Value-based exemption clearances must be counted in aggregate turnover computation under the small-scale exemption scheme.

Exemption notifications granting relief up to a specified aggregate value of clearances were treated as value-based exemptions, so clearances made under Notification Nos. 5/98-C.E. and 5/99-C.E. had to be included while computing the aggregate value under Notification Nos. 8/98-C.E. and 8/99-C.E. The exclusion for exemptions not based on quantity or value did not apply. On penalty, the dispute involved interpretation of the exemption scheme, so penal action was not warranted and the penalty was deleted. The duty demand was sustained, but the assessee obtained relief on penalty.

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Issues: (i) Whether clearances effected under Notification Nos. 5/98-C.E. and 5/99-C.E. were to be included while computing the aggregate value of clearances under Notification No. 8/98-C.E. and Notification No. 8/99-C.E.; (ii) whether penalty was imposable.

Issue (i): Whether clearances effected under Notification Nos. 5/98-C.E. and 5/99-C.E. were to be included while computing the aggregate value of clearances under Notification No. 8/98-C.E. and Notification No. 8/99-C.E.

Analysis: The exemption under Notification Nos. 5/98-C.E. and 5/99-C.E. granted complete exemption up to a specified aggregate value and partial exemption thereafter. Such a scheme operates on the basis of value of clearances and not merely on an unrelated cap. The exclusion in Notification No. 8/98-C.E. for exemptions not based on quantity or value of clearances did not apply. The clearances under Notification Nos. 5/98-C.E. and 5/99-C.E. therefore had to be taken into account while determining the aggregate value of clearances for home consumption.

Conclusion: The inclusion of such clearances in the aggregate value under Notification No. 8/98-C.E. and Notification No. 8/99-C.E. was upheld against the assessee.

Issue (ii): Whether penalty was imposable.

Analysis: The dispute turned on interpretation of exemption notifications. On that footing, the failure to exclude the clearances did not justify penal action under the governing excise penalty provision.

Conclusion: Penalty was set aside in favour of the assessee.

Final Conclusion: The duty demand was sustained, but the penalty was deleted, resulting in a partial success for the Revenue and partial relief to the assessee.

Ratio Decidendi: An exemption notification that grants relief up to a specified aggregate value of clearances is an exemption based on value of clearances, and such clearances are includible for computing aggregate value under another notification that excludes only exemptions not based on quantity or value.

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