Factory-wide worker count controls exemption, while residuary excise recovery limited the demand on the available record.

An exemption for trailers under Notification No. 31/66 depended on the factory employing not more than five workers, and the Court held that the count must cover the factory as a whole, not only the manufacturing section. On the departmental materials, including the project report and Inspector of Factories report, the unit employed more than five workers, so the exemption was unavailable. On limitation, a residuary excise recovery under Rule 10A could sustain the demand where Rule 10 did not apply, so the demand was not wholly time-barred. However, the demand for 1969 and 1970 was unsustainable on the material before the Court.

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Issues: (i) Whether the petitioner was entitled to exemption under Notification No. 31/66 on the footing that the manufacturing unit alone employed fewer than five workers, and (ii) whether the demand for excise duty was barred by limitation.

Issue (i): Whether the petitioner was entitled to exemption under Notification No. 31/66 on the footing that the manufacturing unit alone employed fewer than five workers

Analysis: The exemption under the notification applied to trailers manufactured in a factory employing not more than five workers. The Court found that the relevant inquiry was the employment in the factory as a whole and not a segmented count confined to the manufacturing section. The departmental material, including the project report and the Inspector of Factories report, showed employment of more than five workers during the relevant period. The contention that the sales and service staff should be excluded was rejected.

Conclusion: The petitioner was not entitled to exemption under Notification No. 31/66 on the basis urged.

Issue (ii): Whether the demand for excise duty was barred by limitation

Analysis: The demand was upheld as one made under Rule 10A of the Central Excise Rules, 1944, which was treated as a residuary provision applicable where Rule 10 did not apply. The Court held that recovery for the years in question was valid in law and not barred merely on the plea of limitation. At the same time, the material showed that the project report on which part of the demand rested was relevant only for 1971 to 1975, and the exact filing date had to be ascertained. On that basis, the demand for 1969 and 1970 was set aside.

Conclusion: The demand was not wholly time-barred, but the demand for 1969 and 1970 could not be sustained.

Final Conclusion: The writ petition succeeded only to the limited extent that the demand for 1969 and 1970 was quashed, while the remaining demand and the denial of exemption were sustained.

Ratio Decidendi: For an exemption conditioned on the number of workers in a factory, the employment test must be applied to the factory as a whole, and a residuary excise demand provision may sustain recovery where the ordinary assessment rule is inapplicable.

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