Limitation and small scale exemption must be re-examined afresh when duty liability follows a change in excisability view.

Where duty liability arises after a change in the departmental view on excisability, limitation and exemption entitlement must be examined independently on the material on record. The demand could not be confirmed without a finding on limitation, especially where the goods had been cleared under an approved classification list, and the longer period had to be justified afresh. The small scale exemption claim also required reconsideration in de novo proceedings, rather than rejection solely on allegations of clandestine removal or misstatement. The matter was therefore remanded for fresh decision on limitation and exemption, with the classification issue kept open.

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Issues: (i) Whether the demand was barred by limitation. (ii) Whether the appellants were entitled to the benefit of the small scale exemption notification.

Issue (i): Whether the demand was barred by limitation.

Analysis: The order-in-original did not record any finding on limitation. The issue required examination in the light of the fact that the goods had been cleared under an approved classification list and the department had to justify invocation of the longer period on the basis of the material on record.

Conclusion: The issue of limitation was left for fresh determination by the Commissioner.

Issue (ii): Whether the appellants were entitled to the benefit of the small scale exemption notification.

Analysis: The goods had been cleared during the relevant period under the then prevailing departmental view. Once the goods were subsequently held excisable, the entitlement to the exemption notification had to be examined afresh for proper determination of duty liability, instead of denying the benefit outright on the premise of clandestine removal and misstatement in the classification list.

Conclusion: The benefit of the exemption notification was required to be reconsidered in de novo proceedings.

Final Conclusion: The impugned order was set aside and the matter was remanded for fresh decision on limitation and exemption, with the classification issue kept open.

Ratio Decidendi: Where duty liability is determined after a change in the departmental view on excisability, the related questions of limitation and exemption entitlement must be independently and freshly adjudicated before confirming duty.

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