Red-faced Montgomery County officials who permitted construction of a Silver Spring office building that apparently exceeds legal limits are now caught between the builders, who have almost finished it, and local residents who insist the top two floors must come down.

The building at Wayne and Cedar avenues has two levels higher than the county height limit of 35 feet for office buildings that border residential areas. Its floor space exceeds county limits, and the structure is not set back from the sidewalk as the law requires, county officials said.

The same Department of Environmental Protection officials previously approved the project at two stages, and allowed construction to continue from spring last year until late April, when repeated citizen inquiries--which had been dismissed earlier by DEP agents--finally prompted officials to review their work.

The county DEP on May 6 ordered Taro Construction Co. to stop working on the building at 801 Wayne Ave. Permanent Financial Corp., the owner, went to the county Board of Appeals this week asking that the order be rescinded. No decision was reached; hearings are set to continue Wednesday.

Attorneys for the county are seeking to have a fifth-floor-level "penthouse" removed from the building. Joseph P. Blocher, of Linowes & Blocher, a prominent real estate law firm, maintained at the hearing that the penthouse structure was actually a roof, and as a roof, shouldn't be measured when calculating the building height.

Attorneys have not presented arguments about other points in question to the Appeals Board. Although Board of Appeals Chairman Joseph E. O'Brian barred resident groups from making presentations, they submitted letters and legal memoranda in the case, calling the building "monstrously inappropriate" and asking the board to force owners into compliance with all zoning standards.

The builder first presented construction plans in January 1982 and again this year, and each time they were approved, according to James M. Hicks, chief of the Construction Code Enforcement division of DEP. In both cases, he said, county employes inspected blueprints but failed to detect inconsistencies between the plans and zoning standards.

"There was a series of little nuances that got away from us," Hicks said. "This slipped through the net we try to maintain." He said the builders should have ensured their plans conformed.

But he said his department's inspectors should have discovered, for example, that the plans list a "penthouse" but show none on the roof drawing. "They've got no excuse," he said.

Over the past year, Silver Spring residents called DEP and questioned whether the building was too high, residents said and Hicks acknowledged. They were told repeatedly and incorrectly that its height limit was 60 feet, Hicks said. The office building is 53 feet high, Hicks said.

"It's sort of an unusual condition," Hicks said. "The first thing officials responding to inquiries looked at, is this zone where 60 feet is the limit. But if you looked at other factors, you would see it's 35" feet, because the commercial zone borders on a residential area.

On April 28, the Montgomery County Planning Board got a complaint about the building, and chairman Norman L. Christeller looked into it, and notified John L. Menke, director of the DEP, suggesting he investigate. Hicks said inspectors measured the building, and decided it indeed was over the height and floor-space limits, and was not set back enough on the property.

DEP issued the stop-work order May 6, citing the project's alleged violations to the county zoning ordinance that sets the measurements.

When word spread to community groups in Silver Spring, officials soon discovered that residents were outraged to learn that what they had suspected all along was true, and that county construction officials had told them otherwise. Members of East Silver Spring Citizens' Association and the Seven Oaks/Evanswood Civic Association sent a joint appeal Monday to Menke, expressing dismay at the county's actions.

"We are alarmed and even further outraged . . . to discover that DEP is attempting to negotiate a deal with the builders--without any notice whatever to the community," wrote Arthur Krummenoehl and Robert W. Colvin, presidents of the Seven Oaks and East Silver Spring groups, respectively.

They were referring to an April 9 meeting with Hicks, county attorneys and attorneys for the builders in which, according to a memo Hicks wrote, the DEP was willing to let the fourth story stand, although it is eight feet higher than the 35-foot limit.

Hicks said in an interiew that the law allows an exception for "uninhabitable space" above the limit. He said that according to standard building codes, office space--since it is non-residential--would fit the category of uninhabitable space.

Outside the meeting, Nancy Floreen, a Silver Spring resident and attorney, said the planning board, which wrote the law, considers uninhabitable space to mean room for mechanical equipment.

Though residents were not permitted to testify, several said they would hold firm to the position that the civic association presidents asserted in their letter to the county appeals board. The letter asks that the top two levels be removed, and the building be brought into compliance with the property set-back measurements. To do that, Hicks said, the builder would have to "shave off the front face of the fourth floor." The building extends farther in each ascending floor.