P L D 1988 Lahore 344 (PLP)

(i) (ii) Having failed to take stock of the situation at the proper time, the petitioner failed to procure and remelt gur when its prices were well within its reach. (ii) (iii)The petitioner did not make any attempt to use khandsari as . substitute of sugarcane. (iii) (iv)The petitioner could only produce 30% of the notified capacity even after utilising 75% of the crushing season. (iv) (v)He accordingly, allowed a further sum of Rs.6,38,400 as abatement in addition to the claim earlier allowed. 6. 1 have seen the original file which contains the material on the basis of which the learned Second Secretary passed Tile order, This shows that in spite of best efforts and support from the administration and the M.P.As., the mill could not get adequate quantities of sugarcane and that they even went to the extent of requesting the Deputy Commissioner to allow them to stop crushing the young sugarcane (seeds), as that would have a bad effect in the next season. The file also shows that the ban imposed by the District Magistrate, Bahawalnagar, on the manufacture of gur, shakKar and khandsari from sugarcane throughout Fort Abbas, Chishtian and BahawaInagar Tehsils was only effective from 6‑1‑1973 to 30‑1‑1973, as the said order was set aside by the Lahore High Court, Bahawalpur Bench, on 30‑1‑1973. The petitioner mill thus had only 25 days to purchase sugarcane. The report also shows that the petitioner mill, though it worked for 125 days, it could not work continuously for 24 hours and if the total hours that the mill actually worked was divided by 24, the mill can only be said to have worked continuously for 66 days.

7. In the light of this report the following position emerges:‑ (i) There was an acute shortage of sugarcane throughout the whole season. (ii) Due to acute shortage of sugarcane, the prices of gur, shakkar and Khandsari were very high. (iii) (iii) That though the District Magistrate, BahawaInagar imposed a ban on the manufacture of gur, shakkar and Khandsari from sugarcane in three tehsils under him, the ban only lasted for 25 days. This was hardly sufficient time to enable the mill to procure any larger quantity of sugarcane, than what they normally could. (iv) (iv)The petitioner mill could only produce 30% of the notified capacity after utilising 41% of the crushing season. In these circumstances, the undernoted findings given by the learned Second Secretary cannot be stated to be correct or fair:‑ (i) (i)That the petitioner mill did not properly foresee and plan its future‑ procurement of sugarcane, gur, shakkar and khandsari. If there was an acute shortage of sugarcane. gur, shakkar and khandsari were hardly available, as there were many sugarcane factories in the district which were also buying sugarcane and the prices of gur, shakkar and kiiandsari would be high as to be uneconomical. (ii) (ii)The petitioner failed to procure and remelt gur when its prices were well within reach in view of what is stated above it was C not economical to procure and remelt gur, shakkar and khandsari, as the prices were higher than normal, except for some short period of 25 days. (iii) (iii)The petitioner did not make any attempt to use khandsari as a substitute. In view of what is stated above, it was not possible for the petitioner mill to use khandsari as substitute for sugarcane. (iv) (iv)The petitioner could only produce 30% of the notified capacity after utilising 75% of the crushing season. Actually 41% of the crushing season was utilized. The case, therefore, requires to be reexamined again, without prejudice to the rights of the Central Board of Revenue to see that the shortfall was beyond the control of the manufacturer and whether, in its opinion, it was substantial.

8. With regard to the year 1973‑74, the petitioner mill worked from 31‑10‑1973 to 6‑5‑1974. The mill produced 20753.70 tons of sugar, leaving a shortfall of 2046.36 tons. The rate of central Excise Duty on sugar in this year was Rs.280 per metric ton. The petitioner claimed a rebate of Rs.5,72,

964. The petitioner was not allowed any rebate at all, because the shortfall was not treated as substantial within the meaning of Rule 4 of the Excise Duty on Production Capacity (Sugarcane) Rules, 1972. The petitioner claimed that the shortfall in the production was beyond its control for the following reasons: (a) There was severe frost and prolonged foggy weather in December, 1973. Consequently the standing crop suffered heavily. (b) Supply of sugarcane to the factory was affected by heavy rain. (c) Operational breakdowns were frequent due to scarcity of furnace oil and diesel oil during the season.

9. The learned Second Secretary, who passed the impugned order on 27‑3‑1984, inter alia held:‑‑ (i) That the petitioner mill merely relied upon availability of sugarcane and did not use gur, shakkar and khandsari. They thus ignored the very important raw materials which had to be used by them, as sugarcane capacity is fixed with reference to sugar that is to be produced by the mill by the use of sugarcane, gur and khandsari. (ii) Since the mill worked for 125 days as against the standing crushing season of 160 days, on the basis of which production capacity is settled, the mill succeeded in procuring adequate quantity of sugarcane for a longer period. Any plea with regard to failure of crop is untenable. (iii) The plea of scarcity of furnace and diesel oil was raised at a stage when its authenticity could not be checked by the staff. Hence the plea was inadmissible. (iv) That the entire shortfall was not, therefore, due to reasons beyond the control of the petitioner mill., (v) He accordingly did not allow any abatement of duty.

10. I have seen the original file which contains material on the basis of which the learned Second Secretary pissed the order. The material supports the findings given by the learned Second Secretary. The production capacity is fixed on the basis of crushing season of 160 days. In this year the mill crushed sugarcane for 186 days. It is, therefore, obvious that there was ample sugarcane and the petitioner could have stocked sugarcane in advance as was required. If it failed to do so and at some later stage some part of the crop was affected by frost, the failure of the petitioner mill to stock the sugarcane cannot be stated to be beyond the control of the mill. In t, this year the mill did not claim that gur and khandsari was not available due to paucity or high prices. In this view of the matter, the abatement was rightly disallowed. Even otherwise, the shortfall ,in the production capacity is about 9%. ' Earlier, the claim was inter alia disallowed on this basis. Due to the decision in the Peshawar case, the learned Second Secretary perhaps did not feel comfortable to refer to this factor again, lest his order may be set aside on this ground. However, this is an important matter. The shortfall in this year is not substantial. Unless the shortfall in production is substantial, no abatement can be allowed under Rule 4 of Excise Duty on production Capacity (Sugarcane) Rules, 1972, No interference is called for in this case.

11. With regard to the year 1974‑75, petitioner mill worked from 6‑11‑1974 to 7‑3‑1975. Deducting hours of closure, the mill worked for 92 days only. The mill produced 15073.27 tons of sugar, leaving a shortfall of 7726.73 tons. The rate of Central Excise Duty on sugar in this year was Rs.830 per metric ton. The petitioner claimed rebate of Rs.64,13,138.59. The petitioner has been allowed the total rebate of Rs.54,66,938.59. The petitioner claimed that the shortfall in the production was beyond its control for the following reasons: (a) The sugarcane allocated to the mill was not sufficient. (b) Transport difficulty affected availability of sugarcane. (c) Seeds of 1974‑75 crop were damaged by the frost during the preceding year. (d) High prices of fertilizer restricted its use and affected sugarcane yield. (e) Complete stoppage of mill from 26‑12‑1974 to 6‑1‑1975 due to the turbine failure and high price of gur, which made it uneconomical to remelt gur for manufacture of sugar.

12. The learned Second Secretary, who passed the impugned order on 27‑3‑1984, inter alia held:‑ (i) The mill produced 156 tons of sugar for remelting gur. This quantity could have been increased through larger procurement of gur Production is fixed after taking into consideration the fact that the mill must use sugarcane, gur and khandsari. (ii) The petitioner did not make any attempt to use khandsari as substitute of sugar. (iii) The other difficulties as were beyond the control of the petitioner had been taken into account and acknowledge by allowing earlier abatement to the extent of Rs.45,10,738.59, (vi) Excluding negligence and lack of advance planning on the part of the petitioner resulting in the shortfall, he allowed a further abatement of Rs.9,46,200.

13. I have seen the original file which contains material on the basis of which the learned Second Secretary has passed the order Whilst the report of the department admits that the mill crushed all the available sugarcane, both within its authorised zone area and outside its zone area, the report does not support the petitioner to the effect that transport difficulty affected availability of sugarcane, or that seeds of 1974‑75 crop were damaged by the frost during the preceding year, or that high prices of fertilizer restricted its use and affected sugarcane yield. The report admits that the mill remained closed during the season due to breakdown of electricity, defect in machinery and for maintenance. In granting abatement, what is to be seen is what part of the shortfall is beyond the control of the manufacturer and not what is the total shortfall. Once the shortfall which is beyond the control of the manufacturer, is fixed, then it is to be seen whether the same is substantial. If it is not so, it need not be allowed under rule

4. In the instant case, the findings of the learned Second Secretary are neither illegal nor perverse. Nol interference is, therefore, called for in this case.

13. In view of the above, writ petition (W.P.No.2764 of 1985) which relates to the year 1972‑73 is accepted with costs and the order of the Second Secretary, Central Board of Revenue, respondent No.2, dated 27‑3‑1984 is set aside. The case is remanded to the said learned Officer for a fresh decision in the matter, after hearing the petitioner. The case should be decided within two months. Rupees Three Thousand (Rs.3,000) is allowed to the petitioner as counsel's fee. Writ petition (W.P.No.2766 I of 1985) which relates to the year 1973‑74 and writ petition (W.P.No. 2665 of 1985) which relates to the year 1974‑75 are both dismissed with costs. Rupees Three Thousand (Rs.3,000) is allowed to the Central Excise as counsel's fee in each case. M. B. A./B-55/L Order accordingly.