Exemption computation based on assumptions failed where contemporaneous records supported the assessee's claim and the duty demand was unsustainable.

Exemption under Notification No. 191/80 could not be denied on the basis of a computation unsupported by the assessee's contemporaneous records. The paper manufacturer maintained logs and returns with departmental knowledge, and those records were accepted over the relevant period. The Tribunal found the department's percentage calculation relied on assumptions, including averaged consistency readings, unsupported flow assumptions, and disregard of opening and closing balance adjustments. As the proposed computation lacked a reasonable factual basis, the alleged procedural non-compliance did not justify duty demand, and the exemption was upheld.

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Issues: Whether the duty demand could be sustained by denying the exemption under Notification No. 191/80 dated 08-12-1980 on the basis of the department's method of computation and alleged non-compliance with the prescribed procedure.

Analysis: The paper was claimed to be eligible for exemption where the bagasse pulp content was not less than 75% by weight. The appellants maintained logs and returns with departmental knowledge, and the records had been accepted over the relevant period. The department's demand rested on a computation that treated consistency readings and flow assumptions in a manner not supported by the actual manner in which the process was recorded and verified. The Tribunal found that the calculations proceeded on assumptions without a reasonable factual basis, including averaging of readings taken at different times and ignoring opening and closing balance adjustments reflected in the records. In these circumstances, the alleged procedural lapse and the department's method of working out the percentage could not justify denial of the exemption.

Conclusion: The demand was not sustainable and the appeal was allowed in favour of the assessee.

Ratio Decidendi: An exemption demand cannot be upheld on conjectural or assumption-based calculations when the assessee's contemporaneous records, accepted by the department, do not support the proposed computation and no reasonable basis exists for denying the exemption.

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