., where a factory has worked in
the base period (1st October, 1971 to 30th
September, 1972) it will be entitled to the
full rebate on its entire production during
the various periods mentioned in the
Notification, although during the
corresponding periods in the last season, the
production may be nil.
The Committee shall be glad if you kindly
confirm whether their above presumption is
correct.
Thanking you for a line in reply’.
In this letter dated 1st November, 1972 the Ministry of
Finance intimated the Committee that the presumption made by
the Committee is confirmed in respect of the established
factories only. Later on, however, the Government of India
revised their opinion which has led to the present
controversy.
768
It is brought to our notice that the sugar factories are
governed by and follow the procedure prescribed by Rule 173-
G of the Central Excise Rules, which rule occurs in Chapter
VII-A ’Removal of Excisable Goods on Determination of Duty
by producers, Manufacturers or Private WareHouse Licencees."
Rule 173 G requires every assessee to keep an accountcurrent
with the Collector separately for each excisable goods, in
the suc form and manner, as the Collector may require. The
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rule requires the assessee to make credit periodically in
such account-current, by cash payment into the treasury, so
as to keep the balance in such account-cumrent sufrent to
cover the duties due on the goods intended to be removed at
any time. Every such assessee has to pay the duty
determined for each consignment by debit to such account
current before removal of goods. The Rules further require
every assessee to furnish a monthly return in the prescribed
form, on the basis of which, assessment is completed by the
appropriate officer.
Coming back to the facts of these appeals, the claim for
rebate made by these factories was allowed in the first
instance but later proceedings were initiated to recover
back, or re-adjust, as the case may be, the benefit already
allowed. This was the phenomenon all over the country.
These disputes were carried to High Courts. The main
dispute was the same 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.
The first of the reported decisions is of the Andhra Pradesh
High Court (Chinnappa Reddy, J., as he then was) in
Etikoppaka Co- operative
769
Agricultural Society v. Union of Inida, 1982 E.L.T. 19. The
reasoning in the said Judgment has been followed by most of
the other High Courts. See 1986 (26) E.L.T. 904 (Bombay);
1982 (59) E.L.T. 409 (AHahabad) ; 1982 E.L.T. 19 (Punjab &
Haryana); 1986 (24) E.L.T. 259 (Madras) and 1987
(30) E.L.T. 260 (Orissa).
Shri Ganguli, learned counsel for the Union of India
contends as follows : Language of the Notifications
(pertaining to the year 1972-73 and 1973-74) is quite clear
and unambiguous. The benefit of rebate is available only
where the "sugar produced in a factory during the period
commencing from the 1st day of October, 1972 and ending with
the 30th day of November, 1972 which is in excess of the
quantity of sugar produced during the corresponding period
in 1971" to take clause (i) of the Notification relating to
1972-73. The clause contemplates and is based on the
premise that sugar is produced during October- November,
1972 as well as October-November, 1971. If no sugar was
produced during the corresponding period in the previous
sugar year (October-November, 1971), the very clause is
inapplicable. The contention of the factory-owners, which
has no doubt been accepted by a majority of High Court, does
voilence to the plain language of the clause. The
interpretation placed by the factoryowners leads to certain
absurd consequences. Learned counsel gave more than one
illustration to emphasise his submission. Take a. case
where a factory has produced one thousand quintals of sugars
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in October-November 1971 and has also produced one thousand
quintals in October-November 1972. In such a situation the
factory would not get any rebate in terms of the
notification dated 28.9.72, whereas another factory which
may not have produced any sugar whatsoever in October-
November 1971 but has produced one thousand quintals of
sugar in October-November 1972, gets the rebate at the rate
of rupees forty per quintal. This would really amount to,
says the counsel, punishing the first factory more
efficient factory for producing the sugar in the previous
year And to rewarding the second one the indolent factory
which did not produce any sugar during OctoberNovember,
1971. Another illustration given by the learned counsel is
this; a factory had produced five thousand quintals of sugar
during the period 1st December, 1971 to 30th April, 1972; it
produces the very some 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
770
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 Clause (1) of the first Proviso in
the said notification should be harmonised with the several
clauses mentioned in the Table and that no interpretation
should be adopted which renders any part of the said
notification superfluous.
We find ourselves unable to agree with the learned counsel
for the Union of India. While we agree that the several
clauses in the Notification must be read together,
harmonised and reasonably understood, we cannot also ignore
the underlying object and purpose of the notification. We
Also agree that an interpretation which leads to absurd
consequences should be avoided. Even so, we are afraid, we
cannot agree with the learned counsel. The object behind
the notification was evidently not only to induce the
factories to produce more sugar but also to induce them to
start their production early in the sugar year. The object
appears to be also to induce the factories to keep on
producing the sugar all the year-round, which they may
perhaps not have done otherwise. Running the factories
during the off-season (we are told, off-season means
October-November period and then again the period from May-
June to September), may have its own problems which may
increase the cost of production. Be that as it may, the
main issue is whether the words " the quantity of sugar
produced during the corresponding period....... do not take
in the case of a factory which has not produced any sugar
whatsoever during the relevant corresponding period ? On a
consideration of the rival points of view, we are of the
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opinion that it does take in. Holding otherwise would have
this absurd consequence : a factory which has produced, say,
just one quintal of sugar during the relevant corresponding
period and has produced 1000 quintals during October-
November, 1972 would qualify for the rebate on 999 quin-
771
tals while another factory which has not produced any sugar
nil production but has produced 1000 quintals during
October- November, 1972, would not qualify. How does this
interpretation advance the purpose of the notification, is
difficult to appreciate.
Coming to the second illustration given by the learned
counsel, we must say that the idea behind the said
notification is to induce the manufacturers to produce more
in the current sugar year than what they have produced in
the previous sugar year or during the previous corresponding
period in the previous sugar 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 benefit of the said
rebate would not be available to a factory ’which did not
work during the base period." Why does it say so? What is
its meaning and implication? It is only that the factory
need not necessarily have worked during each of the
corresponding periods in the base year; it is enough if it
has worked in the base year.
We may point out that a majority of the High Courts in the
country have adopted the very same interpretation as has
been placed by us.
It is then argued by the learned counsel for the appellant
that exemption notifications should be strictly concluded.
There is no quarrel with the proposition but there is
another equally valid principle that such notifications
should be given their due effect, keeping in view the
purpose
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underlying. We must reiterate that no factory owner would
keep his factory idle during a particular period only with a
view to produce sugar during the same period in the next
sugar year and earn rebate in the next year. More
particularly, it can not reasonably be expected that a
factory-owner would deliberately keep his factory idle
during the peak production period (December to April) only
with a view to produce sugar during that period next year
and earn rebate in such next year. It would be unrealistic
to say so. Actually these notifications were being issued
every year confined to that year. They were being issued
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just on the eve of the sugar year or a few days after the
commencement of the sugar year and there were variations in
the relevant clauses from year to year. Construed
realistically, we see no room for any absurdity resulting
from our interpretation’ The case of October-November
appears to be rather an exception. Normally, it appears, no
factory-owner commenced the production of sugar in these
months because of several unfavorable factors. Indeed,
these unfavorable factors appear to be present to a large
extent even during the months June to September. These
notifications were evidently meant to compensate the
factory-owners for producing during these months as well.
As stated already, one must proceed on the assumption that
every industrialist and businessman would, ordinarily, like
to produce as much more as possible, since, normally
speaking, more production means more profits.
For the above reasons, we are of the opinion that the
interpretation placed upon the said notifications 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.
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 12.10.74 (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.
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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:
There is a minor controversy with respect to the working of
Clause (2) in Notification No. 146/74 dated 12.10.74
relating to the sugar year 1974-75. Clause (2) the table
contained in the notification reads as follows:
TABLE
------------------------------------------------------------
No. Description of Sugar Duty of excise
------------------------------------------------------------
1 2 Free Sale Levy of Sugar
Sugar
3 4
------------------------------------------------------------
1.........................
2. Sugar produced in a factory during the period
commencing on the 1st day of December, 1974, and ending with
the 30th day of September, 1975 which is in excess of the
average production of the corresponding period of the
preceding five sugar years, that is,
(a) on excess production upto Rs. 20/- per Rs. 5/- per
7.5% quintal quintal
(b) on excess production on the Rs. 40/-per Rs. 10/- per
next 10% quintal quintal
(c) on excess production on the Rs.501-per Rs. 14/- per
next 10% quintal quintal
(d) on excess production on the Rs.60/-per Rs. 18/- per
next 10% quintal quintal
(e) on excess production beyond Rs. 82/-per Rs. 22/- per
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37.5% quintal quintal
============================================================
Mr. Ganguli, learned counsel for the Union of India says
that some of the Courts have applied the percentages
mentioned in sub-clauses (a) to (e) to the excess production
and not to the average production of the preceding five
sugar years. We may take an illustration to explain what
the learned counsel says. Take a case. where the average
production of a factory during the corresponding period
(December 1 to September 30) of
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the preceding five sugar years is 1000 quintals. That
factory produces 2,500 quintals during the period December
1, 1974 to September 30, 1975. In such a case, the
ascending percentages mentioned in sub-clauses (a) to (e) of
clause (2) have to be applied for working out the rebate.
According to us, it must be done in the following manner,
keeping in mind that the basis for these percentages in the
average production of the previous five years and not the
excess production. Out of 2,500 quintals produced during
the said period in the current sugar year (December 1, 1974
to September 30, 1975), the average of the five previous
sugar years i.e., 1000 quintals should be deducted first,
which means the excess production during the current year is
1500 quintals. 7.5% of 1000 quintals is 75 quintals. On
this quantity of 75 quintals, the rate of rebate as per sub-
clause (a) will be Rs. 20 per quintal in the case of free
sale sugar and Rs. 5 per quintal in the case of levy sugar.
Next 10% of excess production means 100 quintals which would
be eligible for rebate under sub-clause (b) at the rate of
Rs. 40 per quintal in the case of free sale sugar and Rs. 10
per quintal in the case of levy sugar. The next 100
quintals would be eligible for rebate under sub-clause (c)
at the rate of Rs.50 per quintal in the case of free sale
sugar and Rs. 14 per quintal in the case of levy sugar.
Then again the next 100 quintals would be eligible for
rebate under sub-clause (d) at the rate of Rs. 60 per
quintal in the case of free sale sugar and Rs. 18 per
quintal in the case of levy sugar. The balance of 1125
quintals would qualify for rebate under sub-clause (e) at
the rate of Rs. 82 per quintal in the case of free sale
sugar and Rs. 22 per quintal in the case of levy sugar.
This is the interpretation and understanding contended for
by Shri Ganguli and we must say that none of the counsel for
the factory-owners’ disputed the same. It is accordingly
directed that the above method shall be followed in working
out clause (2) of the notification dated 12.10.74.
Accordingly all the civil appeals except Civil Appeal Nos.
3831- 32 of 1988, fail and are dismissed. Civil Appeals No.
3831-32 of 1988 are allowed. The authorities will take
action in accordance with this judgment. There will be no
order as to costs.
V.P.R.
CA Nos. 3831-32/88 allowed.
Rest of the appeals dismissed.
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