Exemption deduction and extended limitation: special excise duty was excluded, but the extended period could not be sustained.

An exemption notification permitting deduction of excise duty did not, on its terms, extend to special excise duty, so the assessee's claim to deduct that levy was rejected. On limitation, the extended period could not be sustained because prior proceedings for the immediately preceding period had already been dropped on the footing that the proviso to Section 11A was unavailable; the demand was therefore confined to the normal limitation period. The stated result was that the demand survived only to that extent and the appeal succeeded in part.

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Issues: (i) whether special excise duty could be deducted while determining the assessable value under Notification No. 161/66; (ii) whether the extended period of limitation could be invoked for the demand.

Issue (i): Whether special excise duty could be deducted while determining the assessable value under Notification No. 161/66.

Analysis: The notification permitted deduction only of excise duty. In view of the governing principle that an exemption from duty of excise does not, by itself, extend to special excise duty unless the relevant statutory provisions are incorporated, the deduction claimed for special excise duty was not available.

Conclusion: The issue was decided against the assessee.

Issue (ii): Whether the extended period of limitation could be invoked for the demand.

Analysis: The prior proceedings for the immediately preceding period had been dropped on the ground that the proviso to Section 11A could not be invoked. On that basis, the extended period was held not to be sustainable for the present demand.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The demand was upheld only to the extent of the normal limitation period, and the appeal succeeded in part.

Ratio Decidendi: An exemption notification allowing deduction of excise duty does not automatically include special excise duty, and the extended period of limitation cannot be sustained where the basis for invoking it is not made out.

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