Full Judgment
2. The Respondent submitted a claim of rebate of duty on excess-production by it on 6545 quintals of sugar in terms of Notification 203/72-C.E., as amended. This Notification provides for rebate on sugar produced from 1-3-1973 to 30-4-1973 which is an excess of the sugar produced during the corresponding period 1972.
3. The Assistant Collector, Mazaffarpur reduced rebate claimed by Rs. 8,860/- on the ground that the sugar produced during the period from 1-3-1972 to 30-4-1972 was 3171 quintals and not 2645 quintals as claimed by the Respondent. In appeal, the Collector (Appeals) over-ruled the Assistant Collector of Central Excise. He observed that in the month of March/April, 1972, the appellant produced 3717 quintals of sugar of which 2479 quintals was unmarketable. This quantity was re-processed in 1973, resulting in recovery of 2474 quintals of marketable sugar. This quantity should be included in 1973 production.
He cited the judgment of the Patna High Court in the Respondent's own case to say good sugar recovered in one year by re-process, defective sugar produced in the earlier year should be treated as production of the year of re-processing. He, therefore, directed the Assistant Collector, Central Excise to work out the rebate according to these parameters. The appeal is against this Order.
4. There was no one for the Respondent and no request for adjournment received. The appeal is, therefore, being disposed of on merits.
5. The ground in appeal which was reiterated by Shri Mohan Lal, JDR is that sugar is defined in the sucrose content and if this criterion is satisfied, the marketability or otherwise of the sugar is of no significance, and the defective sugar having been cleared when the reprocess would attract the duty. The operation of the Patna High Court's judgment has been stayed absolutely by the Hon'ble Supreme Court. He relies upon the decision of the Supreme Court in Saraswat Mali Sahakare Sakhar Karkhana Ltd. v. Union of India, 1994 (75) E.L.T.28 (SC). This judgment, however, is not applicable to this case as it deals with computing the average production.
6. It has been argued in the appeal that operation of the Patna High Court's judgment has been stayed by the Hon'ble Supreme Court by its order of January, 1982. The Departmental Representative was not able to inform us of the ultimate fate of the judgment. However, in that judgment, the Court had also relied upon its judgment in the Lotus Industries Ltd. case where it was held that re-processing of sugar amounted to 'manufacture'. It has not been argued that the operation of this judgment has also been stayed. It would, therefore, apply to the same effect as the judgment relied upon by the Collector (Appeals).
7. There is another aspect to the matter. Sugar for becoming liable to duty must conform to the definition in the Tariff. However, it must also be in addition marketable i.e. capable of being taken to the market for being bought and sold. If the sugar for some reason was defective and, therefore, could not be marketed, it cannot be considered to have reached stage where it is commercially known as 'sugar'. A distinction has to be made between sugar which originally did not reach a stage of marketability for whatever reason, have to be re-processed and sugar which was first marketable but owing to storage or other reasons became unmarketable and had to be re-processed. There may be some support for the Department's view in the latter situation.
In the former situation, however, the sugar must be considered to have been manufactured only when it became marketable. The appeal itself says that in the present case, the total production in 1972 season included 2479 quintals of yellow and brown sugar. It is this quantity which was re-processed in 1973. This lends support to the view that this quantity was not marketable in the form in which it was produced in 1972 and only reached this stage in the next year. It must, therefore, be considered the production of 1973.
8. In this view of the matter, the Collector's finding has to be upheld. We, therefore, dismiss the Department's appeal.