Exemption turnover, limitation, and partner penalty turn on exclusion of exempt goods, no suppression, and no knowing contravention.

For exemption under Notification No. 8/2003-CE, turnover must be computed only on specified goods after excluding non-excisable and exempted excisable goods, and assessable value must reflect admissible abatement rather than mechanically adopting retail sale price figures; the matter was remanded for fresh quantification on that basis. The extended limitation period was unavailable because regular returns and departmental correspondence negatived suppression of facts or wilful misstatement, so the demand beyond one year from the show-cause notice was set aside. Penalty on the partner under Rule 26 failed because knowing participation in the contravention was not established, and the penalty was deleted.

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Issues: (i) whether, for eligibility to Notification No. 8/2003-CE, the turnover had to be computed by excluding the value of non-excisable and exempted excisable goods and by allowing abatement while determining assessable value; (ii) whether the extended period of limitation could be invoked; and (iii) whether penalty on the partner under Rule 26 of the Central Excise Rules, 2002 was sustainable.

Issue (i): whether, for eligibility to Notification No. 8/2003-CE, the turnover had to be computed by excluding the value of non-excisable and exempted excisable goods and by allowing abatement while determining assessable value.

Analysis: The turnover for deciding entitlement to the exemption had to be computed only on the basis of specified goods, after excluding the value of non-excisable goods and exempted excisable goods. The assessable value also had to be determined by allowing the applicable abatement and not by mechanically adopting retail sale price figures without examining the admissibility of such deduction.

Conclusion: The issue was decided in favour of the assessee, and the matter was remanded for fresh quantification on the correct turnover and admissible abatement.

Issue (ii): whether the extended period of limitation could be invoked.

Analysis: The records showed continuous correspondence with the department and regular filing of returns, which negatived any allegation of suppression of facts or wilful misstatement. In the absence of such ingredients, the extended limitation period was not available to the Revenue.

Conclusion: The issue was decided in favour of the assessee, and the demand beyond one year from the date of the show cause notice was set aside.

Issue (iii): whether penalty on the partner under Rule 26 of the Central Excise Rules, 2002 was sustainable.

Analysis: No knowing participation or deliberate contravention by the partner was established so as to attract penal liability under Rule 26.

Conclusion: The issue was decided in favour of the assessee, and the penalty on the partner was set aside.

Final Conclusion: The demand was confined to the period within limitation, the personal penalty on the partner was deleted, and the remaining demand and any consequential penalty on the main appellant were sent back for fresh quantification.

Ratio Decidendi: For exemption-linked turnover and duty computation, non-excisable and exempt goods must be excluded and admissible abatement allowed; the extended limitation period cannot be invoked without suppression or wilful misstatement; and penalty under Rule 26 requires knowing involvement in the contravention.

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