Exemption for newsprint rejects and extended limitation under excise law were narrowly construed, restricting duty demand to the normal period.

Newsprint rejects exceeding 5% of production were not covered by Notification No. 261/88 or Notification No. 60/88 because the exemption applied to newsprint and not to rejects, and classification under the same tariff sub-heading did not expand the scope of the notification. An asserted approval by the Registrar of Newspapers for sale of the excess quantity was not proved. On limitation, the demand for 1989-90 could not be carried beyond the normal six-month period under the extended proviso to Section 11A because the notice contained no allegation of suppression, and the liability could be worked out only after the financial year closed. The demand was therefore restricted to the admissible period.

---

---

Issues: (i) Whether the appellants were entitled to exemption under Notification No. 261/88 or Notification No. 60/88 in respect of newsprint rejects exceeding 5% of production; and (ii) whether the demand for the period 1989-90 was barred by limitation beyond six months and could be sustained under the extended period under the proviso to Section 11A of the Central Excise Act, 1944.

Issue (i): Whether the appellants were entitled to exemption under Notification No. 261/88 or Notification No. 60/88 in respect of newsprint rejects exceeding 5% of production.

Analysis: The quantity of rejects admittedly exceeded 5% of total newsprint production. Notification No. 60/88 was held applicable to newsprint and not to rejects, and the mere fact that both may fall under the same tariff sub-heading did not bring rejects within the exemption. The asserted approval by the Registrar of Newspapers for sale of the excess quantity was not substantiated.

Conclusion: The appellants were held not eligible for exemption under Notification No. 261/88 or Notification No. 60/88.

Issue (ii): Whether the demand for the period 1989-90 was barred by limitation beyond six months and could be sustained under the extended period under the proviso to Section 11A of the Central Excise Act, 1944.

Analysis: The demand relating to exemptible rejects could be worked out only after the close of the financial year, and the show cause notice contained no allegation of suppression or other facts necessary to invoke the extended period. Accordingly, the demand beyond the normal limitation period could not be sustained.

Conclusion: The demand was held partly time barred and was confined to the period of six months from the date of payment of duty.

Final Conclusion: Exemption was denied, but the demand was restricted on limitation and the quantum payable was directed to be recalculated for the admissible period.

Ratio Decidendi: An exemption confined to a specified commodity cannot be extended to rejects merely because they fall under the same tariff heading, and the extended period of limitation cannot be invoked in the absence of allegations of suppression where the liability is ascertainable only after the accounting period closes.

---