Third-party investigation without corroboration cannot sustain excise demand where records show production, clearance, and exemption eligibility.

A demand founded solely on a third-party investigation, without independent corroboration at the assessee's premises, could not be sustained where contemporaneous records, departmental visits, Range Officer verification, toll barrier entries, and other evidence supported commercial production and movement of goods. The Tribunal held that assumptions about non-genuine purchases and manufacture were insufficient in a record-based adjudication, especially where earlier decisions arising from the same investigation had rejected the allegations for want of concrete evidence. On that basis, the demand, interest, and penalty failed, and the assessee was entitled to exemption under Notification No. 56/2002-C.E.

---

---

Issues: Whether the demand, interest, and penalty were sustainable when the department's case rested on the Meerut investigation without independent investigation or concrete evidence against the Jammu-based manufacturer, and whether the assessee was entitled to the benefit of Notification No. 56/2002-C.E. dated 14.11.2002.

Analysis: The proceedings were based on an investigation conducted at the end of another jurisdiction and proceeded on the premise that the raw material purchases and manufacture were not genuine. The Tribunal noted that the record contained material showing commercial production, departmental visits, verification by the Range Officer, toll barrier entries, and other contemporaneous evidence supporting manufacture and movement of goods. It also relied on earlier decisions arising out of the same investigation, which had held that the allegations were founded on assumption and presumption rather than concrete corroboration. In a record-based adjudication, such evidence could not be discarded merely because the investigating officers had not conducted independent verification at the assessee's premises.

Conclusion: The demand, interest, and penalty were not sustainable. The assessee was entitled to the exemption benefit under Notification No. 56/2002-C.E. dated 14.11.2002.

Ratio Decidendi: A demand based only on a third-party investigation and unsupported by independent corroborative evidence at the assessee's end cannot be sustained where contemporaneous records and departmental verifications show manufacture and clearance of goods.

---