Exempt goods still count as excisable clearances; suppression in exemption declarations can justify extended limitation and penalty.

Goods listed in the First Schedule to the Central Excises and Salt Act, 1944 remained excisable even when exempted from duty, so Tariff Item 68 clearances had to be counted in the aggregate value for Notification No. 80/80-C.E.; on that basis, exemption was unavailable where the prescribed threshold was exceeded. The majority also treated non-disclosure of the value of clearances in the exemption declaration as suppression of material facts, justifying the extended limitation period under Section 11-A and sustaining the penalty. A separate opinion accepted exemption eligibility but disagreed on limitation, holding that the extended period was unavailable absent intent to evade duty.

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Issues: (i) Whether goods falling under Tariff Item 68, though exempt from duty, remained excisable goods for computing the aggregate value of clearances under Notification No. 80/80-C.E. dated 19.06.1980. (ii) Whether the extended period under Section 11-A of the Central Excises and Salt Act, 1944 and the penalty were justified on account of suppression of facts and intent to evade duty.

Issue (i): Whether goods falling under Tariff Item 68, though exempt from duty, remained excisable goods for computing the aggregate value of clearances under Notification No. 80/80-C.E. dated 19.06.1980.

Analysis: The applicable exemption under Notification No. 80/80-C.E. denied benefit where the manufacturer cleared excisable goods falling under more than one tariff item and the aggregate value of all excisable goods exceeded the prescribed limit. The Tribunal applied the settled view that goods specified in the First Schedule to the Central Excises and Salt Act, 1944 continued to be excisable goods even when exempted from duty by notification under the Central Excise Rules, 1944. On that basis, the Tariff Item 68 goods had to be included in computing the aggregate value of clearances.

Conclusion: The Tariff Item 68 goods were includible, and the assessee was not entitled to exemption under Notification No. 80/80-C.E. on this ground.

Issue (ii): Whether the extended period under Section 11-A of the Central Excises and Salt Act, 1944 and the penalty were justified on account of suppression of facts and intent to evade duty.

Analysis: The majority found that the assessee had disclosed manufacture of Tariff Item 68 goods but had not disclosed the value of clearances, while the declaration under Notification No. 80/80-C.E. contained an incorrect statement that the value of clearances remained below the threshold. This was treated as suppression of material facts warranting invocation of the longer limitation period under Section 11-A. The same factual basis supported the finding of deliberate conduct sufficient to sustain the penalty. The separate opinion disagreed on limitation, holding that the earlier disclosure and lack of clear legal position negatived any intent to evade duty.

Conclusion: The extended period and the penalty were upheld by the majority.

Final Conclusion: The demand on the paints and varnishes was sustained, the penalty was maintained, and the appeal failed; the dissent would have restricted the demand to the normal limitation period.

Concurring Opinion: None. The separate opinion of V.P. Gulati, Member (T), agreed on exemption eligibility but dissented on limitation, holding that the extended period was unavailable for want of intention to evade duty and that the demand was confined to the normal period.

Ratio Decidendi: Goods which remain excisable under the tariff do not cease to be excisable merely because they are exempt from duty by notification, and suppression of material facts in a declaration justifies invocation of the extended limitation period under the excise law.

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