Exemption for Kraft paper manufacture from waste paper required fresh verification where contemporaneous proof of non-pulp-stage production was lacking.

Eligibility for exemption under Notification No. 04/2006-CE depended on whether Kraft paper was manufactured from waste paper through a pulp stage and whether a pulping machine was installed. The adverse view against the assessee was founded mainly on audit assumptions and later correspondence, but the department produced no contemporaneous proof of factory inspection, panchnama, or physical verification. Purchase records for the pulping machine and documents showing procurement of waste paper supported the assessee's claim. On that record, final denial of exemption was not justified, and the matter was remanded for fresh verification and a de novo speaking order.

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Issues: Whether the appellant was eligible for exemption under Notification No. 04/2006-CE dated 01.03.2006 for Kraft paper alleged to have been manufactured otherwise than from the pulp stage.

Analysis: The dispute turned on whether a pulping machine was installed and whether the Kraft paper was manufactured from waste paper through a pulp stage. The finding against the appellant was based largely on an assumption drawn from audit and later correspondence, but no contemporaneous documentary proof of factory visit, panchnama, or physical verification was produced. The appellant, on the other hand, produced purchase documents for the pulping machine and material showing procurement of waste paper, which supported its claim. In the absence of reliable verification by the department, the adverse conclusion could not be sustained at that stage.

Conclusion: The appellant's eligibility to the exemption could not be finally denied on the existing record, and the matter was remanded for fresh verification and a de novo speaking order.

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