Exemption denial needs supporting evidence; unsupported MODVAT allegations cannot sustain duty demand or proceedings.

Denial of exemption under Notification No. 203/92-Cus. could not be sustained where the show cause notice merely alleged availment of MODVAT credit under Rule 57A without supporting documentary evidence. The tribunal held that a demand or exemption denial cannot rest on presumption or assumption alone, and that the department must place some evidence to substantiate the alleged breach of the notification condition. As no such evidence was produced, the proceedings were not maintainable and the order dropping them was upheld.

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Issues: Whether denial of exemption under Notification No. 203/92-Cus. could be sustained on the basis of a show cause notice alleging availment of MODVAT credit under Rule 57A without supporting evidence.

Analysis: The notice alleging violation of the notification condition was issued without any documentary material to show that the respondent had availed MODVAT credit. A demand or denial of exemption cannot rest on presumption or assumption alone. Where the department does not place evidence to support the allegation in the show cause notice, the proceedings cannot be sustained.

Conclusion: The challenge to the order dropping the proceedings failed and the Revenue's appeal was dismissed.

Final Conclusion: An exemption demand based solely on an unsupported allegation cannot be maintained, and the order dropping the proceedings was upheld.

Ratio Decidendi: A show cause notice seeking denial of exemption must be founded on some supporting evidence, and duty cannot be demanded merely on presumption that the exemption condition was violated.

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