ORDER
V.T. Raghavachari, Member (J)
1. Show cause notice dated 15.5.79 was issued to M/s. Marathwada S.S.K. Ltd. with reference to their claim for incentive rebate on excess production during May, 1978 to September, 1989 in terms of notification No. 108/78 dated 28.4.78. It was mentioned therein that they did not fulfil the condition of Clause 5 of the notification and therefore did not appear to be eligible for the rebate claimed. They replied reiterating their eligibility. The Superintendent under order dated 20.6.79 rejected their claim holding that as they did not fulfil the conditions of Clause 5 of notification No. 108/78 they were not eligible for the incentive rebate claimed by them. On appeal the said order was set aside by the Appellate Collector under his order dated 15.12.80. He held that it was incorrect to say that they did not fulfil the conditions prescribed in Clause 5 of the notification. Alter setting aside the order of the Superintendent he remanded the matter to the Superintendent to work out the exact amount of rebate admissible and then credit the same to their PLA. The Central Government being of the view that the said order of the Appellate Collector was not legal, proper and correct issued notice dated 5.6.81 Under Section 36(2) of the Central Excises and Salt Act. The Central Govt. pointed out that any factory which was not in existence during all the 3 sugar years preceding the sugar year 1977-78 would not be entitled to benefit under the notification and since the factory of the respondents started working in December, 1976 only and did not therefore produce any sugar during whole of sugar years 1974-75, 1975-76 the same was not entitled to the benefit under the notification. The notice further pointed out that the factory would be barred from availing benefit under notification No. 108/78 by reason of Clause 6 thereto. The Central Govt. thus being tentatively of the view that the order of the Appellate Collector was wrong the notice required the respondents to show cause why the order of the Appellate Collector should not be set aside and thereafter such orders as was deemed fit should not be passed. The respondents replied refuting the tentative conclusion of the Central Govt. and reiterating their entitlement to the incentive rebate. The proceedings initiated under the said show cause notice were transferred to this Tribunal on the formation thereof and the said proceedings are the present deemed appeal before us.
2. We have heard Shri K.C. Sachar for the Department and Shri K.C. Sharma, Consultant for the respondents.
3. Before seeking to discuss the merits of the respective contentions it would appear to us to be proper to refer to an aspect of the proceedings before the lower authorities which appears to us to be rather curious. The respondents had lodged their claim for incentive rebate in terms of notification No. 108/78 by their letter dated 30.7.78 followed by a further letter dated 1/6.10.1978 giving the details required. From the paper book filed by the Department it appears that, evidently in connection with similar rebate claims filed by the various sugar factories, the Collector had sought instructions from the Govt. and that the Govt. by letter dated 25.4.79 addressed to the Collector of Central Excise, Pune informed him that the sugar factories which were not in existence during all the preceding 3 sugar years (preceding sugar year 1977-78) will not be entitled to rebate under notification No. 108/78. Evidently following the said instructions of the Govt. the Assistant Chief Accounts Officer of the Central Excise Collectorate, Pune had written to the Superintendent on 8.5.79. This letter of the Assistant Chief Accounts Officer, after referring to the rebate claim of the respondents and the letter dated 9.8.78 from the Collectorate regarding the same, reads as follows :
“On going through the Incentive rebate claim papers lodged by M/s. Marathwada Sahakari Sakhar Karkhana Ltd. Dongarkada, under Notification No. 108/78 dated 28.4.78 it is seen that the factory does not fulfil the condition of Clause-5 of the notification under reference. The factory is, therefore, not eligible for Incentive rebate under the said notification. In the circumstances, you may reject the claim of the factory by passing an appellable order. All the claim papers are returned herewith.”
It was evidently following the said instructions that the show cause notice dated 15.5.79 had been issued by the Superintendent to the respondents. It is curious that though, the Superintendent mentioned in the said notice that the factory did not fulfil the conditions of Clause 5 of the notification he did not choose to explain why they did not fulfil the said condition. Clause 5 of the notification reads as follows :
“5. Notwithstanding anything contained in this notification, a factory whose overall production of sugar during the 1977-78 sugar year does not exceed the average production of the preceding three sugar years shall not be entitled to any exemption of duty of excise under this notification. Where production in any of the preceding three years was nil, the average production shall be determined as under :-
The average production shall be worked out on the basis of the sugar year or years in which the factory had actually worked and the sugar year of years in which it did not work during the preceding three sugar years shall be ignored while arriving at the average.”
4. It may be noted that this Clause 5 does not in terms contain any stipulation that the factory should have been in existence during all the three preceding sugar years. As already mentioned, though the show cause notice of the Superintendent appears to have followed the instructions of the Govt. (which made reference to the need in the factory having been in existence during the 3 preceding sugar years) the show cause notice of the Supdt. gave no such interpretation as the basis for the notice but only blandly stated that the factory of the respondents did not fulfil the conditions of Clause 5 of the notification. Naturally in their reply the respondents did not go into the question of the need for the factory having been in existence during all the 3 preceding sugar years but went only into the question whether any sugar need have been produced during each of the 3 preceding sugar years. The order of the Superintendent on adjudication read merely as follows :
“I have gone through the (SIC) in this papers pertaining to the incentive rebate claim lodged by Marathwada S.S.K. Ltd., of Dongarkada and find that the factory does not fulfil the condition of Clause 5 of the notification No. 108/78 dated 28.4.78. The factory is, therefore, not eligible for incentive rebate under the said notification. I, therefore, reject the claim.”
It is curious that here also the Superintendent gives no reasons why he concluded that the factory of the respondents did not fulfil the conditions of Clause 5 of the notification but merely stated his conclusion that they did not.
5. Thus it appears that the Superintendent was entirely guided by the instructions of the Govt. and the Assistant Chief Accounts Officer and did not bestow his mind on the matter
6. It is evidently in these circumstances that when the respondents preferred their appeal to the Appellate Collector they, in referring to the order of the Superintendent (in paragraph 13 of their appeal) complained that he appears to have passed the order on the advice of the higher authorities and not bestowing his own mind. Thereafter they had referred to their discussions with the Superintendent and, on coming to know of the stand of the Department that, in order to be eligible for the rebate claimed, the factory should have been in existence during all the three preceding sugar years, put forward their own contentions against the said claim. We refer to these facts only to show that the initial order of the Supdt. would have been liable to be set aside on the very ground that it was not an order passed by the Superintendent functioning as a quasi-judicial authority after bestowing his mind to the problem but had been passed merely under instructions of superiors without giving any reasons for his conclusion.
7. The Appellate Collector had held in his order that Clause 3 of the notification provided that in determining the average production during the period May-September during the preceding three sugar years the period in which the factory did not work should be ignored and that there were similar provisions in Clause 5 also. He held that the years during which there had been no production on the part of the respondents had to be therefore ignored in accordance with the said provisions in working out the average production and therefore respondents were not disentitled to the rebate claimed, subject to proper quantification thereof by the Superintendent. In seeking to set aside the said order the Govt. have mentioned in their review notice that under the terms of the notification no factory would be entitled to the rebate claim unless it had been in existence during each of the 3 preceding years. Shri Sachar for the Department supports this contention while Shri Sharma for the respondents claims that this would not be a proper interpretation of the provisions of the notification. Clause 5 of the notification has been extracted supra.
8. In order to appreciate the contentions fully it would be proper to reproduce Clause 3 and 4 also. They read as under :
“3. Where during the period mentioned in column (1) of the said Table production in any of the preceding three sugar years was nil, the average production shall be determined as under :-
The average production for the said period in the preceding three sugar years shall be worked out on the basis of the period or periods in which the factory had actually worked during the said period and the period or periods in which it did not work during the said period shall be ignored while arriving at the average.”
“4. Where production during May to September in all the preceding three sugar years was nil, the entire production during May to September, 1978 will be entitled to the exemption under this notification.”
9. It may be seen that none of Clauses 3, 4 & 5 specifically referred to the existence of the factory during each of the 3 preceding sugar years as the condition precedent for eligibility under the notification. Hence the contention regarding existence of the factory during each of the 3 preceding sugar years had been raised merely as an inference arising from the terms of the notification. The question would therefore be whether such an inference would be a logical or justifiable inference.
10. In this connection we may refer to the judgment of the Bombay High Court in the case of Balasahib Desai S.S.K. Ltd. (1982 ELT 866) where with reference to notification No. 257/76 a similar contention had been raised on behalf of the Department. The Bombay High Court held that such a contention was untenable pointing out that the notification nowhere provided that the advantage is available only if the factory had been in existence during all the preceding 5 years and had produced sugar in each of the said preceding 5 years. But Shri Sachar for the Department refers us to another decision of the Delhi High Court in the case of Chaata Sugar Co. Ltd. The judgment reads as follows : “In our opinion the interpretation sought to be placed on the notification by the petitioner is not correct. When the notification speaks of production being nil in the previous 3 years it contemplates existence of a factory which did not produce. It does not mean that whether the factory was not in existence and so there was no production the exemption would be attracted. Dismissed”. Thus while the respondents rely on the judgment of the Bombay High Court the Deptt. relies on the judgment of the Delhi High Court. We may point out that in several earlier decisions this Tribunal had followed the judgment of the Bombay High Court, the judgment of the Delhi High Court not having been cited during those proceedings. The first paragraph of Clause 5 of the notification contains a stipulation as to which factory would be excluded from claiming benefit under the notification. It is stipulated thereunder that where the overall production of sugar during the 1977-78 sugar year did not exceed the average production of the preceding three sugar years the factory would not be entitled to benefit. It is significant that there is no such similar express provision to deny eligibility under the notification for a factory which had not been in existence during all the three preceding sugar years.
11. As to how the average production is to be computed the said Clause 5 itself makes provision that where production in any of the three preceding years was nil the average production was to be worked out ignoring the year in which there was no production. It is on the application of this stipulation for exclusion of the year during which there was no production that the average production of the respondents had been worked out for claiming the benefit of rebate.
12. In arriving at a conclusion whether that would be the reasonable interpretation of the provisions of the notification or whether it will be reasonable to conclude that the non-existence of the factory during any of the three preceding years would dis-entitle the factory to the benefit of the notification, the observations of the Andhra Pradesh High Court in the case of Etikoppaka Co-operative Agricultural Society Ltd. (1979 ELT-J 533) would be relevant. The argument in the said case was no doubt with reference to ineligibility based on the fact of no production itself and not on the basis of non-existence. The High Court observed as follows :
“If no sugar was produced during the corresponding period in the year 1972-73 his argument was that the notification was inapplicable. This interpretation appears to me to be prima facie unreasonable. If no sugar was produced during the relevant period in the year 1972-73 it must be said that the production of sugar during the relevant period was Nil and the excess sugar produced in the year 1973-74 should be calculated on that basis. The interpretation of the Central Government “counsel would lead to absurd results. It would mean that if a manufacturer produced even one ounce of sugar during the relevant period in, 1972-73 he would be entitled to rebate but not if he produced ‘NIL’ sugar.”
13. In our opinion an equally untenable result would follow if we are to hold that a factory would be entitled to benefit of the notification if it had been in existence during all the 3 preceding years but did not produce any sugar during a particular year but would not be entitled to such benefit if it had not produced any sugar during any of the 3 preceding years for the reason that it was not in existence.
14. It would therefore appear to us that acceptance of the interpretation of the terms of the notification as suggested in the review notice of the Govt. would lead to absurd results and that the suggested interpretation would therefore not be a logical interpretation. We are therefore satisfied that the ground cited in the review notice of the Govt. for setting aside the order of the Appellate Collector is not acceptable.
15. As earlier mentioned, the review notice contained another ground also to the effect that the terms of Clause 6 of the notification were attracted to the factory of the respondents. Except making such an assertion the notice gave no details as to how the provisions of Clause 6 of the notification were attracted to the factory of the respondents. Hence the said ground is also not acceptable for setting aside the order of the Appellate Collector.
16. In the result we hold that no grounds have been established to set aside the order of the Appellate Collector. This appeal is accordingly dismissed and the review notice dated 5.6.1981 is discharged.