Exemption notification breach must be proved by evidence, not presumption, before duty demand and penalty can stand.

An exemption demand based on alleged breach of Notification No. 203/92-Cus. could not be sustained where the record contained no material proving that the transferor had availed input stage credit under Rule 57A. The alleged contravention rested on presumption rather than evidence, so the finding of violation was unsustainable. The confirmed duty demand and connected penalty were set aside.

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Issues: Whether the duty demand and penalty could be sustained on the allegation that the importer violated condition v(a) of Notification No. 203/92-Cus. by availing input stage credit under Rule 57A of the Central Excise Rules, in the absence of material showing such availment by the transferor.

Analysis: The demand was founded on the allegation that the goods were imported duty free under the notification while the transferor had allegedly taken input stage credit, thereby breaching the notification condition. The record, however, did not contain any material establishing that the transferor had in fact availed such credit. The conclusion of violation was based on presumption, although a reply had been filed and there was no evidence to support the proposed contravention. A demand resting on an unproved breach of the exemption condition could not be sustained.

Conclusion: The finding of violation was not sustainable and the confirmed duty demand and connected penalty were set aside.

Ratio Decidendi: A demand under an exemption notification cannot be upheld on mere presumption of breach of condition when the record contains no material proving the alleged violation.

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