judgement:
Appeal No. 5897 of 1983.
From the Judgment and Order dated 25.7.1979 of the Madras High Court in Tax Case No. 54/76 (Reference No. 35/76.) T.A. Ramachandran and Janki Ramachandran for the Appellant.
J. Ramamurthy, P. Parmeswaran (NP), Ranbir Chandra (NP), T.V. Ratnam and Ms. A. Subhashini (NP) for the Respondent.
The Judgment of the Court was delivered by R.M. SAHAI, J.
Legal issues that arise for consideration in this appeal, directed against the decision of the High Court in Commissioner of Income Tax, Tamil Nadu vs Universal Radiators, on questions of law referred to it in a reference under the Income Tax Act (in brief 'the Act ') are, if the excess amount paid to the assessee due to fluctuation in exchange rate was taxable either because the payment being related to trading activity it could not be excluded under Section 10(3) of the Act even if it was casual and non recurring in nature or it was stock in trade, therefore, taxable as revenue receipt or in any case the compensation for the loss of goods could not be deemed anything but profit.
Shorn of details the assessee, a manufacturer of radiators for automobiles booked copper ingots from a corporation in the United States of America for being brought to Bombay where it was to be rolled into strips and sheets and then despatched to assessee for being used for manufacture.
While the ingots were at sea, hostilities broke out between India and Pakistan and, the vessel carrving the goods was seized by the authorities in Pakistan.
The claim of the assessee for the price paid by it for the goods was ultimately settled in its favour by the insurer in America.
Meanwhile the Indian Rupee had been devalued and, therefore, in terms of rupees the appellant firm got Rs. 3,43,556 as against their payment 780 of Rs. 2,00,164 at the old rate.
The difference was credited to profit on devaluation in the Profit and Loss Account.
The claim of the appellant that the difference being a casual receipt and non recurring in nature, it was not liable to tax, was not accepted by the Income Tax Officer.
In appeal the Appellate Assistant Commissioner was of opinion that the receipt was one which did not arise directly from carrying on business by the assessee but was incidental to it.
But he did not find any merit in the submission that the ultimate realisation was in nature of capital gains and not revenue receipt.
In further appeal the Tribunal held that when the goods were seized by the Pakistan authorities the character of the goods changed and it became sterlised and, therefore, it ceased to be stock in trade of the assessee.
The Tribunal held that the devaluation surplus was in nature of.
capital receipt and not a profit made by the assessee in course of business.
It further found that the money which came to the assessee was as a result of the settlement of the insurance claim and, therefore, the profit that resulted from it could not be considered to have arisen in normal course of business.
When the matter came to the High Court, in its advisory jurisdiction, at the instance of the department, on the following questions of law, (i) Wether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law, in holding that the devaluation surplus earned by the assessee consequent to the settlement of the claim by the insurance company is not assessable as revenue receipt for the assessment year 1967 68 ? (ii)Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the profit earned by the assessee on account of devaluation of Indian Currency was not in the course of carrying on of the business or incidental to the business ? It did not agree with the Tribunal as according to it if the assessee had got the goods imported into India and sold them it would have got higher amount as a result of devaluation.
Therefore, it held that there could be no dispute that the assessee was liable to pay tax on difference of the sale price and the cost.
The High Court further held that the nature of the amount which came in the hands of the assessee was revenue receipt.
It 781 did not agree that the payment made to the assessee was otherwise than for business, as the whole transaction was part and parcel of the business carried on by the assessee and could not be described as extraneous to it.
The High Court thus negatived the claim of assessee for two reasons, one, the difference in the cost price and the sale price, and the other, that it was revenue receipt.
In observing that, 'If the assessee had got the goods imported into India and had sold them at a higher rate, which would have increased as a result of devaluation, then there can be no dispute that the assessee would be liable to tax on the difference between the sale price and the cost ', the High Court oversimplified the issue.
May be any profit or gain accruing to an assessee as a result of difference between the sale price and the cost price in a year is income.
And by that yardstick the devaluation surplus, irrespective of any other consideration, may be receipt which in common parlance may be income.
But liability to pay tax under the Act arises on the income accruing to an assessee in a year.
The word 'income ', ordinarily in normal sense, connotes any earning or profit or pin periodically, regularly or even daily in whatever manner and from whatever source.
Thus it is a word of very wide import.
Clause (24) of Section 2 of the Act is legislative recognition of its elasticity.
Its scope has been widened from time to time by extending it to varied nature of income.
Even before it was defined as including profits, gains, dividends and contributions received by a trust it was held to be a word, 'of broadest connotation ' which could not be 'understood in restricted or technical sense '.
The wide meaning of the word was explained by this Court in Raghuvanshi Mills Ltd., Bombay vs Commissioner of Income Tax, Bombay city, and it was emphasised that the expression, 'from whatever source derived ' widened the net.
But exigibility to tax is not the same as liability to pay tax.
The former depends on charge created by the Act and latter on computation in accordance with the provisions in the Act and the rules.
Surplus in consequence of devaluation of the currency was undoubtedly receipt, but the liability to pay tax on it could arise only if it was income for purposes of the Act and was not liable to be excluded from computation under any of the provisions of the Act or the rules framed thereunder.
Section 10 of the Act provided for exclusion of certain income from computation.
One of its subsection, which is relevant for this appeal, during the period under dispute, stood as under, In computing the total income of a previous year of any 782 person, any income failing within any of the following clauses shall not be included (3) any receipts which are of a casual and non recurring nature, unless they are (i) (ii)receipts arising from business or the exercise of a profession or occupation; or (iii) In substantive clause, an income which was casual and non recurring in nature was excluded from being charged as income of the assessee.
Due to use of word, 'and ', existence of both the conditions was mandatory.
Absence of any disentitled the assessee from claiming any benefit under the clause.
C Casual ' according to dictionary means 'accidental or irregular '.
this meaning was approved by this Court in Ramanathan Cheuiar vs Commissioner of Income Tax, Madras, Non recurring is one which is not likely to occur again in a year.
But an income even after satisfying the two conditions may still not have been liable to be excluded if it fell in one of the exceptions carved out by the proviso.
In other words, the receipt should not only have been casual and non recurring only but it should not have been 'receipts arising from business '.
To put it the other way, if an income arose in the usual course of business, then it would not have been liable for exclusion even if it was casual or non recurring in nature. 'Casual ', as explained earlier, means accidental or irregular.
But if the irregular or the accidental income arose as a result of business activity, then even if it was non recurring, it may not have fallen outside the revenue net.
The real test, therefore, was the nature and character of income which accrued to the assessee.
The casual nature of it or non recurring nature were only aids to decide if the nature of income was in the course of business or otherwise.
In Raghuvanshi Mills Ltd. (Supra) it was held by this Court that a receipt even if it was casual and non recurring in nature would be liable to tax if it arose from business. 'Business ' has been defined in Clause ' 13 of Section 2 of the Act as including 'any trade, commerce or manfacture or any adventure or concern in the nature of trade, commerce or manufacture '.
In Barendra Prasad Ray and Ors.
vs Income Tax Officer, it has been held, by this Court, that the expression, 783 'business ' is of very wide import and it means an activity carried on continuously and systematically by a person by the application of his labour and skill with a view to earning the income.
The width of the definition has been recognised, by this Court, even in S.G. Mercantile Corporation Pvt. Ltd. vs Commissioner of Income Tax and Commissioner of Income Tax vs Calcutta National Bank, And even a single venture has been held to amount to business and the profit arising out of such a venture has been held to be taxable as income arising from business.
In Commissioner of Income Tax, Mysore vs Canara Bank Ltd., (1967) LXIII ITR 328 it was held, by this Court, that where money was lying idle and the blocked balance was not employed for internal operation or for business by the bank the profit accruing to the assessee on the blocked capital due to fluctuation in exchange rate could not be held to be income arising out of business activity or trading operation.
The ratio reflects the rationale implicit in sub section (3) of Section 10 of the Act.
An income which was casual in nature could be brought in the revenue net only if it arose from business.
In other words the receipt or profit of the nature covered by Section 10(3) could be brought to tax if it was result of any business activity carried on by the assessee.
The assessee carried on business of manufacturing radiators and not ingots.
They were imported to be converted into strips and sheets at Bombay.
The link which could create direct relationship between the finished goods and raw material was snapped even before it reached Bombay.
Payment made for loss of such goods did not bear any nexus with the assessee 's business.
May be that if it would have reached, it could have been after conversion into strips and sheets used as raw material.
But so long it did not reach Bombay and was not converted into raw material, the connection it bore with the assessee 's business was remote.
And any payment made in respect of it could not be said to accrue from business.
In Strong and Company of Romsay, Limited vs Woodifield (Surveyor of Taxes), 5 Tax Cases p.215, a converse case where the assessee claimed deduction of certain payments made to a customer, for the injury caused to him by falling off a chimney due to the assessee 's servant 's negligence, it was held, "it does not follow that if a loss is in any sense connected with the trade, it must always be allowed as a deduction; for it may be only remotely connected with the trade or 784 it may be connected with something else quite as much as or even more than with the trade.
I think only such losses can be deducted as are connected with it in the sense that they are really incidental to the trade itself.
" The word 'from ' according to dictionary means 'out of.
The income thus should have accrued out of the business carried on by the assessee.
An income directly or ancillary to the business may be an income from business, but any income to an assessee carrying on business does not become an income from business unless the necessary relationship between the two is established.
What was lost on the seas was not raw material, but something which was capable of being converted into raw material.
The necessary nexus between ingots and radiators which could have resulted in income from ingots never came into being.
Thus any devaluation surplus arising out of payment paid for loss of ingots could not be treated as income from business of the.
assessee.
For deciding the next aspect, namely, if the excess payment due to devaluation could be treated as revenue receipt, two questions arise, one, if the ingots were stock in trade and other the effect in law of its being blocked or sterlised.
Stock in trade is goods or commodity in which the assessee deals in course of business activity.
Good or commodity may be capital or revenue depending on.
if it is bought or sold or is used or exploited by the assessee.
Since the ingots by itself were not raw material and were not usable by the assessee for the business of manufacturing radiators, unless they were converted into strips and sheets, they could not be treated as stock in trade.
The buying of the ingots by the assessee was not a part of its trading activity.
Income from goods purchased for business is not an income from business.
Ratio in State Bank of India vs Commissioner of Income Tar, Emakultam, relied on behalf of department is not helpful ' as the Bank of Cochin, as part of its banking business, had been purchasing cheque payment orders, mail transfers, demand drafts etc.
drawn in foreign currencies which were sold or en cashed through assessee correspondent banks in foreign currencies concerned and proceeds credited to the current account of the assessee and therefore the foreign exchange was held to be stock in trade of the assessee, and any increase in value of foreign currency resulting in excess credited to the a 'ssessee 's account as a result of devaluation was held to be in consequence of assessee 's business activity.
785 Even assuming it was stock in trade, it was held by this Court in Commissioner of Income Tax vs Canara Bank Lid, (supra) that stock intrade, if it gets blocked and sterlised and no trading activity could be carried with it, then it ceased to be stock in trade, and any devaluation surplus arising on such capital due to exchange rate would be capital and not revenue.
Applying the ratio of this case, the copper ingots, which even if assumed to be stock in trade, were blocked and sterlised due to hostilities between India and Pakistan, and, therefore, it ceased to be stockin trade and any surplus arising due to exchange ratio in the circumstances was capital receipt only.
Coming to the issue whether devaluation surplus earned by the assessee consequent on the settlement of the claim by the insurance company could be treated as revenue receipt, it may be stated that taxability on profit or deduction for loss depends on whether profit or loss arises in course of business.
The courts have maintained a distinction between insurance against loss of goods and insurance against loss of profits.
The latter is undoubtedly taxable as is clear from the decision in Raghuvanshi Mills (supra) where any amount paid by the insurance company 'on account of loss of profit ' was held taxable.
But what happens where the insurance company pays any amount against loss of goods.
Does it by virtue of compensation become profit and is taxable as such.
Taxability of the amount paid on settlement of claim by the insurance company depends both on the nature of payment and purpose of insurance.
Raghuvanshi Mills ' decision is an authority for the proposition where the very purpose of insurance itself is profit or gain.
Result may be the same where the payment is made for goods in which the assessee carried on business.
Any payment being accretion from business, the excess or surplus accruing for any reason may be nothing but profit.
(see the King vs B. C Fir and Cedar Lumber Company, Ltd. , Green (HM Inspector of Taxes) vs J. Gliksten & Son, Ltd Reports of Tax Gases Vol.14 p.365, Commissioner of Income Tax, Bombay City III vs Popular Metal Works & Rolling Mills (1983) ITR Vol.
142 p.361.
But where payment is made to compensate for loss of use of any goods in which the assessee does not carry on any business or the payment is a just equivalent of the cost incurred by the assessee, but excess accrues due to fortuitous circumstances or is a windfall, then the accrual may be a receipt, but it would not be income arising from business, and, therefore, not taxable under the Act.
In Commissioner of Inland Revenue vs William 's Executors, 26 Tax Cases p.23, 786 the distinction was explained thus, "A manufacturer can, of course, insure his factory against fire.
The receipts from that insurance will obviously be capital receipts.
But supposing he goes further, as the manufacturer did in that case, and insures himself against the loss of profits which he will suffer while his factory is out of action; it seems to me it is beyond question that sums received in respect of that insurance against loss of profits must be of a revenue nature.
" The assessee did not carry on business of buying and selling ingots.
The compensation paid to the assessee was not for any trading or business activity, but just equivalent in money of the goods lost by the assessee which it was prevented from using.
The excess arose onsuch payment in respect of goods in which the assessee did not carry on any business.
Due to fortuitous circumstances of devaluation of currency, but not due to any business or trading activity the amount could not be brought to tax.
The Appellate Tribunal in the instant case had found, "the profit on account of devaluation is not business profit or income as it has nothing to do with the business or trading activity of the assessee.
The profit arose since the clai m was settled by the Insurance Company and the Indian rupee was devalued.
Even without paying for the goods contracted for, the assessee by an extraordinary set of fortuitous circumstances earned a profit which by its very nature is causal and non recurring.
In this view of the matter the profit cannot be charged to tax." The High Court of Kerala in Commissioner of Income Tax vs Union Engineering Works, held : "In the instant case, the excess profit, as found by the Tribunal, was not a receipt arising from business; nor was it, as admitted on both sides, capital gains.
This was part of the compensation received by the assessee from the insurer for damage caused to its goods.
The claim for the compensation for damage caused to the goods had. been 787 settled with the insurer, and the sum, so settled did am include any excess profit.
The excess profit arose entirely due to the , devaluation.
This excess amount was in the nature of a windfall, being the unexpected fruit of devaluation, and it can not, therefore, be regarded as a receipt arising from business though it may be said in a sense to be a receipt in the course, of business.
We hold that the Tribunal had correctly held that the sum of Rs.13,455.75 received by the assessee was not a recipt arising from its business within the meaning of section 10(3)(ii) 'of the Income Tax Act, 1961.
" We are of the view that on the facts of that case, the High Court of Kerala was right in law in upholding the findings of the Tribunal while on the facts found in the instant case, the High Court, of Madras was wrong in law in reversing the well considered order of the Tribunal.
For reasons stated by us this appeal suceeds and is allowed.
Both the questions referred by the Tribunal to the High Court are answered in the affirmative, i,e, in favour of assessee and against the department.
The assessee shall be entitled to its costs.
N. V. K. Appeal allowed.

summary/full:
The appellant assessee a manufacturers of radiators for automobiles booked copper ingots from a corporation In the United States of America for being brought to Bombay where it was to be rolled Into strips and sheets and then despatched to the assessee for being used for manufacture.
While the ingots were at sea, hostilities broke out between India and Pakistan and, the vessel carrying the goods was seized by the authorities in Pakistan.
The claim of the assessee for the price paid by it for the goods was ultimately settled in its favour by the Insurer in America.
The Indian Rupee In the meanwhile had been devalued and, therefore, in terms of rupees the appellant firm got Rs. 3,43,556/ as against their payment of Rs. 2,00,164/ at the old rates.
The differnece was credited to profit on devaluation in the Profit and Loss Account.
The claim of the appellant that the difference being a causal receipt and non recurring In nature, and as such was not liable to tax, was not accepted by the IncomeTax Officer.
The Appellate Assistant Commissioner rejected the appeal of the assessee, being of the opinion that the receipt was one which did not arise directly from carrying on business by the assessee but was the incidental 776 to it, and not finding any merit in the submission that the ultimate realisation was in the nature of capital gains and not revenue recipt.
In further appeal by the assessee, the Tribunal held that when the goods were seized by the Pakistan authorities the character of the goods changed and it became sterilized and, therefore, it ceased to be stock intrade of the assessee, that the devaluation surplus was in nature of capital receipt and not a profit made by the assessee in the course of business, that the money which came to the assessee was as a result of the settlement of the insurance claim and, therefore, the profit that resulted from it could not be considered in the normal course of business.
The High Court in its advisory jurisdiction at the instance of the ' Department negatived the claim of the assessee for two reasons, one the difference in the cost price and the sale price, and the other that it was revenue receipt, and did not agree with the Tribunal as according to it if the assessee had got the goods imported into India and sold them it would have got higher amount as a result of devaluation, and held that there could be no dispute that the assessee was liable to pay tax on the difference of the sale price and the cost.
It further held that the nature of the amount which came in the hands of the assessee was a revenue receipt, and did not agree that the payment made to the assessee was otherwise than for business, as the whole transaction was part and parcel of the business carried on by the assessee and could not be described as extraneous to it.
In the assesses appeal to this Court, on the question whether the excess amount paid to the assessee due to fluctuation in exchange rate was taxable or not.
Allowing the appeal, this Court, HELD : 1.
The word 'income ', ordinarily in normal sense, connotes any earning or profit or gain periodically, regularly or even daily in whatever manner and from whatever source.
It is thus a word of very wide import.
Section 2(24) of the Income Tax Act is legislative, recognition of its elasticity.
Its scope has even widened from time to time by extending it to varied nature of income.
Even before it was defined as including profits, gains, dividends and contributions received by a trust it was held to be a word, 'of broadest connotation ' which could not be understood in restricted or technical sense. ' [781 D E] 777 Raghuvanshi Mills Ltd., Bombay vs Commissioner of Income Tax, Bombay City, , referred to.
[781 E] 2. 'Casual ' means accidental or irregular.
If the irregular or the accidental income arose as a result of business activity, them even if it was non recurring, it may not have fallen outside the revenue net.
The real test, is therefore, what was the nature and character of the income which accrued to the assessee.
The causal nature of it or non recurring nature were only aids to decide if the nature of income was in the course of business or otherwise.
[782 F] Barendra Prasad Ray and Ors.
vs Income Tax Officer, ; section G. Mercantile Corporation Pvt. Ltd. vs Commissioner of Income Tax, ; Commissioner of Income Tax vs Calcutta National Bank, and Commissioner of Income Tax, Mysore vs Canara Bank Ltd. (1967) LXIII ITR 328, referred to.
[782 G, H, 783 B] 3.
An income which was casual in nature could be brought In the revenue net only if it arose from business.
In other words the receipt or profit of the nature covered by Section 10(3) could be brought to tax if it was the result of any business activity carried on by the assessee.
[783 D] In the instant case, the assessee carried on business of manufacturing radiators and not ingots.
The ingots were imported to be converted into strips and sheets at Bombay.
The link which could create direct relationship between the finished goods and the raw material was snapped even before it reached Bombay.
Payment made for loss of such goods did not bear any nexus with the assessee 's business.
May be that if it would have reached, it could have been 'after conversion into strips and sheets used as raw material.
But so long as it did not reach Bombay and was not converted into raw material, the connection it bore with the assessee 's business was remote.
And any payment made in respect of it could not be said to accrue from business.
[783 E] Strong and Company of Romsey, Limited vs Woodifieid (Survevor of Taves), 5 Tax Cases p.215, referred to.
[783 F] 4.
An income directly or ancillary to the business may be an income from business, but any income to an assessee carrying on business does not become an income from business unless the necessary relationship 778 between the two is established.
[784 B] In the Instant case, what was lost was not raw material, but something which was capable of being converted into raw material.
The necessary nexus between ingots and radiators which could have resulted in income from ingots never came into being.
Thus any devaluation surplus arising out of payment paid for loss of ingots could not be treated as income from business of the assessee.
[784 C] section Income from goods purchased for business is not an income from business.
In the instant case buying ingots by the assessee was not a part of its trading activity.
[784 F] State Bank of India vs Commissioner of Imcome Tax, Ernakulam, , distinguished.
[784 F] 6.
Taxability on profit or deduction for loss depends on whether profit or loss arises in the course of business.
The courts have maintained a distinction between insurance against loss of goods and insurance against loss of profits.
The latter is undoubtedly taxable.
Taxability of the amount paid on settlement of claim by the insurance company depends both on the nature of payment and purpose of insurance.
[785 D E] 7.
Any payment being accretion from business, the excess or surplus accruing for any reason may be nothing but profit.
But where payment is made to compensate for loss of use of any goods in which the assessee does not carry on any business or the payment is a just equivalent of the cost incurred by the assessee, but excess accrues due to fortuitous circumstances or is a windfall, then the accrual may be a receipt, but it would not be income arising from business, and, therefore, not taxable under the Act.
[785 F G] Commissioner of Inland Revenue vs William 's Executors, 26 Tax Cases p.23, referred to.
[785 H] In the instant case, the assessee did not carry on business of buying and selling of ingots.
The compensation paid to the assessee was not for any trading or business activity, but just equivalent in money of the goods lost by the assessee which it was prevented from using.
The excess arose on such payment in respect of goods in which the assessee did not carry on any business.
Due to fortuitous circumstances of devaluation of currency, but not due to any business or trading activity the amount could not 779 be brought to tax.
[786 C D] Commissioner of Income Tax vs Union Engineering Works, , approved.
[786 G]


judgement:
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 (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 section 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 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 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 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 vs Union of Inida, The reasoning in the said Judgment has been followed by most of the other High Courts.
See ; 1982 (59) E.L.T. 409 (AHahabad) ; & Haryana); and 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 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 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 772 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 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.
773 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 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 774 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.

dataset_name: IN-Abs

summary/full:
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 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.
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, 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.
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 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 vs Union of India, ; ; 1982 (59) E.L.T. 409 (Allahabad); & Haryana); and 1987 (30) E.L.T. 260 (Orissa), approved.
[768 H, 769 A]


judgement:
Appeal No. 1496 of 1993.
From the Judgment and Order dated 20.2.1985 of the Orissa High Court in First Appeal No.139 of 1974 Raj Kumar Mehta for the Appellant.
The Judgment of the Court was delivered by B.P. JEEVAN REDDY, J.
Heard the counsel for the appellant.
None appears for the respondent though served.
Leave granted.
This appeal by the Orissa State Electricity Board is preferred against the judgment of the Orissa High Court allowing partly an appeal preferred .by the respondent.
The dispute pertains to the liability of the consumer (respondent in this appeal) to pay the minimum charges during the period subsequent to the date of disconnection of supply of energy to him for the non payment of electricity dues.
The respondent is an industry.
It entered into an agreement with the appellant for supply of electricity on March 5, 1965.
The agreement was valid for a period of five years.
He started availing of the energy with effect from July 31, 1965.
The supply of his industry was disconnected on April 30, 1968 for non payment of electricity charges.
Since the consumer also failed to pay the minimum charges for the period subsequent to the date of disconnection, the Board filed a suit for the amount due on account of the electricity consumed between April 1, 1968 and April 30, 1968 and for the minimum charges for the period May 1, 1968 to March 5, 1970.
(It may be remembered that the agreement between parties was valid upto March 5, 1970).
The Trial Court decreed the suit as prayed for along with interest 862 of 6% per annum on the amount decreed from the date of suit till the date of decree and also future interest at the same rate till full satisfaction.
On appeal, the High Court sustained the decree of the Trial Court only for the period upto the date of disconnection (April 30, 1968) but disallowed the claim for the period subsequent to the date of disconnection.
The reasoning of the High Court is that inasmuch as the supply was disconnected and the respondent consumer did not avail of any energy whatsoever during the period subsequent to the disconnection, it is not liable to pay the minimum charges.
In this appeal, it is contended by the learned counsel for the appellant that the question arising herein is concluded in favour of the Board by the decision of this Court in Bihar State Electricity Board, Patna and Ors.
vs M/s Green Rubber Industries and Ors., [1990] 1 S.C.C. 731.
On a perusal of the judgment, we find that was also a case where the claim inter alia pertained to the period subsequent to the date of disconnection till the expiry of the agreement.
In that case too, minimum charges were claimed by the Board even for the period during which the supply remained disconnected and no energy whatsoever was availed of by the consumer.
We also find that clause (4) of the agreement considered ' in the said decision and clauses (6) and (13) of the agreement concerned herein are substantially same.
Clause (13) of the agreement between the parties hereto does oblige the consumer to pay a certain minimum charges in any event.
The clause reads as follows: "Clause 13.
The consumer shall (subject to the provisions hereinafter contained) pay to the Engineer for the power demand and electrical energy supplied under this Agreement, the charges to be ascertained as mentioned below viz. (Government resolution on tariff to be inserted here) LARGE INDUSTRIES: For demand of 125 K.V.A. and above for supply at 11 K.V. at (i) Rs.5.50 paise per K.V.A. per month plus (ii) Rs.0.08 paise per K.W.H. per month subject to an overall maximum rate of Rs.0.09 paise per K.W.H. and 863 without prejudice to payment of minimum charge of 75 per cent of the contract demand at the above rate of Rs.5.50 paise per K.V.A. per month and subject further to absolute minimum payment on 125 K.V.A. in the first part of the tariff.
For less than 250 K.V.A the demand may be metered in K.W. and charged for at Rs.6.00 per K.W. per month.
Besides the charges for K.W.H. consumed at the rate specified above.
For supply at M.T. less than 11 K.V.A and M.T. less that 11 K.V.A. and M.T. the above rate will be increased by 10%.
" The reasons for such a stipulation and its justifiability are duly and fully explained by this Court in the aforesaid decision.
It is not necessary for us to reiterate the same.
The appeal is accordingly allowed.
The Judgment of the High Court is set aside.
The judgment and decree of the Trial Court is restored.
No costs.
T.N.A. Appeal allowed.

summary/full:
The respondent industry entered into an agreement with the appellant Board for supply of electricity on 5th March, 1965.
Under the agreement, which was valid for five years i.e. upto 5th March 1970, consumer was obliged to pay certain minimum charges in any event.
However, on 30th April, 1968 supply of electricity to respondent was disconnected for non payment of electricity charges.
Since the respondent also failed to pay the minimum charges for the period subsequent to the date of disconnection, the Electricity Board riled a suit for the amount due on account of the electricity consumed upto April 30, 1968 and for the minimum charges from May 1, 1968 to March 5, 1970.
The Trial Court decreed the suit.
The respondent preferred an appeal before the High Court which sustained the Trial Court 's decree only for the period upto the date of disconnection but disallowed the claim for the period subsequent to the date of disconnection on the ground that since the respondent did not avail of any energy whatsoever during the period subsequent to the disconnection it was not liable to pay the minimum charges for that person.
In appeal to this Court it was contended on behalf of the Electricity Board that in view of the judgment of this Court in the case of Bihar State Electricity Board, Patna and Ors.
vs M/s Creen Rubber Industries and Ors., [1990] 1 S.C.C. 731 the respondent was liable to pay the minimum charges for the period subsequent to disconnection.
861 Allowing the appeal and setting aside the order of the High Court, this Court, HELD: Clause (13) of the agreement between the parties does oblige the consumer to pay a certain minimum charges in any event.
The judgment and decree of the Trial Court is restored.
[862 E, 863 D] Bihar State Electricity Board, Patna & Ors.
vs M/s Green Rubber Industries and Ors., [1990] 1 S.C.C. 731, relied on.