V.P. Gulati, Member (T)

1. This is an appeal against the order of the Collector of Central Excise (Appeals) who has upheld the levy of duty in respect of P or P foods and soaps manufactured by the appellants denying the benefit of Notification No. 80/80 on the ground that the clearances of the excisable goods made by the appellants in the preceding year i.e., 1980-81, were more than 20 lakhs. The Assistant Collector held that for the purpose of notification No. 80/80 amended by the notification No. 73/81, the aggregate value of the clearances during the preceding year 1980-81 should be reckoned after taking into account the goods falling under item No. 68 even though exempted under various notifications. The appellants were manufacturing soap and P or P Foods and other items falling under item 68 apart from the spice powders which are exempted. The aggregate value of the goods cleared by them during 1980-81, other than the spice powders, was Rs. 19,73,254.85. The value of the spice powders cleared was Rs. 2,30,436.83. The appellants' plea is that once the goods had been exempted under a notification, these cease to be excisable goods and should not be included in the value of excisable goods cleared by the appellants and have cited the judgments of the High Courts in support of their plea. They have cited the following judgments :

(i) Allahabad High Court (Divisional Bench) presided by D.M. Chandrasekhar and Umesh Chandra Srivastava, 33 in the case of Nagarat Paints v. Union of India:1978, Tax L.R. NOC 45;

(ii) Supreme Court of India, in the case of State of Tamil Nadu v. V.K. Kandaswamy : (1975) 36 STC 191 (S.C.);

(iii) Madhya Pradesh High Court, in the case of Tata Exports Limited v. Union of India : MANU/MP/0140/1985 : 1985 (22) E.L.T. 732 (M.P.).

The appellants are aware of a judgment of Madras High Court which is in favour of interpretation placed by the Revenue in the notification. It has been pleaded that where there is doubt in the matter of taxation, interpretation favourable to the subject should be preferred. It has been pleaded excisable goods as ordinarily understood are those which are subject to the payment of duty.

2. Smt. J.K. Chander, the learned JDR, pleaded that benefit of notification 80/80 was not available to the appellants inasmuch as the aggregate value of the clearances in 1980-81 was over 20 lakhs. She pleaded that even the exempted spice powders were required to be included for the purpose of arriving at total value of clearances of excisable goods in 1980-81 as they were goods falling under 68. She cited a reported case in support of her plea : 1983 E.L.T. 2265 (Delhi) High Court : Vishal Andhra Industries v. Union of India. She drew our attention to the observations of the Hon'ble Judges as under :

'Excisable goods' is defined to mean goods specified in the 1st Schedule to the Central Excises Act as being subject to excise duty and Rule 8 of the Central Excise Rules permits exemption from payment of the whole or any part of duty leviable on such goods. Therefore if exemption was given on payment of full or part of duty it cannot be said that the goods in question have ceased to be excisable goods. The contention that by issue of exemption notification under Rule 8 the goods should be treated to have been taken out of the First Schedule and therefore ceased to be 'excisable goods', was not sustainable in law (1978 ELT 525 overruled ).

3. The appellants representative also submitted a written note at the same time of hearing before us. In the written submission is cited the Supreme Court judgment in the case of Tamil Nadu v. V.K. Kandaswamy (1975) 36 STC 191 (S.C.) . We find so far as the High Court judgments on the point in dispute are concerned, there is divergence of views expressed by the different High Courts in the judgments cited before us. We find that the Hon'ble Supreme Court, in the case cited, have amplified the scope of taxable goods in the context of the scope of Section 7-A of Madras Ge