Duty-paid presumption for open-market inputs defeats excise demand where the department fails to disprove the raw materials' status.

Wire rods drawn into wire by reducing gauge were discussed as a central excise manufacturing issue, but the demand could not stand where the department failed to disprove that the inputs bought from the open market were duty paid. Goods purchased from the open market are treated as duty paid unless the contrary is shown, and the burden lies on the department to rebut that presumption. On the record, the evidence was insufficient to establish that the raw materials were not duty paid, so denial of exemption and the consequential demand were unsustainable.

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Issues: (i) Whether wire rods drawn into wire by reducing gauge amounted to manufacture for central excise purposes; (ii) whether the department had discharged the burden of proving that the raw materials purchased from the open market were not duty paid, so as to sustain the demand and deny exemption.

Issue (i): Whether wire rods drawn into wire by reducing gauge amounted to manufacture for central excise purposes.

Analysis: The process of drawing wire rods to reduce their dimensions was treated as a settled process in excise law, but the Tribunal relied on the fact that the material remained within the same broad description in the cited circumstances. On the record, the challenge to excisability did not justify upholding the demand where the departmental case failed on the duty-paid character of the inputs and the exemption position.

Conclusion: The issue was not decided against the assessee so as to sustain the demand.

Issue (ii): Whether the department had discharged the burden of proving that the raw materials purchased from the open market were not duty paid, so as to sustain the demand and deny exemption.

Analysis: Goods purchased from the open market are to be treated as duty paid unless the contrary is proved. The burden therefore lay on the department to show that the wire rods were not duty paid, and that burden was not discharged. The materials were purchased from SAIL or the open market and the evidence relied upon by the department was insufficient to rebut the presumption. In these circumstances, the denial of exemption and the consequential demand could not be sustained.

Conclusion: The department failed to prove that the inputs were not duty paid, and the demand was unsustainable.

Final Conclusion: The impugned order was set aside and the appeals succeeded because the department did not rebut the presumption that the inputs were duty paid.

Ratio Decidendi: Where goods are purchased from the open market, they are to be treated as duty paid unless the department proves otherwise, and a demand based on denial of that presumption cannot stand without such proof.

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