After making a few updates to my site it stopped working after deploying. The issue was that the gem version of compass had not been tied down and the server was working with newer version.

The error was coming from this line in my sass file :

$gradient = #FFFFFF // This get converted to  'white' in the error message
background-image:         linear-gradient(to bottom, #{$gradient}, #{$back})

Again the error was:

Syntax error: Not a valid color stop: Sass::Script::String: white

To fix the issue I had to revert back to compass 0.10.6

Reverting Compass

Bundler Gemfile gem "compass", "0.10.6"
then run $ bundle update

Or directly from the command line gem install compass -v 0.10.6

Now run gem list and remove the newer versions ie
gem uninstall compass -v 0.12.1