Manufacture cannot be denied on mere assumption where records and surrounding evidence support production and exemption entitlement.

A duty demand and refund denial based on an allegation that the unit was not manufacturing goods was held unsustainable where departmental verification, industrial and pollution permissions, and movement of goods supported actual manufacture. The Tribunal noted that the allegation depended mainly on findings from another commissionerate and assumptions about raw material suppliers and farmers, without concrete investigation at the assessee's premises or corroborative evidence disproving manufacture. On those facts, the assessee remained entitled to the area-based exemption under Notification No. 56/2002-CE, and the impugned order was set aside with consequential relief.

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Issues: Whether the demand and denial of refund based on the allegation that the unit was not manufacturing goods was sustainable, and whether the assessee was entitled to the benefit of the area-based exemption.

Analysis: The record showed periodical departmental verification, permissions from the industrial and pollution authorities, and movement of goods into and out of the unit. The allegation rested mainly on an investigation carried out at another commissionerate and on the assumption that the raw material suppliers and farmers were non-existent. The absence of any concrete investigation at the assessee's end, together with the lack of corroborative evidence disproving manufacture, meant that the charge could not be sustained. The Tribunal also relied on earlier decisions on identical facts holding that manufacture could not be denied merely on speculative inference.

Conclusion: The demand on the footing that the assessee was not a manufacturer was unsustainable, and the assessee remained entitled to the exemption under Notification No. 56/2002-CE dated 14.11.2002.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: A duty demand or refund denial cannot be sustained on mere assumption or presumption when departmental records and surrounding evidence support manufacture and there is no concrete corroborative material disproving it.

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