Custom, Excise & Service Tax Tribunal
Smart Steels vs Raipur on 22 August, 2019
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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
New Delhi
PRINCIPAL BENCH-COURT NO. IV
Excise Appeal No. 50654 of 2019-DB
[Arising out of Order-in-Original No. RPR-EXCUS-000-COM-CEX-087-2018
dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise
& Customs, Central GST Building, Raipur]
Smart Steels .........Appellant
Industrial Area, Bhilai (C.G)
Versus
Pr. Commissioner of Central Tax,
Central Excise & Customs, Central GST Building
Raipur (C.G.) .......Respondent
With Excise Appeal No. 50655 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-CEX-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Haryana Rolling Mill .........Appellant Light Industries Area, Bhilai, (C.G) Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50656 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Euro Pratik Ispat Private Limited .........Appellant Dharsiva Tanda Road, Dharsiva(C.G) Versus Pr. Commissioner of Central Tax, 2 Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50657 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-CEX-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Pragati Ingots & Power Private Limited .........Appellant Urla Dharsiwa Bendri, (C.G) Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50658 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-CEX-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Shri Jai Baba Steel Private Limited .........Appellant Heavy Industries Area, Bhilai (C.G) Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50659 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-CEX-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Balaji Loha Limited .........Appellant Urla Industries Area, Urla Raipur(C.G) Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50660 of 2019-DB 3 [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-CEX-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Pilania Steels Private Limited .........Appellant Heavy Industrial Area, Bhilai(C.G) Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G) ...Respondent With Excise Appeal No. 50661 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Maa Santoshi Industries .........Appellant TP Nagar, Near 15 Block, Angan Badi Kendra District-Korba, Chattisgarh Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50662 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-CEX-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Bhagwati Power & Steel Limited .........Appellant Dharshiwan, Raipur,(C.G) Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50663 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-CEX-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] J S Forge Private Limited .........Appellant Industrial Estate, Bhilai(C.G) 4 Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50664 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-CEX-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Maheshwari Steels .........Appellant Ganjpara, Durg, (C.G) Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50665 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-CEX-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Sandeep Agarwal .........Appellant M/s Hariom Ingots & Power Private Limited Light Industrial Area, Bhilai, (C.G) Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50666 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-CEX-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Bhagwan Das Agarwal .........Appellant M/s Hariom Ingots & Power Private Limited Light Industrial Area, Bhilai (C.G) Versus 5 Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50667 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Shri Santosh Agarwal .........Appellant Director, M/s Hariom Ingots Power Private Limited, Light Industrial Area, Bhilai (C.G) Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50723 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] M/s Jai Balaji Industrial Limited .........Appellant Rasamada, Borai, Distt. Durg(C.G) Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50527 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] Crest Steel & Power Private Limited .........Appellant Khasra NO. 1259, Rasmada, Murhipar Road, Joratarai, Distt. Rajnandgaon, (C.G.) Versus 6 Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent With Excise Appeal No. 50771 of 2019-DB [Arising out of Order-in-Original No. RPR-EXCUS-000-COM-087-2018 dated 10/12/2018 passed by Pr. Commissioner of Central Tax & Central Excise & Customs, Central GST Building, Raipur] M/s Hariom Ingots & Power Private Limited .........Appellant (The main appellant) Light Industrial Area, Bhilai (C.G.) Versus Pr. Commissioner of Central Tax, Central Excise & Customs, Central GST Building Raipur (C.G.) .......Respondent Appearance Present for the appellant: Shri Vaibhav Dixit, Shri Anurag Mishra, Ms. Tripti Gutpa, Shri Vinay K. Jain & Ms. Priyanka Goel, Advocates Present for the respondent: Shri V B Jain & Shri P Juneja, Authorised Rep. Coram:
Hon'ble Mr. Bijay Kumar, Member (Technical) Hon'ble Ms. Rachna Gupta, Member (Judicial) Date of hearing: 04.07.2019 Date of decision: 22.08.2019 Final Order Nos. 51109-51125/2019 Per Bijay Kumar:
1. These appeals are filed by M/s. Hari Om Ingots and Powers Pvt.
Ltd.(hereinafter referred to as „the main appellant/company‟) and other appellants against Order-in-Original No.RPR/EXCUS/000/COM/ 7 087/2018 dated 10.12.2018 wherein the learned Commissioner has confirmed the demand of Rs.13,62,40,831/- under Section 11A(4) of the Central Excise Act,1944(hereinafter referred to as „the Act‟) alongwith Interest under Section 11AA of the Act. Further a demand of Rs.3,57,289/- has also been confirmed against the main appellant in respect of shortage of goods detected at the time of verification of the stocks. Penalty of equivalent amount is also imposed the appellant under Section 11AC(1) (c) of the Act. Separate penalties of Rs.10,00000/- each have been imposed against Shri Sandeep Agarwal,Shri Santosh Agarwal,Shri Bhagwandas Agarwal the Directors of the main appellant, who are in appeal against penalties imposed upon them under Rule 26 of the Central Excise Rules,2002 (hereinafter referred to as „the Rules‟). The Central Excise Duties have been confirmed against the other appellants along with penalties as indicated in the impugned order under the provisions of the Act. Since all the appeals are against the common order, therefore, all the appeals are taken up together for the disposal.
2. The brief facts of the case are that the Central Excise Officers searched the factory premises of the main appellant as well as the residential premises of Shri Manoj Agarwal, their Director on 07.08.2012. The search of the factory premises resulted into shortage of finished excisable goods involving the central excise duties to the tune of amounting to Rs.3,57,289/-. The officers also recovered certain loose sheets of papers from a Car bearing Registration No.CG04H1321, owned by Shri Om Prakash Sai, Accountant, of the appellant company which was parked inside the factory premises. Some computer 8 data, which was maintained in Tally Software for the period 2009-2010 and 2011-12 and some sale and purchase data, which was maintained in ERP System were also retrieved from the Computer. According to panchanama dated 08.08.2012, the said computer data was burnt into one writable CD, the copy of which was also provided to the main appellant, and the original copy was retained by the officers of the Department for further investigation. Search of the residential premises of Shri Manoj Agarwal, Director of the main appellant resulted into recovery of certain loose documents from his brief case. The statement of Shri Om Prakash Sai, Accountant, was recorded on 07.08.2012. Similarly statements of same transporters were also obtained by the investigating officers who were transporting the goods manufactured by the appellant. After the search and the seizure, the enquiries and investigations were started by the Department after a gap of 4 years and the data which was burned into one CD, was opened by the officers on 19.02.2016. According to the panchnama dated 19.02.2016, surprisingly, two CD(s) were recovered in which the Tally Data for the years 2009-10 & 2010-11 was found to contain dispatch and purchase record for the year 2011-12 & 2012-13 in Excel format. Accordingly various statements, from Director of the main appellant, their Accountant, seller of the Raw Material, purchaser of the furnished goods, were also recorded by the department. On the basis of the loose documents recovered from the aforesaid Car and on the basis of the Computer Data, the department concluded that the appellant has cleared the goods valued at Rs.70,52,63,430/- during the stipulated period 2011-12 clandestinely, and thus evaded Central Excise duty to the tune of Rs.7,26,42,133/-. Similarly, it was 9 concluded by the department that the appellant has cleared goods valued at Rs.51,45,52,577/- without payment of Central Excise duty during the disputed period (2012-13) and evaded the Central Excise duty to the tune of Rs.6,35,98,698/-. Accordingly, a Show Cause Notice F. No. IV(6)INV/Hari Om/44/ 2012-13/P/4123 dated 06.05.2016 was issued to the main appellants for demand of Central Excise duty amounting to Rs.13,62,40,831/- under Section 11A(4) of the Act alongwith Interest, and penalty under Section 11AC of the Act. Central Excise duties were also demanded from the other appellants along with penalties as per show cause notice separate penalties were imposed on the Directors of the main appellant.
3. The main appellant challenged the entire search and seizure operation before the Hon‟ble High Court of Chhattisgarh at Bilaspur vide Writ Petition No.318 of 2017. The said Petition was decided by the Hon‟ble High Court vide its order dated 23.10.2017 directing the Department to provide some of the relevant documents and also liberty was given to the Departmental authorities to decide whether those documents were relevant and should be provided to the Petitioner or not. The appellant filed another Writ Petition No.552 of 2017 challenging the entire search and seizure operations before the Hon‟ble High Court of Chhattisgarh at Bilaspur. The Hon‟ble High Court vide order dated 17.05.2018 has observed as under:-
"For the foregoing, while agreeing with the order of dismissal of the Writ Petition rendered by the Writ Court, the Writ Appeal is disposed of with an observation that if occasion so arises, the appellants would be at liberty to raise grounds regarding validity of the search and seizure 10 operation in the appellate proceeding, after the final order is passed by the Commissioner".
4. The appellant also filed the Special Leave Petition to the Hon‟ble Supreme Court of India against Order dated 17.05.2018, which was subsequently withdrawn by the appellant.
5. The main appellant filed a defence reply to the impugned show cause notice by letter dated 27.06.2018, denying all the allegations made against them. The appellant also asked for the cross-examination of various persons whose statements were relied upon by the department. The appellant further asked for the cross-examination of some of the officers, who participated in search and seizure operation. The learned Commissioner(Adjudicating Authority) allowed the cross- examination of some of the witnesses, however, cross-examination some of the officers and independent witnesses were denied, without giving any specific reasons. The appellant also submitted an additional defence replies dated 27.08.2018. The learned Commissioner by the impugned order confirmed the demand of Central Excise duty alongwith Interest and penalty against all the appellants as per impugned order. Individual penalties were imposed against Shri Sandeep Agrawal, Shri Santosh Agrawal, Shri Bhagwan Das Agrawal were imposed under Rule 26 of the Rules, 2002. Penalty on various raw material suppliers and purchaser of the goods was also imposed along with duty demanded by the learned Commissioner under the provisions of the Act and the Rules.
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6. Shri Anurag Mishra, learned Counsel of the appellants submitted that the entire search and seizure operation was made in the appellants factory in violation to Section 100 of CrPC read with Section 18 of the Act. He submitted that one of the witnesses, namely Shri K.Shrinu, was panch witness both at the search proceedings in factory premises as well as on the residential premises on the same day and almost on the same time. The learned Counsel has submitted that the residential premises of the Director and the factory premises of the appellant are far away and it was not possible for a person to be present on the same time on both the places. The learned Counsel also submitted that the panchnama and recovery proceedings made in the residential premises of the Director was without any search warrant and the document resumed there from cannot be relied upon in the proceedings. The learned Counsel also relied upon the judgment of Hon‟ble Karnataka High Court in case of Nenmal Shankarlal Parmer Vs. Assistant Commissioner of Income Tax (Investigation) reported in 1992 (195) ITR 582, Commissioner of Income Tax Vs. M/s.Rohini S. Walia and Another reported in 2007 (289) ITR 328 (Delhi) and CIT Vs. Pushpa Rani, reported at 289 ITR 328. The learned Counsel further submitted that the entire proceedings were initiated in absence of independent witnesses and hence the search and seizure was in violation of Section 100 of CrPC and the recovery of documents from the residential premises and factory premises is not sustainable and cannot become a base to create such a huge demand against the appellant.
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7. The learned Counsel further submitted that according to the panchnama dated 07.08.2012 the Computer Data which was maintained in Tally for the period 2009-10 to 2011-12 and Data maintained in ERP for sale and purchase was burned into one time writeable CD and copy of one CD was handed over to the appellant and one copy was retained for further enquiry. The learned Counsel further submitted that the process of burning of Computer Data into CD should have been done in the presence of a Computer expert and certification from him should have been obtained which was a mandatory requirement under Section 36(B) of the Central Excise Act,1944. The learned Counsel further submitted that the entire data is inadmissible and under challenge, since the mandate under Section 36B for the resumption of data from electronic evidences was not followed. Following infirmities are existing with respect to this data:-
a) Panchnama dated 19.02.2016 mentioned that data was copied on 2 „one time writable CDs‟ while Panchnama dated 07.08.2012 mentions that data was copied on 1 „one time writable CDs‟.
[Existence of 2 CDs instead of 1].
b) Panchnama dated 19.02.2016 mentioned that two CDs have details pertaining to „tally detail of 2009-10 to 2011-12‟ and „dispatch and sale related excel files of 2011-12 and 2012-13‟. However, in Panchnama dated 07.08.2012 „dispatch and sale related excel files of 2011-12 and 2012-13‟ are not mentioned to have been recovered.
c) Finding in the impugned order Para-19. 6 to 19.6.3 of the OIO at Page No. 53 to 54 herein, no Computer Expert/Forensic Expert 13 were present during extraction of the data, which is required under Section 36B.
d) Absence of any Digital Forensic Examination Report which was explained by the department as not having been prepared in their letter dated 05.02.2018
e) Absence of any certificate of authorization to support the fact that printouts were produced by the computer during the period over which the computer was used regularly to store or process information.
f) Absence of any certificate of authorization to support the fact that printouts were produced by the computer over that period by the person having lawful control over the use of the computer.
g) Absence of signature by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities.
8. The learned Counsel submitted that the Computer printout which has been relied upon by the department against the appellant to prove the charges of clandestine removal are not an admissible evidence in according to the provisions of Section 36-B due to above cited reasons. He heavily relied upon the judgment of Hon‟ble Apex Court in case of M/s. Anwar P.V. Vs. P.K. Basheer- reported at 2017 (352) ELT 416 (S.C) wherein the Hon‟ble Supreme Court has set certain fundamentals to accept electronic documents as an evidence. The learned Counsel has also relied upon various decisions; M/s. S.N. Agrotech Vs. CC New Delhi; [2018 (361) ELT 0761( Trib. Delhi)] M/s. Shivam Steel Corporation Vs. CC & CCE BBSR [2016 (339) ELT 310 (Trib. Kolkata)] 14 M/s. Jindal Nickel & Alloys Ltd. Vs. Commissioner of Central Excise, Delhi [2012 (279) ELT 134 (Trib.-Del.)] Commissioner of Central Excise, Trichy Vs. Sri Ulaganayagi Amman Steels [2009 (241) ELT 537 (Tri.-Chennai)] Copier Force India Ltd. Vs. Commissioner of Central Excise, Chennai-[ 2008 (231) ELT 224(Trib.-Chennai)] Shri Ulaganayagi Ammal Steels Vs. CCE, Trichy [2008 (231) ELT 434 (Tri.-Chennai)] SSI, Chakra Cements Ltd. Vs. Commissioner of CCE, Guntar [2008 (231) ELT 67 (Tri.-Bang.)], Premier Instruments & Controls Ltd. Vs. CCE, Coimbatore [2005 (183) ELT 65 (Tri.- Chennai)] Flex Industries Ltd. vs. Commissioner [2016 (333) E.L.T. A235 (Tri. - Del.)].
9. The learned Counsel further relied upon on the judgment of Hon‟ble CESTAT, New Delhi in case of M/s. Popular Paints and Chemicals Vs. Commissioner of Central Excise & Customs, Raipur wherein the Appellate Tribunal vide Final Order No.52716-52718/2018 dated 06.08.2018 has held that :-
"The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65B of the Evidence Act are not complied with, as the law now stands in India. Thus, it has been clearly laid down by the Supreme Court that the computer printout can be admitted in evidence only if the same are produced in accordance with the provisions of Section 65B(2) of the Evidence Act. A certificate is also required to accompany the said of computer printouts as prescribed under Section 65B(4) of Evidence Act. It has been clearly laid down in para 15 of this judgement that all the safeguards as prescribed in Section 65B(2) & (4), to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tempering, alteration, transposition, excision etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. We may add here that the provisions of Section 65B of Indian Evidence Act and Section 36B of Central Excise Act are pari material. It is 15 evident from the Appeal that the investigation officers while seizing has failed to take safeguards as mandated under Section 36B of Central Excise Act. Further the cloning process of the hard-disks and retrieval of the data is admissible for want of cross-examination of Sh. Vipul Saxena, who has done cloning of the data from the computer system. We, therefore, hold that the computer printouts cannot held to admissible evidence in terms of Section 36B(2) & (4) of the Central Excise Act in the case at hand."
10. As regard to the loose papers sheets recovered from Car with Registration No.CG04H1321 of Shri Om Prakash Sai, Accountant, the learned Counsel submitted that these are third party documents. Also, there are glaring infirmities in respect to the documentary evidence. These infirmities are as follows:
(i) Hand-writing expert not consulted to verify the authorship of the loose sheets and documents. It was important, since the documents were recovered from a third party. Moreover, the sets of documents were un-related and also un-
authenticated.
(ii) The investigating authority has not mentioned the manner and approach adopted in the preparation of the relied upon documents from the loose sheets and third party documents. The details contained on the loose sheets and third party documents are actually not comprehensible and therefore the preparation of the details cannot be accepted on face value.
(iii) Author of documents was not identified and therefore it was not verifiable as to what was the actual nature and objective behind the recordings mentioned in the documents. The allegation made against the appellant does not survive since the author of the documents is itself not ascertainable. 16
(iv) Documents resumed from the private car was not belonging to appellant but pertain to the owner of the vehicle. The documents cannot be used as incriminating evidence since the resumption of the documents arises out of a third party property. Moreover, the Panchnama proceedings are being challenged on the ground of that the Panch-witnesses were not present at the time of the resumption of the documents from the car of the accountant of the main appellant.
(v) Contradictory and random details were picked up from the loose sheets and the third party documents, as such when the details are themselves contradictory and random the credibility of the evidence is further demolished. For the month of June 2012, contradictory figures of suppressed production capacity has been shown at Pages 49/SCN vs Page 57-58/ SCN vs Page 63/SCN.
(vi) There was lack of any corroboratory evidence in the form of raw material quantity, investigation at the end of the Sales tax authorities, electricity consumption and purchasers of the finished goods.
(vii) There were discrepancies between RUD-III vis-i-vis RUD-
XXIII; RUD-IX vis-i-vis RUD-XXX; RUD-X vis-i-vis RUD-XXXI; RUD-XXVIII, XXIX, LV, LVI vis-i-vis RUD-VII and RUD-VIII. Details prepared by the department, portrayed as being digital copies of loose sheets cannot were contradictory to each other.
11. He further submitted that the resumption of the loose sheets and third party documents were in absence of pancha witnesses who were not 17 present on the spot and were simply made to sign in their affidavits, and on this score there are various rulings which clearly held that the demand of duty solely based on the loose sheets and third party documents is not sustainable. He heavily relied upon the judgement of C.C .Ex. Vs. Laxmi Engineer Works reported in 2001 (134) E.L.T. 811 (Trib.Del) wherein it is held that mere recovery of certain loose slips from the premises of the appellant would not prove that the goods were clandestinely removed from the factory. The said judgement of the Tribunal was approved by the Hon‟ble Punjab & Hariyana High Court as reported in 2001 (254) E.L.T. 205 (P & H). He submitted that private records are not reliable and thus not admissible in evidence as there is no tangible evidence to conclusively relate them to the appellant. The Accountant, from whose Car the said loose records were recovered as initially accepted that the said records pertained to production and clearance activity of the appellant; but the said statements were not only retracted by him but also during his cross- examination he denied that the said records related to the production activity of the appellant company. The department failed to recover any other documents so as to prove that those documents related to the production and clearance made by the appellant company. These documents are thus not reliable accordingly to learned advocate placing reliance on the following judgments;
Kuber Tobacco Products Pvt. Ltd. Vs. CCE [2013(290) E.L.T. 545 (T)] Rhino Rubbers Ltd. Vs. Collector[1996(85)ELT 260 (T)] CCE Vs. Rajratan Synthetics Ltd. [2013(297) E.L.T. 63 (T)] Savitri Concast Ltd Vs. CCE [2015(329) E.L.T. 213 (T)] 18 Balajee Structurals (India) Pvt. Ltd. Vs. CCE [2016 (341) E.L.T. 457(T)] CCE Vs. Rajaguru Spinning Mills [2009 (243) E.L.T. 280 (T)] Rama Spinners Pvt. Ltd. Vs.CCE [2017(348) ELT 321 (T)] CCE Vs. Goldy Engineering Works [2017(345) ELT 149 (T)] CCE Vs. C.M.-Re-Rollers & Fabricators [2004(168) E.L.T.506 (T)]
12. The learned Counsel submitted that inculpatory statements by itself cannot be relied upon. In the present case inculpatory statements of various persons, such as suppliers of goods and two of the buyers have wrongly been relied upon to confirm the alleged demand, discarding their depositions made during the cross- examination. It is settled law that even inculpatory statements are required to be supported by tangible evidence, which in the present case is absent. He submitted that request to cross-examine the officer, who has seized the aforesaid documents and computer data was denied and some of the other witnesses to the panchnama did not appear for the cross-examination. He submitted that such an un- authenticated document cannot be relied upon to prove the charges of clandestine removal merely on the basis of some of the statements. He relied upon on the following judgments.
(i) J&K Cigarettes Ltd. Vs. Collector reported at 2009(242) ELT 189 (Del)
(ii) CCE Vs. Prag Pentachem Pvt. Ltd. reported at 2018 (360) E.L.T. 1025 (T) 19
13. Regarding shortage of the goods the appellant submitted that the physical verification was done on the basis of average weighment and eyes estimation and actually there was no shortage at the time of stock verification of the goods. He relied upon the following judgements;
(i) CCE Lucknow Vs. Sigma Castings reported in 2012 (282) E.L.T 414 (Trib. Delhi),
(ii) AAR Kay Industries Vs. CCE Chandigarh Reported in 2004 (165) E.L.T. 412 (Trib. - Del.),
(iii) Micro Forge (I) Pvt. Ltd. Vs. CCE Rajkot 2004 (169) E.L.T. 251 (Tri. - Mumbai):-
(iv) CCE Indore v. Kapil Steel Ltd. Vs. 2006 (204) E.L.T. 411 (Tri. -
Del.),
(v) D.P. Steels Industries Vs. CCE Jaipur-1995 (78) E.L.T. 492 (Tribunal),
(vi) CCE Lucknow Vs. Kundan Casting (P) Ltd.-2008 (227) E.L.T. 465 (Tri. - Del.),
(vii) RHL Profiles Vs. CCE Kanpur reported in 2013 (290) ELT 247 (Tri. - Del.),
14. Ld. Advocate further submitted that the learned Commissioner has not permitted the cross examination of 9 witnesses and their statements were relied by him without conducting the examination in chief. In such a scenario, their oral statement cannot be relied upon. He further submitted that appellant was allowed cross examination of few of the witnesses, who has categorically deposed that their statements were extracted under coerosion threat and under duress. He further submitted that the Adjudicating Authority had failed to 20 follow the mandate of Section 9D of the Act regarding examination of witness in chief placing reliance on the following judgments:-
(i) G-tech Industries Vs. Union of India- reported at 2016 (339) ELT
209.
(ii) C.C. Vs.. Bussa Overseas Properties Ltd., reported at 2007 (216) E.L.T. 659 (S.C.)
(iii) J.&K. Cigarettes Ltd. Vs. CCE, reported at 2009 (242) E.L.T. 189 (Del.) = 2011 (22) S.T.R. 225 (Del.).
(iv) C.C.E. v. Parmarth Iron Pvt Ltd., reported at 2010 (260) E.L.T. 514 (All.)
(v) Hukum Chand Shyam Lal v. Union of India- reported at (1976) 2 SCC 128.
15. He further submitted that the demand is also barred by limitation as all the material facts were within the knowledge of the department, as the main appellant was paying huge Central Excise duty on regular basis RT-12 Returns were regularly being the audits were also conducted on time to time basis and no such discrepancies were ever been noticed by the department. He submitted that the demand is not sustainable on merit as well as limitation and, therefore, the present order imposing duty, penalty and interest against the appellant and their Directors are liable to be set aside.
16. In respect of the other appellants from Sl.Nos.5 to 21 except Sl.No.16 it was submitted that all of them except M/s. Maheswari Steels are the supplier of the raw material of the goods. Individual duty and penalty has been confirmed against the said supplier of the goods. It was submitted on their behalf that duty and penalty has been confirmed against them only on the basis of the loose sheets 21 without any corroboration. It was submitted that they had cleared the goods after payment of Central Excise duty and the said documents were submitted alongwith the defence reply. It was further submitted that the duty has been confirmed against most of them without any investigation and enquiry at their end. The learned Counsel further submitted that in the entire case no evidence has been brought on the record as to how and to whom the goods were cleared without payment of central excise duty. The Show Cause Notices were issued to 3 of the noticees M/s.Subhi Steels, M/s.Maheshwari Steels and M/s. K. G. Ispat Pvt. Ltd. alleging that they were managing illicit purchase from the appellant. No documentary evidence except of the oral statements was recorded from them. The learned Counsel has submitted that in the show cause notice demand of central excise duty has been made on approximately value of Rs.121 Crores without any evidence with regard to whom such a huge quantity of goods were cleared. No evidence in regard to production of the said goods, clearance, transportation, receipt of payment in cash had been adduced by the department. The entire demands were based on illicit documents and illogical conclusions of the department. These demand were based on mere assumptions and presumptions and could not be sustained in absence of evidence. He submitted that penalty against the appellant from Sl. No.5 to 21 is not sustainable and liable thus to be set aside.
17. The learned Authorised Representative reiterated the findings of the learned Commissioner and submitted that the search were made under proper authorisation in the form of search warrant and the 22 panchnamas proceedings were made in the presence of independent witnesses which was not only signed by the proper officers; but also by the representative of the company. No objection as regard to the panchanama proceedings were made by the appellant on the date of the search. He further submitted that Directors of the company were present and witnesses the entire search and seizure operation and they have not objected that Shri K. Shrinu is witness to the both of the panchnama at the office as well as residential premises. The learned AR submitted that Shri K.Shrinu and Shri Sunil Kumar Pandey, who were the panch witnesses to the panchnama were not the employees of the appellant company, as the appellant could not produced their appointment letter, attendance register, salary slips etc. Therefore, the search proceedings were made in presence of independent witnesses and same cannot be challenged by the appellant at this stage.
18. Learned Authorised Representative submitted that at the time of the visit of the officer shortage the stock of the finished goods was noticed by the officers and the Director of the company has accepted the manner of stock taking and agreed to pay central excise duty on the aforesaid shortage of the goods. He further submitted that it was wrongly presumed by the appellant that at the time of the visit the computer data was burned into one CD only. He stated that it is quite evident from the panchanama that at the time of the visit the computer data were burnt into 2 CD(s) one in which the Tally Data was burnt and in another CD ERP data were burned. He submitted that the entire activity was done in the presence of the independent pancha 23 witnesses and in the presence of the representative of the appellant company. No objection as regard to recovery of CD was made by the appellant at the time of the visit of the officer. He further submitted that the computer data which was burned into 2 CD(s) were retrieved after a gap of 4 years; but no manipulation was done in the CD(s). He submitted that the computer data which was earlier burned into 2 CD(s) were under a proper panchnama and in the presence of representative of the company, therefore, allegation of manipulation of data is not maintainable. He submitted that if there were only one CD on the date of the resumption then why the appellant has not objected when 2 CD(s) were opened on 19.02.2016.
19. Learned Authorised Representative further submitted that the loose sheets were recovered from the Car of the accountant of the company and during his statement the said accountant has categorically admitted that the loose sheets are in the form of trial balance and of other account details which were made Annexures to the Show Cause Notice and related to the sale and purchase of clandestinely removed goods from the appellant factory. He further submitted that Director of the company has also accepted the fact that the said documents pertains to the appellant company and, therefore, should have been accepted as an evidence for clandestinely removal of the goods from the appellant factory. He further submitted that the statement of the transporters and raw material suppliers clearly established that the appellant company was engaged in the manufacture and clandestine removal of the goods. He stated that if the said loose documents were not related to the sale and purchase of 24 the appellant then why both the Accountant as well as the Directors as made an admission that the said documents were related to production and clearance activity of the appellant.
20. Learned Authorised Representative further submitted that the statements of the raw material suppliers clearly established that the appellant has purchased the goods from them without payment of Central Excise duty. The learned AR submitted that it is a sufficient proof to establish that the appellant is procuring the raw material without payment of Central Excise duty and manufacturing the goods out of the said non duty paid goods for clandestine removal. The learned AR submitted that recovery of computer data, loose paper sheets from the accountant and the confessional statement of various persons clearly established that the appellant company were engaged in illicit manufacture and clandestine removal of the goods without payment of Central Excise duty. He supported the contentions of the learned Commissioner and submitted that the order of the learned Commissioner is justifiable and liable to be upheld.
21. Heard the parties and perused the case records.
22. Before going into merit of the case, we have to consider as to whether the entire search and seizure operation was made according to the provisions of Section 100 of the CrPC read with Section 18 of the Act. As regard to the Question of independent witnesses we have perused the affidavit of Shri K Shrinu, Shri Sunil Kumar Pandey and Shri Naresh Chandra Nishaad who were made witness to the proceedings. From their affidavit it is evident that they all are 25 employees of the appellant company. We have gone through the records of cross-examination of Shri K Shrinu, Shri Sunil Kumar Pandey and Shri Naresh Chandra Nishaad who have confirmed that they were employees of the appellant company. We have also seen panchnama made in the factory premises and also at the residential premises of the Director and come to the conclusion that Shri K Shrinu was present at both the places on the same time, which are quite far from each other. We have also seen that the panchanama proceedings continued beyond normal working hours and confirmed for 24 hours. The cross-examination of the departmental officers who were participated in search and seizure proceedings were denied to the appellant and, therefore, we are left with no option; but agree to the contention of the appellant that the search and seizure proceedings were made beyond the normal working hours of the appellants factory. From the cross-examination of panch witnesses, it is evident that the pancha witnesses were not present at the time of search and seizure operation and their signatures were obtained without explaining then the content of the panchnama. We have also considered the judgement cited by the learned advocate and hold that search and seizure proceedings are made in violation of Section 100 of Cr PC read with Section 18 of the Act, for the aforesaid reasons.
23. We have also perused the panchnama dated 07.08.2012 which clearly states that Tally Data of 2009-10 to 2011-12 and ERP Data of sale and purchase was burned into two writable CDs of which one was given to the main appellant and other copy was retained by the officers for further investigation. We have also seen Annexure-A to the 26 panchnama dated 07.08.2012, which contained the details of documents resumed but there is no mention of any CD(s) where the data was burnt. We agree with the contention of the learned Advocate that at the time of the burning of CD(s), a certificate should have been obtained as per the provision of Section 36-B. The panchanama dated 19.02.2016 not only speaks of 2 CD(s) but also that computer data was retrieved after a gap of 4 years which itself creates a suspicion. Further also no certificate from the competent authority was obtained by the officers even at this point of time. The Hon‟ble Apex Court in case of M/s. Anwar P.V. Vs. P.K. Basheer reported at 2017 (352) E.L.T. 416 has clearly laid down that the computer printout can be admitted in evidence only if the same are produced in accordance with the provisions of Section 65B(2) of the Evidence Act. A certificate is also required to accompany the said of computer printouts as prescribed under Section 65B(4) of Evidence Act. It has been clearly laid down in para 15 of this judgement that all the safeguards as prescribed in Section 65B(2) & (4), of the Act be met with to ensure the source and authenticity, pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tempering, alteration, transposition, excision etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. We may add here that the provisions of Section 65B of Indian Evidence Act and Section 36B of Central Excise Act, 1944 of the Act are pari materia. It is evident from the panchanama, record of cross-examination that the investigating officer had failed to follow the safeguard as mandated under Section 36B CEA, 1944. Further the burning process of data into CD and their 27 subsequent retrieval was not made in presence of any computer expert and, therefore, in light of the judgement of the Apex Court the said data cannot be relied upon to prove the charges of clandestine removal against the appellant. Similar findings was made by the Gujrat High Court and the Tribunal in following cases:-
(i) AMBICA ORGANICS VS. C.C.EX. SURAT
2016(334) E.L.T. 97 (Trib)
which has been upheld by the Gujrat High Court as reported in 2016 (334) E.L.T. A-67
(ii) PREMIER INSTRUMENTS & CONTROLS LTD. Vs. COMMISSIONER OF CENTRAL EXCISE, COIMBATORE 2005 (183) E.L.T. 65 (Trib)
(iii) JAYSHREE VYPASA LTD. VS. C.C.EX, RAJKOTE 2015 (327) E.L.T. 380 (Trib)
(iv) AGARVANSHI ALUMINIUM LTD. VS. C.C.EX.
2014 (299) E.L.T. 83 (Trib)
24. We have also considered the judgement of M/s. Popular Paints & Chemicals Vs. C.C.Ex. & Cus., Raipur, wherein this Tribunal vide Final Order No.52716-52718/2018 dated 06.08.2018 under similar facts and circumstances has set aside the demand based on such unauthenticated data. In view of the above we hold that charges of clandestine removal based on such unauthenticated data is not sustainable and hence are set aside.
25. It is evident from the panchnama dated 07.08.2012 that the shortage was detected on the basis of eye estimation and also on average weight without physical weighment. The department failed to gather any of documents from the factory of the appellant and also from the residential premises of the Director of the appellant. Further 28 the loose documents which were recovered from the car of the accountant were not put to test for ascertaining to the authorship of these documents. Moreover, these documents could not be corrected with the corroborative evidence. The investigating authority failed to elucidate the system adopted for the preparation of the relied upon documents which were allegedly based on these documents. The details contained on the loose sheets and third party documents are actually not comprehensible and, therefore, cannot be accepted as admissible piece of evidence. Moreover, the Panchnama proceedings have been challenged on the ground of that the Panch-witnesses were not present at the time of the resumption of the evidence. Also, during the cross-examination the Accountant has categorically stated that he has already retracted his earlier statements and he has never stated that the said document pertains to production and clandestine removal of the goods from the appellant factory. In C.C.E. Vs. Kuber Tobacco Product Ltd. [2016(339) E.L.T. A-130] the Hon‟ble Delhi High Court has held that without any corroborative evidence, loose papers, documents cannot be a sufficient to prove charges of clandestine removal. The Hon‟ble Delhi High Court in case of C.C.Ex. Vs. Vishnu & Co. Pvt. Ltd.[2015-TIOL-2792-HC-DEL-CX] has also held that merely on the basis of statement made by the third party including transporter, agents and employees are not sufficient to prove the charges of clandestine removal in absence of independent corroborative evidence. The Hon‟ble P & H High Court in case of M/s. G-Tech Industries Ltd. Vs. Union of India[2016(339) ELT P&H] has held that Section 9D has to be construed strictly, as mandatory and not merely directory. We have seen that the learned Commissioner not only denied the cross- 29
examination of officers who has conducted the raid, but also of other persons whose cross-examination was sought by the appellant. We have also seen that the contents of cross-examination were not at all considered by the learned Commissioner while adjudicating the case. We have also seen from the record that the statements were relied upon by the adjudicating authority without conducting examination in chief of the matter which is the basic requirement of provision of Section 9D. We have also considered the following judgements cited by the appellant:-
(i) M/s.SAKEEN ALLOYS PVT. LTD. VS. C.C.Ex.
2013 (296) E.L.T. 392 (Trib) which was upheld by the Gujrat High Court [2011 (308) E.L.T. 655 (Guj) and subsequently by the Supreme Court reported at[2015 (319) ELT A-117(SC)].
(ii) M/s. R. A. CASTING PVT. LTD. VS. C.C.EX 2009 (237) E.L.T. 674 (Trib).
This judgement was firstly upheld by the Allahabad High Court reported at [2011 (269) E.L.T. 337 (All) and thereafter By the Supreme Court reported at [2011 (269) ELT A-108]
(iii) M/s. ONTINENTAL CEMENT COMPANY VS. U.O.I. 2014 (309) E.L.T. 411(All)
(iv) M/s.TRIVENI ENGINEERING & INDUSTRIES LTD. VS. C.C.Ex.
2016 (334) E.L.T. 595 (All)
26. Relying on these judgments, we hold that the charges of clandestine removal of the goods cannot be upheld merely on assumptions and presumptions, but has to be proved with positive evidence such as purchase of excess raw materials, consumption of excess electricity, employment of extra labour, seizure of cash, transportation of clandestinely removed goods etc. It has also been held that onus of proof of bringing clinching evidence is on the 30 Revenue. It has been held that the clandestine manufacturing and removal of excisable goods is to be proved by tangible, direct affirmative and incontrovertible evidence relating to receipts of raw materials inside the factory premises, and non-accountal thereof in the statutory records, utilization of such raw materials for clandestinely manufacture of finished goods. manufactured of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, amount received by the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal. All these material evidence are missing in the present case and the evidences brought into the record by the department are incomplete, inconsistent and not a reliable piece of evidence to prove charges of clandestine removal.
27. The shortage which was detected by the officers is the on average weight method basis and, therefore, mere admission by the directors, who deposited the duty for the shortage, is not enough to proof that the goods were clandestinely cleared from the appellant factory. We have also considered the judgement cited by the appellant in case of C. C. Ex. Lucknow Vs. M/s.Sigma Castings reported at 2012 (282) E.L.T. 414 (Trib.Delhi), M/s. AAR Kay Industries Vs. C. C. Ex., Chandigarh reported at 2004 (165) E.L.T. 412 (Trib.-Del.), M/s. Micro Forge (I) Pvt. Ltd. Vs. C. C. Ex. Rajkot reported in 2004 (169) E.L.T. 251 (Trib.- Mumbai), C.C.Ex. Indore Vs. M/s. Kapil Steel Ltd. V/s 2006 (204) E.L.T. 411 (Trib.-Del.), M/s. D.P. Steels Industries Vs. C.C.Ex Jaipur reported at 1995 (78) E.L.T. 492 (Tribunal), C.C.Ex. Lucknow Vs. M/s. Kundan Casting (P) Ltd. reported at 2008 (227) 31 E.L.T. 465 (Trib.-Del.), M/s. RHL Profiles Vs. C.C.Ex. Kanpur reported at 2013 (290) ELT 247 (Trib.-Del.). In view of the findings contained in these judgments we hold that the shortage was detected on average basis is not sustainable and, therefore, we set aside the demand.
28. We have considered the submissions made by the other appellants as regard to demand of duty and penalty imposed against them. We find that no material evidence except few statements was brought on record to prove the charges against them. Most of the raw material supplier have enclosed their invoices on the basis of which the goods were cleared by them to the appellant after payment of Central Excise duty. Under the circumstances we also set aside the duties and penalties imposed on the other appellants as well.
29. Accordingly, we set aside the impugned order and allow all these appeals with consequential benefits.
(Pronounced in open court on 22.08.2019)
(Rachna Gupta) (Bijay Kumar)
Member (Judicial) Member (Technical)
Tejo