SSI exemption dispute: unreliable diary entries could not support differential duty once the clandestine removal basis was rejected.

Denial of SSI exemption could not be sustained by relying on diary entries after the clandestine removal demand based on those very entries had been dropped. Once the seized diary was found unreliable, it could not again form the basis for comparing sales tax returns, RT-12 returns and alleged differential duty. The remaining discrepancy between the return figures required consideration of the assessee's explanation, including inclusion of export sales and returned goods, but the adjudication order recorded no finding on that explanation. The confirmation of differential duty and penalties therefore could not stand and the matter required fresh adjudication on the relevant return figures and explanations.

---

---

Issues: Whether the denial of SSI exemption and the consequent differential duty could be sustained by relying on diary entries after the demand based on alleged clandestine removals from those entries had been dropped.

Analysis: The differential duty confirmed in the adjudication had been worked out by comparing the higher of the sales figures shown in the sales tax returns and the figures appearing in the diary seized from the factory, and then comparing that figure with the RT-12 return values. Once the diary entries were themselves found unreliable and the demand based on clandestine removals was dropped, those entries could not be used again to deny SSI exemption. The remaining difference between the RT-12 figures and the sales tax return figures required consideration of the assessee's explanation, including the plea that export sales and returned goods had been included in the figures. Since the adjudication order recorded no finding on that explanation, the confirmation of differential duty could not stand.

Conclusion: The demand and penalties could not be sustained on the basis adopted in the impugned order, and the matter required fresh adjudication after comparing only the relevant return figures and examining the assessee's explanation.

---