Tariff classification and limitation under excise exemption law: goods counted in turnover, but demand restricted to six months.

Dantmanjan Lal was treated as falling under Tariff Item 68, not as an ayurvedic medicine excluded from the exemption computation, so its value had to be included in the aggregate clearances test under Notification No. 71/78-C.E., as amended. On that footing, the preceding-year turnover crossed the prescribed exemption limit and the denial of exemption was sustained on merits. Separately, because the show cause notice did not allege suppression or wilful misstatement and the goods were disclosed in the classification list and catalogue, the duty demand could extend only to the statutory six-month period, with the balance time-barred.

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Issues: (i) Whether Dantmanjan Lal was classifiable as an ayurvedic medicine or under Tariff Item 68 and whether its value was includible in the aggregate value of clearances for exemption under Notification No. 71/78-C.E. as amended. (ii) Whether the duty demand was barred beyond six months prior to the show cause notice.

Issue (i): Whether Dantmanjan Lal was classifiable as an ayurvedic medicine or under Tariff Item 68 and whether its value was includible in the aggregate value of clearances for exemption under Notification No. 71/78-C.E. as amended.

Analysis: The goods were held to fall under Tariff Item 68 and not to be excluded as ayurvedic medicine for the purpose of the exemption notification. The amended notification required inclusion of clearances of excisable goods falling under more than one tariff item, and the aggregate value of clearances during the preceding financial year exceeded the prescribed limit. The value of the goods was therefore liable to be taken into account while testing eligibility for the exemption.

Conclusion: This issue was decided against the respondents and in favour of the Revenue.

Issue (ii): Whether the duty demand was barred beyond six months prior to the show cause notice.

Analysis: The show cause notice did not allege suppression of facts or wilful misstatement, and the goods were disclosed in the classification list and catalogue. In these circumstances, the demand could not travel beyond six months preceding the notice and had to be confined to the permissible period under the governing limitation rule.

Conclusion: This issue was decided in favour of the respondents and against the Revenue.

Final Conclusion: The order of exemption denial was sustained on merits, but the duty demand was restricted to the legally permissible six-month period, with consequential refund for the balance.

Ratio Decidendi: Goods falling under Tariff Item 68 are includible in the aggregate value of clearances for an exemption that turns on preceding-year turnover, and in the absence of suppression or wilful misstatement the duty demand is confined to the statutory limitation period.

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