Exemption and refund cannot be denied on mere suspicion when records and departmental verification support actual manufacture and movement.

A fiscal demand and denial of exemption were found unsustainable where allegations of non-manufacture and non-receipt of inputs rested mainly on assumptions and generalized suspicion. Contemporaneous records, including truck movement, toll or post entries, departmental purchase verification, factory activity, and visits by departmental and related agencies, supported the assessee's manufacturing operations. In the absence of corroborative evidence disproving manufacture or clearance of goods, adverse findings could not stand. The assessee was therefore entitled to the refund and exemption benefit under Notification No. 56/2002-CE dated 14.11.2002.

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Issues: Whether the denial of refund and confirmation of duty demand could be sustained when the allegation of non-manufacture and non-receipt of inputs was based mainly on assumptions, and whether the appellant was entitled to the benefit of Notification No. 56/2002-CE dated 14.11.2002.

Analysis: The finding against the appellant rested on an investigation undertaken at another Commissionerate and on the premise that the farmers and raw material supplies were not genuine. The record, however, contained evidence of movement of trucks, toll/post entries, departmental verification of purchases and factory activity, and visits by other departmental authorities and related agencies showing that the unit was functioning. The Tribunal also relied on its earlier view in connected matters that generalized allegations, without concrete evidence at the appellant's end, were insufficient to deny the benefit claimed. In the absence of corroborative evidence to show that the appellant was not manufacturing or clearing goods, the adverse findings were treated as unsustainable.

Conclusion: The appellant's claim could not be rejected on the basis of mere assumption and presumption, and the appellant was entitled to the exemption and refund benefit under Notification No. 56/2002-CE dated 14.11.2002.

Ratio Decidendi: A fiscal demand or denial of exemption cannot be sustained on generalized suspicion alone when the assessee produces contemporaneous records and departmental corroboration showing manufacture and movement of goods.

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