Per Shiben K Dhar :

The appellants manufacture P&P medicines falling under TI 14-E Pharmacopial preparations falling under TI 68 of erstwhile Central Excise Tariff. The appellants were claiming exemption under Notification 71/78 dated 1/3/78 as amended by Notification No 141/79 dated 30.3.79 for the year 1979-80 on the ground that their total value of clearances of excisable goods in the preceding financial year 1979-80 had not exceeded Rs.20 lakhs.

2. Arguing on behalf of the appellants, the learned Counsel submits that since value of clearances for P&P medicines was less than Rs. 5 lakhs, they were under the bonafide belief that they were eligible to claim exemption on the ground that Pharmacopial preparations which were exempted under the notification, were not liable to be added to the value of P&P medicines for working out the slabs for exemption. They were however, issued a show cause-notice dated 4.4.94 asking them to pay Rs. 62,803/- for the period 1.4.79 to 31.3.80. He submits that the extended period could not be invoked in this case since they were under the bonafide belief that goods exempted were not excisable goods and therefore, clearances of such goods could not to be clubbed with the clearances of goods under TI 14-E. In support of his contention, he cites the case reported in (1995 (78) ELT 401) and (1995 (6) RLT 333 (S.C.) = 1995 (75) ELT 721).

3. Arguing for the Revenue, the learned DR reiterates the department's arguments.

4. Considered. The Collector in his order has held that value of TI 68 goods which were exempt under Notification 55/75 dated 1.3.75 was includible for the purpose of computing turnover of Rs.20 lakhs. The question is whether at the relevant time, the appellants could have taken the view that even exempted goods had to be included as excisable goods for working out the slab. In the case of Pushpam Pharmaceuticals (1995 (6) RLT 333 (S.C.) = (1995) (78) ELT 401 SC, Hon'ble Apex Court held that value of exempted goods is includible in the value of clearances of all excisable goods. The Hon'ble Court however, held that there were conflicting views in the matter. Extended period of five years was not applicable just because of omission unless it was deliberate to escape from payment of duty. Similar view was held by the Apex Court in Cosmic Dye Chemicals Vs. Collector of Central Excise (1995 (75) ELT 721). Following the ratio of these judgments and the facts of the case, we are of the view that on merits, through duty is payable, it can be demanded only for the normal period of limitation i.e. for 6 months. Since the extended period is time barred, we hold that penalty is also not sustainable. In the result we set aside the impugned order and allow the appeal on limitation.