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15. In respect of their production during the years 1971-72 to 1974-75 the appellants, M/s. South India Sugar Ltd. had been granted incentive rebate under the notifications providing therefor, the rebate having been granted in respect of brown sugar and damaged sugar also produced during the respective years. Subsequently two show cause notices dated 16-7-1979 and 18-9-1979 were issued to the appellants calling upon them to show cause why the incentive rebate earlier granted should not be reduced to the extent indicated in the notices and the balance recovered from them. This was on the basis that subsequent to the close of the respective years the appellants had processed the brown/damaged sugar to produce white sugar and in that process of re-processing the quantities as indicated in the show cause notices had been lost and therefore the rebate granted in respect of the quantities so lost was liable to be repaid. The appellants resisted the demand. The Assistant Collector under order dated 30-11-1980 over-ruled their defence and directed re-deposit of the amount of Rs. 8000.27 P demanded under the two show cause notices. The said order was confirmed by the Appellate Collector under order dated 14-8-1981. The appellants had preferred a revision petition to the Government against the said order. The same is the present deemed appeal before us.

17. The decision of the Andhra Pradesh High Court held that dirty sugar unfit for human consumption would not qualify for rebate. But brown/ damaged sugar would not be sugar unfit for human consumption. This would be evident even from the words of the notification which stipulate that white sugar obtained out of reprocessing of defective, damaged or brown sugar should not be taken into consideration if such defective, damaged or brown sugar had already been included in quantifying sugar produced for the purpose of granting rebate. That would clearly establish that damaged or brown sugar would be sugar eligible for rebate. Hence the ratio of the above decision would not apply to our case. The other case of Rohtas Industries Ltd. only laid down that sugar produced in one season and later reprocessed in the next season cannot be treated as sugar manufactured in the next season. Therefore that would also not govern the present issue.

18. Shri Lakshmikumaran on the other hand relies on the words in Sub-clause (c) of 2nd proviso to notification No. 203/72, dated 28-9-1972 and the corresponding proviso in notification No. 189/73, dated 4-10-1973. He points out that under the said provisos it has been specifically stipulated that any sugar obtained by reprocessing of defective, damaged or brown sugar should not be again taken into account for claiming rebate, if the said defective, damaged or brown sugar has already been included in the quantity of sugar produced for deciding the quantum of excess production. He, therefore, contends that while it is permissible under the scheme of the notifications to take into account the brown/damaged sugar produced during the relevant period for claiming rebate thereon also, it is not permissible to take into account the quantity of reprocessed sugar obtained later out of such brown/damaged sugar and this would indicate that the rebate already granted on the brown/damaged sugar should be allowed to continue. I am convinced that this reasoning is correct. The factory should not be denied its claim for rebate on the brown/damaged sugar lost during the reprocessing and at the same time be denied under the notification the benefit of rebate on the reprocessed sugar arising out of the said brown/damaged sugar.

19. In this connection Shri Lakshmikumaran further incidentally relies on the fact that in another appeal arising under exactly similar circumstances the same Appellate Collector had in his earlier order dated 19-2-1981 set aside another order of the Assistant Collector wherein, in respect of the very same appellants, a similar demand for recrediting a part of the rebate already granted had been upheld by the Assistant Collector., The Appellate Collector had in that earlier order held that the brown sugar is also a part of the total sugar produced during the particular season and the rebate as applicable to the excess total production during the season and that the processing of brown sugar and recovery of fine sugar there from during the next season is outside the scope of the incentive rebate granted already.