Judgment:
1. The appellants in this case were manufacturing three product namely (1) Chaman Bahar (2) Gulab Katri and (3) Pono Cream, without obtaining Central Excise licence and without observing central excise formalities and clearing the goods without payment of appropriate duty. The Jurisdictional Officer, therefore, seized the stock of these products.
Subsequently, it was found that the product Chaman Bahar merited classification under sub-heading 2106.90 attracting Nil rate of duty.
The seizure of that product was vacated. However, a show cause notice was issued seeking recovery of duty under Tariff classification 2107.91 for the other products and seeking to impose penalty upon the present appellants. Before the Adjudicating Commissioner the present appellants disputed the classification holding that the remaining two goods were also classifiable under Tariff Heading 2106.90; that the demand suffered from limitation and claimed in case of their failure to achieve the relief on the first two counts, the benefit of the Notification No. 175/86. The Adjudicating Collector rejected all the three contentions and classified the goods under Heading 2107.91, confirmed demand amounting to Rs. 3,87,130.76 and also imposed penalty of Rs. 25,000/- on the present appellants. Against this order, the present appeal is before us.
2. Shri Gopal Parshad, learned Advocate for the appellants, stated that he did not wish to advance any argument either on the classification or on the ground of limitation but would limit his submission only to the availment of the benefit of the Notification No. 175/86. He stated that Collector had erred in denying the benefit even where admittedly during each year of the period covered under the show cause notice, the clearances of such products were within the value of clearances specified in paragraph-1 of the said notification only on the observation that the appellants had failed the test in paragraph 3 of the notification. It is his claim that paragraph 3 has to be read with Explanation II given in para 7 of the notification and when it is so done, the benefit is available.
3. We have also heard Shri Kannan, learned Departmental Representative who submits that Explanation II does not limit the ceiling given in paragraph 3 of the notification.
"3. Nothing contained in this notification shall apply if the aggregate value of clearances of all excisable goods for home consumption :- had exceeded rupees two hundred lakhs in the preceding financial year: Provided that for the purposes of computing the aggregate value of clearances under this paragraph, the clearances of any excisable goods where a manufacturer affixes the specified goods with a brand name or trade name (registered or not) of another person who is not eligible for the grant of exemption under this notification, shall not be taken into account." 6. Before the Collector in their written submissions the assessees had referred to Explanation II in paragraph 7 of this notification. From the relevant portion of her order it becomes clear that the Commissioner had not taken this argument into account. In fact narration shows that this plea of the appellant has not registered on her mind. The explanation reads as under :- "Explanation II. - For the purposes of computing the aggregate value of clearances under this notification, the clearances of any excisable goods, which are chargeable to nil rate of duty or, which are exempted from the whole of duty of excise leviable thereon by any other notification (not being a notification where exemption from the whole of the duty of excise leviable thereon is granted based upon the value or quantity of clearances made in a financial year) issued under Sub-rule (1) of rule 8 of the said Rules, or Sub-section (1) of Section 5A of the Central Excises and Salt Act, 1944 (i of 1944) shall not be taken into account." 7. The phraseology "aggregate value of clearances" occurs in both components of this notification and, therefore, we accept the claim of Shri Gopal Prasad that wherever such aggregate value is computed for the previous year in terms of paragraph 3, the value of clearances of excisable goods which are charged to Nil rate of excise duty must be excluded. The appellants had given the figures of clearances after excluding the value of clearance of Chaman Bahar which are admittedly within the limit prescribed in paragraph 1 of the Notification No.175/86. It has, therefore, to be held that the Collector had erred in not permitting the assessee to avail benefit of this notification.
Extending the benefit we hold that confirmation of demand by the Collector does not sustain and has to be set aside. For the same reason, we set aside the order of penalty also. The appeal is, accordingly, allowed.