Custom, Excise & Service Tax Tribunal
Kamal Sponge Steel &Amp; Power Ltd vs Jaipur-I on 22 January, 2019
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. I
Date of Hearing: 02.01.2019
Date of Decision: 22.01.2019
Appeal No. E/53606-53611/2014-EX [DB]
[Arising out of Order-in-Original No. OIO-JAI-EXCUS-001-COM-136-13-14
dated 31/03/2014 passed by Commissioner of Central Excise-JAIPUR-I]
Kamal Sponge Steel & Power Ltd.
Pawan Jeet Singh Director Of
Anil Sharma G M Of
Kamal Jeet Singh Director Of
Karan Pal Singh Chairman Of
Rakesh Bhatnagar Ex Manager Of Appellants
Vs.
CCE & ST, Indore Respondent
Appearance:
Shri Bipin Garg, Advocate for the Appellants Shri R.K. Mishra, AR for the Respondent CORAM:
Hon'ble Shri Anil Choudhary, Member (Judicial) Hon'ble Shri Bijay Kumar, Member (Technical) FINAL ORDER NO. 50073-50078/2019___ Per Anil Choudhary:
1. These appeals have been filed by M/s Kamal Sponge Steel Pvt Ltd. (herein after referred to as "Appellant Company") and its officials namely Kamal Jeet Singh-Director, Karan pal Singh-
Director, Pawan Jeet Singh-Director, Anil Sharma-General Manager and Rakesh Bhatnagar- Ex. General Manager against common Order in Original No. JAI-EXCUS-001-COM-136-13-14 dt.31.03.2014 passed by Commissioner of Central Excise, Jaipur-I. The appellant company has filed appeal against confirmation of duty demand and imposition of penalty as well as levy of interest. The officials of the 2 Appeal No. E/53606-53611/2014-EX [DB] appellant company have filed appeal against imposition of penalty on them u/r 26 of Central Excise Rules 2002.
2. The facts, in brief, of the matter is that the appellant company is manufacturer of excisable goods namely, MS ingots, MS TMT bar, Runners, Risers and Mis-Rolls falling under heading 72 of First Schedule to the Central Excise Tariff Act, 1985. They are registered with the Central Excise Department for manufacture of the said goods and are holding Central Excise Registration No. AABCA8278MXM003. On the basis of some information that the appellant company was engaged in clandestine removal of their final product without payment of Central Excise Duty, and without entering such products in their statutory records, the officers of Anti-Evasion wing of Jaipur-I Commissionerate of Central Excise visited the factory premises of the appellant company and conducted simultaneous search of factory premises of the appellant company, residential premises of Shri Rakesh Bhatnagar- General manager, office-cum-residence of Shri K.S. Ahaluwalia Chairman, Guest House of the appellant company and residence of Shri Chirag Sharma- Executive Assistant to the Chairman on 21.09.2011. In course of search of the factory premises the officers scrutinised the records and also conducted physical stock verification of MS Ingots and MS TMT Bar. As a result of physical verification a shortage of 88 MT MS Ingots valued at Rs.26,40,000/- involving central excise duty of Rs.2,71,920/- as well as shortage of 56 MT TMT Saria/Bars valued at Rs.19,39,560/- involving central excise duty of Rs.1,99,775/- was 3 Appeal No. E/53606-53611/2014-EX [DB] detected by the investigating officers. A Panchnama describing physical verification of stock was drawn on spot. The officer also resumed computer and certain computer printout of various data. During search of Guest House of the appellant company the officers found some computer generated slips as well as hand written slips which were taken into pocession by the officers. The officers recorded statement of Shri Rakesh Bhatnagar GM and Shri Anil Kumar Sharma Authorised Signatory on 21.09.2011 under section 14 of Central Excise Act 1944. The investigating officers, made comparison of data in computer printout and hand written slips with those in the statutory records maintained by the appellant and came to the conclusion that the differential quantity of excisable goods had been cleared clandestinely without payment of duty. The officers also calculated the average electricity consumption on the basis of total production of finished products, i.e. TMT Bar/Saria by adding the production shown in their statutory records and quantity of clandestine production shown in the computer printout and slips recovered. The production figure so calculated was divided by numbers of units of electricity consumed by the assessee and the actual production was calculated by applying the average production per unit of electricity consumption. The investigating officers came to the conclusion that the excess production arrived at by using average production on the basis of electricity consumption had been removed by the appellant company clandestinely without payment of duty. In course of investigation the officers recorded statement of 4 Appeal No. E/53606-53611/2014-EX [DB] Shri Rakesh Bhatnagar, GM on 21.09.2011, 23.09.2011, 24.09.2011, 07.03.2012 and 12.03.2012; statement of Anil Kumar Sharma-Authorised Signatory on 21.09.2011, 23.09.2011, 24.09.2011, 07.03.2012 and 12.03.2012; statement of Dinesh Kumar Goswami-Excise Executive, on 21.09.2011 and 23.09.2011; and statement of Chirag Sharma- Marketing Manager, on 15.03.2012 under section 14 of Central Excise Act 1944. During investigation the appellant company deposited amount of Rs.1,40,93,564/- on various date(s) as per direction of the investigating officers. After scrutiny of records and comparison of the data in computer print out as well as in the slips resumed, three demand cum show cause notices were issued to the appellant company as detailed below:-
S. No. SCN No. & Dt. Period involved Demand of duty (Rs.)
1. SCN No. V(H) Adj.- (i) 01.04.07 to 31.12.11 7,50,79,267/-
I/CE- (except March 11 to June 11 & Aug 11)
72/59/2012/297
dt.03.05.2012 (ii) for March 11 to June 11 & Aug 11 1,40,93,563/-
Total 8,91,72,830/-
2. SCN No. V (H) Adj- 01.01.12 to 30.06.12 2,27,64,776/-
I/CE-
72/146/2012/3523
dt.06.02.2013
3. SCN No. V (H) Adj.- 01.07.12 to 31.12.12 11,00,285/-
I/CE-
72/39/2013/1354
dt.25.07.2013
Grand Total 11,30,37,891/-
3. The appellant company, in addition to the duty demand, was also asked to show cause why interest should not be demanded on the amount of duty and why penalty should not be imposed under 5 Appeal No. E/53606-53611/2014-EX [DB] section 11AC of Central Excise Act 1944/Rule 25 of Central Excise Rules 2002. The other appellants were asked to show cause as to why penalty should not be imposed on them under rule 26 of Central Excise Rules 2002.
4. The appellant company submitted a detailed reply vide their letter dt. 26.11.2012. They categorically questioned the correctness of the method of physical verification done by the officers. They stated that the verification was done by way of eye estimation only.
They also stated that computer printout and loose slips are unreliable piece of evidence. They further stated that as per settled law, electric consumption cannot form sole basis to allege suppression of production and clandestine removal of goods allegedly produced. The appellant company relied on a number of case laws in support of their defence reply. The other appellants also contested the imposition of penalty on them. The matter was taken us for personal hearing by the Adjudicating Authority on three dates. However, since none of appellant caused appearance before the Learned Adjudicating Authority, he proceeded to Adjudicated the matter Ex-Parte on the basis of evidence available on record. After considering the defence reply, the Learned Adjudicating Authority was pleased to Adjudicate the aforementioned three show cause notices vide the impugned Order-in-Original No. JAI-EXCUS-001- COM-136-13-14 dt.31.03.2014, by which he has been pleased to confirm the proposed duty demand and have appropriated the amount deposited by the appellant company in course of 6 Appeal No. E/53606-53611/2014-EX [DB] investigation, against the demand of duty so confirmed by him. He was also pleased to levy interest on the amount of duty confirmed and also to impose penalty under section 11AC of Central Excise Act 1944/Rule 25 of Central Excise Rules 2002. He was also pleased to impose penalty on other appellants under rule 26 of the Central Excise Rules 2002. The operative portion of the order in original in tabular form is given below:-
SCN Dt. Duty Penalty on Penalty on Penalty on Penalty on Penalty on Demand on Appellant Co. Kamal Jeet Karan Pal Pawan Rakesh Appellant Co. Singh Singh Jeet Singh Bhatnagar SCN dt. 8,91,72,830/- 8,91,72,830/- 50,00,000/- 50,00,000/- 50,00,000 10,00,000/-
/-
03.05.2012 U/s 11AC SCN dt. 2,27,64,776/- 2,27,64,776/- 20,00,000/- 20,00,000/- 20,00,000 5,00,000/-
U/s 11AC /-
06.02.2013
SCN dt 11,00,285/- 2,00,000/- 2,00,000/- 2,00,000/- 2,00,000/- 50,000/-
U/r 25
25.07.2011
5. The appellants are before this Tribunal in appeal against the said Order-in-Original dt.31.03.2014 passed by Learned Commissioner of Central Excise, Jaipur-I.
6. The Learned Advocate appearing on behalf of the appellants stated that order appealed against is vitiated for denial of Natural justice. He stated that the appellants had asked for adjournment on valid grounds, which was not even considered by the learned Commissioner. Copy of request for adjournment is placed in the appeal folder. He also submitted that the request for cross examination has been erroneously denied. He submitted that 7 Appeal No. E/53606-53611/2014-EX [DB] method of physical verification adopted by the officers has not been stated in the panchnama. This could have been made known only by cross examination of the officers and the panch witnesses. However the Learned Advocate categorically stated that the appellants do not want remand of the matter. He prayed for decision in the matter by this Tribunal on the basis of evidence available on record.
7. The Learned counsel on behalf of the appellant further submitted that the entire demand is based on allegation of clandestine removal on the part of the appellant company. However, there is not even an iota of evidence to show suppression of production and clandestine removal by the appellant company. The allegation is based on computer print outs, loose slips and alleged excessive consumption of electricity. He urged that there is no corroborative tangible evidence. The whole allegation is based on the unauthenticated computer print outs and loose slips. The department, instead of making enquires with the raw materials suppliers, transporters, buyers, commission agents, etc. dealing with the goods of the same nature, as produced by the appellant company, devoted time and energy only to obtain confessional statement from the co-noticees. It is settled law that the allegation of clandestine removal must be based on tangible evidence. He submitted that the allegation solely on the basis of unauthenticated slips and confessional statements of co-noticees is unsustainable.
8. As regards physical verification of stock, the learned counsel submitted that the method of physical verification has not been 8 Appeal No. E/53606-53611/2014-EX [DB] stated either in the panchanama or in the show cause notice. He took us through the panchnama dt.21.09.2011 drawn at the time of search of the factory premises, available at page 76 of the appeal paper book to demonstrate absence of method of physical verification in the panchnama. Therefore, as per learned advocate, the quantity of stock is calculated by the officers on eye estimation only, which cannot be taken as a valid evidence for alleging clandestine removal. It is settled law that clandestine removal cannot be based on presumption and assumptions.
9. The learned advocate further stated that the panchnama in the present case has not been drawn properly in as much as the places of recovery of computer print outs and loose slips is not indicated in the panchnama. In addition it appears that no panchnama or seizure memo or detention memo in respect of computer and other documents had been prepared. Thus, the panchnama drawn is vitiated and hence cannot be taken as evidence to hold against the appellant. Moreover the parameters for taking computer printout as evidence are clearly specified in section 36 B of Central Excise Act 1944. There is nothing to show fulfilment of the prescribed parameter in respect of the computer printout relied upon by the department, to hold against the appellant. Thus, the demand of duty calculated on the basis of figures in the computer printout and loose slips is unsustainable.
10. The learned advocate also submitted that the demand of duty on the quantity of final product calculated on the basis of electricity 9 Appeal No. E/53606-53611/2014-EX [DB] consumption is unsustainable in view of law laid down in the case of R.A Casting. He also submitted that the said decision has been erroneously distinguished by the learned Commissioner.
11. As regards levy of interest, the learned counsel submitted that when the demand of duty itself is unsustainable in law, there is no question of levy of interest in the present case.
12. As regards imposition of penalty under section 11AC of Central Excise Act 1944, the learned advocate submitted that the said penal provision is invokable only in cases of non payment of duty by reasons of fraud etc. In the present case, since there is no tangible evidence of any clandestine activity by the appellant company, the ingredients specified in section 11AC are not satisfied in the present case. Likewise, the penal provisions contained in rule 25 of the Central Excise Rules, 2002, are not attracted in the present case for want of tangible evidence of clandestine removal.
13. As regards imposition of penalty on other appellants, the learned counsel submitted that the penal provisions contained in Rule 26 of Central Excise Rules 2002 have been incorrectly invoked against them in view of the fact that the same is invokable only in cases where elements of mens rea exists and the goods are liable to confiscation. In the present case, there is not even proposal for confiscation of goods. It appears that penalty on the officials of the appellant company has been imposed merely on the basis of post held by them. Such imposition of penalty is clearly unauthorised by law.10
Appeal No. E/53606-53611/2014-EX [DB]
14. The learned advocate submitted compilation of judgement in support of his submissions. The list of case laws relied upon by the learned advocate is given below:-
Sr. Nos. Title of the Case Citation 1. Gupta Synthetics Ltd. Vs CCE [2014 (312) ELT 225 (Tri.)] 2. Aum Aluminum Pvt Ltd. Vs CCE [2014 (311) ELT 354 (Tri.)] 3. CCE Vs Laxmi Engineering Works [2010 (254) ELT 205 (P & H)] 4. Everest Rolling Mills Pvt Ltd. Vs CCE [2013 (292) ELT 397 (Tri.)] 5. Vikram Cement (P) Ltd. Vs CCE [2012 (286) ELT 615 (Tri.)] 6 Commissioner Vs Vikram Cement (P) Ltd. [2014 (303) ELT A82 (All.)] 7. CCE Vs Lord's Chemicals Ltd. [2009 (245) ELT 695 (Tri.)] 8. CCE Vs Lord's Chemicals Ltd. [2010 (258) ELT 48 (Cal.)] 9. CCE Vs Arsh Casting Pvt Ltd. [2010 (252) ELT 191 (H.P)] 10. Shivalaya Ispat & Power Pvt Ltd. Vs CCE [2017 (357) ELT 742 (Tri.)] 11. Super Cassettes Industries Ltd. Vs CCE [2017 (347) ELT 145 (Tri.)] 12. CCE Vs Nissan Thermoware P. Ltd. [2011 (266) ELT 45 (Guj.)] 13. CCE Vs M.S.P. Steel & Power Ltd. [2017 (357) ELT 275 (Tri.)] 14. Varun Dyes Chemicals Pvt Ltd. Vs CCE [2007 (218) ELT 420 (Tri.)] 15. Mahavir Metals Industries Vs CCE [2014 (313) ELT 581 (Tri.)] 16. Premium Packaging Pvt Ltd. Vs CCE [2005 (184) ELT 165 (Tri.)] 17. R.A. Castings Pvt Ltd. Vs CCE [2009 (237) ELT 674 (Tri.)] 18. CCE Vs R.A. Castings Pvt Ltd. [2011 (269) ELT 337 (All.)] 19. Commissioner Vs R.A. Castings Pvt Ltd. [2011 (269) ELT A108 (S.C.)] 20. Om Shanti Steel & Castings Pvt Ltd. Vs UOI [2017 (347) ELT 441 (Jhar.)] 21. Savitri Concast Ltd. Vs CCE [2015 (329) ELT 213 (Tri.)] 22. Madhu Foods Products Vs CCE 91-94[1995 (76) ELT 197 (Tri.)] 23. T.G.L. Poshak Corporation Vs CCE [2002 (140) ELT 187 (Tri.) 20. Oudh Sugar Mills Ltd. Vs UOI [1978 (2) ELT (J172) (S.C.)] 21. Saraya Steel Ltd. Vs CCE [1998 (98) ELT 787 (Tri.)] 22. P.S.P. Appliances (P) Ltd. & Ors. Vs CCE [2005 (70) RLT 431 (Tri.)] 23. CCE Vs Universal Polythene Industries [2001 (130) ELT 228 (Tri.)] 11 Appeal No. E/53606-53611/2014-EX [DB] 24. Utkal Galvanizers Ltd. Vs CCE [2003 (158) ELT 42 (Tri.)] 25. CCE Vs Supreme Fire Works Factory, Sivakasi [2004 (163) ELT 510 (Tri.)] 26. Andaman Timber Industries Vs CCE [2015 (324) ELT 641 (S.C.)] 27. CCE Vs Parmarth Iron Pvt Ltd. [2010 (260) ELT 514 (All.)] 28. Jindal Drugs Pvt Ltd. Vs UOI [2016 (340) ELT 67 (P&H)] 29. Century Metal Recycling Pvt Ltd. Vs CCE [2016 (333) ELT 483 (Tri.)] 30. CCE Vs Gopi Synthetics Pvt Ltd. [2014 (302) ELT 435 (Tri.)] 31. CCE Vs Heliwal Polypackers Pvt Ltd. [2016 (340) ELT 204 (Tri.)] 32. Balajee Structurals (India) Pvt Ltd. Vs CCE [2016 (341) ELT 457 (Tri.)] 33. CCE Vs Star Steels [2015 (315) ELT 495 (All.)] 34. Mahendra Steel Industries Vs CCE [2016 (339) ELT 623 (Tri.)] 35. Kuber Tobacco Products Ltd. Vs CCE [2013 (290) ELT 545 (Tri.)]
15. The Learned AR appearing on behalf of department relied on the order appealed against. He submitted that the order is based on documents recovered from the factory premises and the guest house belonging to the appellant company. The officials of the appellant company recorded confessional statements. He also submitted that learned commissioner has rightly confirmed demand and rightly imposed penalty on the appellants. Searches were conducted at different places related to the appellants including their factory premises and guest house of the company-appellant, located in the factory.
15.1 Result of Searches:
Search at Factory Premises:
Shortage of 88 MT of MS ingots - Duty involved Rs. 2,71,920/- Shortage of 56 MT of TMT Bars - Duty involved Rs. 1,99,775/- Print out of Computer data installed in factory office shown clearance of 441.44 MT of TMT Bars involving duty of Rs. 15, 46,849/- during August 2011 without payment of duty 12 Appeal No. E/53606-53611/2014-EX [DB] Search at Factory‟s Guest House :
Incriminating documents - Hand written as well as computer generated papers various Slip Pads as detailed on Page - 77 of the Paper Book revealed suppression of production - non entry of production and clearance thereof in statutory records in respect of the followings as quantified as below :
Month TMT Bars MS Ingots Mis- Rolls/Scraps March 2011 315.77 MT April 2011 946.35 MT 49.62 MT 212.68 MT May 2011 885.88 MT June 2011 997. 17 MT
15.2. Sh. Rakesh Bhatnagar, GM and Sh. Anil K Sharma, Authorised Signatory in their statement dated 21.09.2011, admitted the above shortage as well as clandestine removal of the above said TMT bars during Aug. 2011 and even paid Rs. 15,46,849/- vide Cheque No. 484353 dated 21.09.2011 and also paid Rs. 4,71,695/-
through debit in RG 23 Pt-II on 22.09.2011.
15.3. Sh. Rakesh Bhatnagar, GM and Sh. Anil K Sharma, Authorised Signatory and Sh. Dinesh K Goswami, Excise Executive in their statement dated 23.09.2011, i.e. two days after the said search admitted that the recovered documents belonged to the 13 Appeal No. E/53606-53611/2014-EX [DB] company and that that they pertain to the production, sale, debtor, creditors of the company, that these documents were authored by Sh. Dinesh Goswami and Sh. Chirag Sharma, Purchase Officer. 15.4. Sh. Rakesh Bhatnagar, GM admitted the alleged clandestine sales/clearances arrived by officers at on the basis of recovered documents and paid Rs. 80,00,000/- vide Cheque dtd. 28.09.2011 against recoverable duty of Rs. 1,10, 25,351/- for the months of April, 2011, May, 2011 and June, 2011. He also paid Rs. 30,25,351/- vide Cheque dated 05.10.2011. Sh. Bhatnagar also paid Rs, 10,49,669/- in lieu duty evaded on clearances in March, 2011.
15.5. The whole case is based on the unaccounted production and clearances as also on consumption of electricity. The corroborative evidences are in the form of documents - computer print outs, loose papers (Kacchi Parchi), slip pads recovered from the factory and its guest house and admissions by the stake holders. The officers of the company could not explain the reason for shortage and accepted the same and later on paid tax as calculated by Revenue. Sh. Rakesh Bhatnagar, GM, Sh. Dinesh Goswami, Excise Executive and Sh. Anil Sharma, Marketing Head & Authorised Signatory, in their respective statements have admitted that the recovered documents were related to their company - M/s Kamal Sponge Steel & Power Ltd. and that on the basis of those documents they were reporting to Sh. Karan Pal Singh and other Directors of the company. They have also accepted sales in cash without Invoice and without payment of 14 Appeal No. E/53606-53611/2014-EX [DB] duty. That is why they on different dates paid huge amount of over Rs. 1.40 crores as excise duty recoverable from them, for their clandestinely cleared products.
15.6. Other duty was computed by the officers on the basis of electricity consumption which can not be ignored as opposed to the R. A. Casting case, corroboration in the form of clandestine clearances have been proved.
15.7. Here it may be noted the statements of Sh. Bhatnagar has never been retracted and the Directors did not appear despite six Summons issued to them which could have provided them opportunity for rebuttal if any. Nor did they avail the opportunity of personal hearings. All these factors combine make the proposition of revenue, on demand of duty viable and the same has rightly been confirmed by the Adjudicating Authority. Admitted facts need not be proved as propounded by the Supreme Court in the case of CCE, Madras Vs. Systems & Components - Para 5 [2004 (165) ELT 136 SC]. Regarding reply of Directors S/Sh. Pawan Jeet Singh and Kamal Jeet Singh that they have not given any confessional statements, so no penalty could be imposed on them is also not tenable in as much as they got ample opportunity to rebut the allegations. Their avoidance from recording statements under Section 14 of CEA, 1944 and non-appearance during personal hearings points towards their guilty minds and in absence of their confessions, preponderance of probability comes into play. The categorical admission of the GM- Sh. Bhatnagar, that he used to brief the Directors from time to time and had to comply with their directions, tells the control exerted by S/Sh. Pawan Jeet Singh and 15 Appeal No. E/53606-53611/2014-EX [DB] Kamal Jeet Singh in the affairs of the company. At the same time, avoidance of law and non-payment of statutory duty by the persons in charge of complying with the law of the land does not absolve them from penalty as stipulated in the book which is not infructuous and perfectly suits the situation here. Some more citations favoring Revenue:
Bajrang Petrolchemicals (P) Ltd. Vs. CCE, Kanpur - [ 2015 (317) ELT 243 All].
Collector Vs. D. Bhoormal - [1983 (13) ELT 1546 SC] Shiv Shakti Steel Tubes Vs. Commissioner - [2008 (227) ELT A 122 (SC)] Fathima Panels Vs. CCE, Mangalore - [2014 (213) ELT 641 (Tri.
Bangalore)
16. In rejoinder the learned advocate submitted that the judgement in Shiv Shakti Steel Tubes stands distinguished by the Hon‟ble High Court in the case of CCE Vs Saron Mechanical Works Pvt. Ltd. reported in 2016 (332) ELT 80 (P&H). He also submitted that law laid down in Bajrang Petro Chemicals (P) Ltd., case is no more a good law in view of contrary judgement of the same High Court in the case of Continental Cement Company Vs UOI reported in 2014 (309) ELT 411 (All.).
17. Heard both sides and perused the records. In this case the demand of duty is on the basis of allegation of clandestine removal of excisable goods without payment of duty. Such allegation has been levelled against the appellant company primarily on the basis of shortage in the stock of finished goods detected by the officers, 16 Appeal No. E/53606-53611/2014-EX [DB] comparison of figures in computer print outs and loose slips recovered from the guest house with the figures in the statutory records maintained by the appellant company and alleged actual production calculated on the basis of electricity consumption. Before discussing the evidence on record relating to the allegations made against the appellant company and other appellants, we propose to first deal with the issue of violation of principle of Natural justice in the present case.
18. The Learned Commissioner in para 49 of the order appealed against has observed that the appellants had been given sufficient opportunity, and did not care to appear on the three dates fixed for personal hearing. We find that appellant had made request for adjournment on the dates fixed for personal hearing. The copy of such adjournment requests is available at page 240 to 242 of the appeal paper book. In addition we find that the appellant had also requested for cross examination, in their reply to show cause notice. There is no evidence on record to show that such requests were considered by the learned commissioner. Therefore, there appears to be violation of principle of Natural justice in the present case. However, since the matter is old and the relied upon documents are available on record, we proceed to decide the matter in view of submission made by both sides and evidence available on record, instead of remanding the matter back to the Adjudicating Authority. As stated above the allegation of clandestine removal is on the basis of (i) Shortage detected in the stock of finished goods (ii) Figures in 17 Appeal No. E/53606-53611/2014-EX [DB] Computer printout/loose slips and (iii) Production calculated on the basis of electricity consumption. We proceed to discuss the allegations individually.
(i) Demand based on shortage detected in the stock of finished goods On perusal of the panchnama available at page 76 of the appeal memo, it is seen that method of physical verification has not been stated in the panchnama. The calculation chart at page 116 of the appeal memo also does not throw any light on the process adopted by the officers for physical verification of the stock. The final product in the present case is accounted for in weight. Therefore, the method for verification of stock of such goods must be the physical weighment of goods. Any other method of ascertaining quantity of such goods will be estimation only. We have also gone through the statement recorded by the officers and we find no mention of the method of physical verification. Nor any calculation chart is made part of panchnama. Thus, we agree with the appellant that verification of stock was by eye estimation only. More over there is no dispute to the fact stated by the appellant company in their reply, that the shortage in case of MS Ingots was 3.24 % and that of TMT bars was 1.4 % of the total production. Such difference in quantity is normal in case of eye estimation of the stock. Therefore, we hold that the 18 Appeal No. E/53606-53611/2014-EX [DB] allegation of clandestine removal on the basis of the so called shortage in stock of final products is un-sustainable and demand in this regard is fit to be set aside.
(ii) Demand based on figures/data in computer printout/loose slips The computer printout and loose slips relied upon by the department for alleging clandestine removal had been recovered from the guest house and from factory premises also. As regards computer printouts, there is nothing on record to suggest the manner in which such printouts were taken. There is also nothing on record to suggest fulfillment of the conditions stipulated in section 36 B of the Central Excise Act 1944 in order to treat computer printout as admissible piece of evidence. The fulfillment of the conditions stipulated in Section 36 B (2) of Central Excise Act 1944 is must for taking computer printout as evidence in the Adjudication proceeding. In this connection we are guided by this Tribunal‟s order in the case of Premium Instruments & Controls Ltd. Vs CCE reported in 2005 (183) ELT 65 (Tri.).
Para 9 of the said judgment is re-produced below:-
9. On the demand of duty on waste and scrap, again the appellants have made out a strong case on merits. The demand covering the period November, 1993 to September, 1998 is based on certain computer print-out relating to the period February, 1996 to 19 Appeal No. E/53606-53611/2014-EX [DB] September, 1998. These print-outs were generated from a personal computer of Shri G. Sampath Kumar, a junior officer of the Company, whose statements were also recorded by the department. Admittedly, whatever facts were stated by Shri Sampath Kumar, in his statements, were based on the entries contained in the computer print-outs. The statements of others, recorded in this case, did not disclose any additional fact. Therefore, apparently, what is contained in the computer print-out is the only basis of the demand of duty on waste and scrap. The question now arises as to whether these print-outs are admissible as evidence, in this case. Ld. Sr. Counsel has pointed out that the computer print-outs did not satisfy the statutory conditions. He has referred to the relevant provisions of Section 36B of the Central Excise Act which deals with admissibility of computer print-outs etc. as evidence and says that the statement contained in a computer print-out shall be deemed to be a document for the purposes of the Act and the rules made thereunder and shall be admissible as evidence of the contents of its original, if the conditions mentioned in sub-section (2) and other provisions of the Section are satisfied in relation to the statement and the computer in question.
Sub-section (2) reads as under:-
The conditions referred to in sub-section (1) in respect of "2. the computer print-out shall be the following, namely:-
(a) the computer print-out containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly 20 Appeal No. E/53606-53611/2014-EX [DB] carried on over that period by the person having lawful control over the use of the computer;
(b) during the said period, there was regularly supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement of the kind from which the information so contained is derived;
(c) throughout the material part of the said period, the computer was operation properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and
(d) the information contained in the statement reproduced or is derived from information supplied to the computer in the ordinary course of the said activities."
19. Ld. Sr. Counsel has argued that the above mentioned conditions were not fulfilled. The computer was not shown to have been used regularly to store or process information for the purposes of any activities regularly carried on by the company. It was also not shown that information of the kind contained in the computer print- out was regularly supplied by the Company to the computer of the appellant in the ordinary course of activities. Again, it was not shown that, during the relevant period, the computer was operating in the above manner properly. The above provision also casts a burden on the party who wants to rely on the computer print-out, to show that the information contained in the print-out had been 21 Appeal No. E/53606-53611/2014-EX [DB] supplied to the computer in the ordinary course of business of the company. We find that none of these conditions was satisfied by the Revenue in this case.
20. The essentiality of fulfillment of the said parameters in respect of computer printouts has also been reiterated in para 5 of the order in the case of Premium Packaging Pvt. Ltd. Vs CCE reported in 2005 (184) ELT 165 (Tri.-Del.). The relevant para is re-produced below:-
5. The Department has no doubt placed much reliance on the provisions of Section 36-B, to sustain the admissibility of the computer print outs for proving the charge of clandestine receipt of raw material and manufacture of the final products by the appellants, but admissibility of the printed material under the said Section, has been made subject to the fulfillment of certain conditions, detailed therein. The condition in respect of the computer printout laid down in that Section, as is evident from the reading of its clause (ii), is that, the computer printout containing the statement was produced by the computer during the period over which the computer was used regularly to store or possess the information. In the instant case, the print outs were not produced by the computer. Peripherals were picked up by the Officers from the Head Office-cum-Sale Depot of the appellants and they were inserted into the computer, and that too, not all but certain information from the part of two zip discs were taken in the absence of the appellants. Certain zip discs were copied out by the Officers in the computer of the Department and that too without associating any authorized person of the appellants‟ company. As observed above, when the appellants wanted to have access to the peripherals and requested for 22 Appeal No. E/53606-53611/2014-EX [DB] obtaining the information or data from those peripherals, some floppies were found blank while some even could not run on the computer. The hard disc even could not be opened for the reason best known to the Department as all these peripherals remained in their custody after the date of seizure i.e. 30-7-1999.
21. In view of the above orders, there can be no doubt that computer printout can be taken in evidence only if the parameters stipulated in section 35 B (2) of the Central Excise Act 1944 are fulfilled. In the present case, we are unable to find any evidence on record to show that the parameters have been fulfilled. In addition there is no corroborative evidence to prove correctness of the data/figure in the computer printout. Under the circumstances, we are of the view that it is not proper to take computer printout in evidence in the present case for holding appellant company guilty of suppression of production and clandestine removal of goods.
22. As regard demand on the basis of figures in the loose slips, it is admitted that the loose slips were found in the guest house and not in the factory premises. On perusal of the panchnama at page 77 of the appeal memo, it is observed that the place from which such loose slips were recovered is not stated therein. The author/scribe of the said loose slips is not identified. The loose slips are therefore unauthenticated and it is hard to place reliance on such unauthenticated piece of documents recovered from a place other than factory premises. More over there is no corroborative evidence to suggest correctness of the figure recorded in the loose slips. 23
Appeal No. E/53606-53611/2014-EX [DB] Therefore, the demand of duty on the basis of figures in such unauthenticated and uncorroborated piece of evidence is unsustainable.
(iii) Demand based on Production calculated on the basis of electricity consumption The method adopted by the department in the present case for calculating per metric ton consumption of electricity is stated in para 14 of the impugned order. As stated therein the total production of the finished products i.e. TMT Bar/Saria was arrived at by adding (i) the production shown by the appellant company in their statutory records and (ii) the alleged clandestine production shown in their private records and such production figure was thereafter divided by number of units of electricity consumed by the appellant company during the Months of March, April, May, June and August 2011. The fact that the figures/data in private records i.e. in the computer printout and loose slips has been taken into consideration as actual production itself shows that the calculation is faulty and erroneous. We have already held that computer printout and loose slips are not reliable piece of evidence in the present case. Therefore, taking the figures/data in such documents as actual production shows that the calculation made on basis of 24 Appeal No. E/53606-53611/2014-EX [DB] the same does not represent the correct figure of production. Moreover, electricity consumed in production of MS ingots has not been taken into consideration. So is the case with units of electricity consumed for lighting the office, factory premises and for lighting of adjoining areas. Thus the figures of average production on the basis of consumption of electricity has not been correctly calculated.
23. The issue of calculation of average production on the basis of electricity consumption and demand of duty on the production figure arrived at on the basis of electricity consumption had been subject matter of litigation for a long period of time. The issue was decided by this Tribunal in the case of R.A. Castings Pvt. Ltd. Vs CCE reported in 2009 (237) ELT 674 (Tri.). The Tribunal‟s decision was affirmed by the Hon‟ble High Court in the case of CCE Vs R.A. Casting Pvt. Ltd. reported in 2011 (269) ELT 337 (All.) which stands maintained by the Hon‟ble Supreme Court as reported in 2011 (269) ELT A108 (S.C) by way of dismissal of SLP filed by the department against the said judgment of Hon‟ble Allahabad High Court. Thus the issue is finally settled in favour of the assessee. The learned Commissioner has not taken cognizance of the Hon‟ble Allahabad High Court judgment and has erroneously distinguished this Tribunal‟s order in the case of R.A. Casting Ltd. [Supra]. As a matter of fact, the demand in this case is also based on theoretical 25 Appeal No. E/53606-53611/2014-EX [DB] calculation taking into account the unauthenticated and uncorroborated figures of production as actual production. Once the allegation of suppression of production and clandestine removal of alleged unaccounted production is proved to be incorrect, the production calculated on the basis of such production figure must be treated as in correct and wrong. Under the circumstances demand of duty on the basis of average production calculated as per consumption of electricity is unsustainable.
24. Before concluding our observations as regard allegation of clandestine removal in the present case, we find that the impugned order is vitiated for not allowing cross examination of the witness of Revenue, as required u/s 9D of the Act. It have been so held by Hon‟ble Supreme Court in „Andman Timbar Industries v/s CCE 2015 (324) ELT 64 (SC).
25. In the present case, there is no reliable evidence to corroborate alleged clandestine manufacture and clearance. There is no evidence to show procurement of excess raw material, actual removal of unaccounted finished goods, receipt of sale proceeds of such clandestinely removed goods, transportation of excess raw material or of unaccounted goods produced. Therefore, we have no hesitation in holding that the allegation of clandestine removal of excisable goods is not proved in this case and hence we set aside the demand of duty with consequential benefit to the appellant company.
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Appeal No. E/53606-53611/2014-EX [DB]
26. Since the allegation of clandestine removal is not proved and since the demand of duty stands set aside by us with consequential relief to the appellant, we refrain from giving findings on the issue of limitation. The penalty imposed on the appellants is set aside with consequential relief to the appellants, as admissible in law.
(Order pronounced in the open court on_22/01/2019__) (Bijay Kumar) (Anil Choudhary) Member (Technical) Member (Judicial) Rekha