Area-based exemption cannot be denied on mere presumption when records show input receipt and actual manufacture.

A demand denying area-based exemption and refund could not stand where the Revenue relied mainly on a third-party investigation at suppliers' end, while contemporaneous records showed truck movement through check posts, entry and exit confirmations, departmental and other verifications, and ongoing manufacturing activity. On that record, the alleged non-receipt of inputs and absence of manufacture was not established. The principle applied was that excise findings must rest on the totality of evidence, and a presumption unsupported by concrete material from the assessee's side is insufficient to dislodge entitlement to exemption. The appellant was therefore held entitled to Notification No. 56/2002-CE and consequential refund relief.

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Issues: Whether the appellant had manufactured and cleared the goods so as to remain entitled to exemption and refund under the area-based exemption notification, despite the Revenue's allegation that the inputs were never received because the source farmers were non-existent.

Analysis: The demand rested on an inference drawn from an investigation at the suppliers' end, but the record contained evidence of movement of trucks through check posts, entry and exit confirmations from the sales tax authorities, visits and verifications by departmental and other government officers, and reports indicating that the manufacturing activity was ongoing. The material on record did not contain any concrete evidence from the appellant's end to establish that no inputs were received or that no manufacture took place. In record-based excise adjudication, findings must rest on the totality of evidence, and a presumption built only on third-party investigation was insufficient to dislodge the appellant's claim of manufacture and eligibility.

Conclusion: The allegation that the appellant was not a manufacturer was not proved, and the appellant was entitled to the benefit of Notification No. 56/2002-CE dated 14.11.2002 and consequential refund relief.

Ratio Decidendi: A demand denying exemption or refund cannot be sustained on mere assumption and presumption from third-party investigations when contemporaneous and corroborative evidence shows receipt of inputs, movement of goods, and actual manufacture.

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