Area-based refund exemption stands where Revenue cannot disprove manufacturing activity with concrete evidence.

Refund under the area-based exemption was denied on the theory that no manufacturing activity had taken place, but the Tribunal found that the Revenue had relied on assumptions rather than concrete evidence. It noted periodic departmental visits that recorded manufacturing activity and observed that there was no independent investigation at the appellant's premises or corroborative material disproving manufacture. On that basis, the challenge to refund under Notification No. 56/2002-CE was held unsustainable and the benefit of the notification was restored.

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Issues: Whether the demand for denial of refund under the area-based exemption was sustainable when the Revenue failed to establish absence of manufacturing activity on the basis of concrete evidence.

Analysis: The appeal concerned refund claimed under Notification No. 56/2002-CE. The challenge to the refund was founded on an investigation conducted at a different commissionerate end and on an inference that the inputs were not actually supplied and that no manufacture had taken place. The Tribunal followed its earlier decision on identical facts and noted that the departmental record showed periodic visits by the Jammu Commissionerate, which had found manufacturing activity in progress. It also held that the case against the appellant rested on assumption and presumption, without any independent investigation at the appellant's end or any concrete corroborative evidence disproving manufacture.

Conclusion: The denial of refund was not sustainable. The appellant was entitled to the benefit of Notification No. 56/2002-CE and the impugned order was set aside.

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