Manufacturing unit status and area-based exemption sustained where presumption of no manufacture lacked corroborative evidence.

Demand for duty, interest and penalties based on an allegation that the assessees had not manufactured goods could not be sustained where the finding rested on presumption rather than corroborative evidence. Contemporaneous material showed movement of raw materials and finished goods at toll barriers, departmental verification of purchases and plant machinery, and no adverse material against the assessees at their end. On that record, the units were treated as manufacturing units, making them eligible for the area-based exemption and consequential refund under Notification No. 56/2002-CE. The demand raised on the alleged erroneous refund, together with penalties, was therefore unsustainable.

---

---

Issues: Whether the demand of duty, interest and penalties alleging that the appellants had not manufactured the goods was sustainable, and whether the appellants were entitled to the benefit of the area-based exemption and consequential refund under Notification No. 56/2002-CE dated 14.11.2002.

Analysis: The allegations rested mainly on the investigation conducted at Meerut and the assumption that the raw material suppliers were non-existent. The record showed, however, that movements of raw material and finished goods were reflected at the toll barriers, departmental officers had visited the units and verified purchases and plant machinery, and no adverse material was brought against the appellants at their end. The finding that no manufacture took place was therefore based only on presumption and not on concrete evidence. In the absence of corroborative evidence to displace the contemporaneous material showing manufacture and clearance, the charge that the appellants were not manufacturing units could not be sustained.

Conclusion: The appellants were held to be manufacturing units eligible for the exemption, and the demand of duty on the alleged erroneous refund, along with the penalties, was unsustainable.

---