Custom, Excise & Service Tax Tribunal
Pilania Industries India Pvt Ltd vs Raipur on 12 June, 2018
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. II
Date of Hearing: 22.05.2018
Date of Decision: 12.06.2018
Appeal No. E/52327-52328/2015-EX [DB]
[Arising out of Order-in-Appeal No. RPR-EXCUS-000-COM-012-2015
dated 17/03/2015 passed by Commissioner of Central Excise-RAIPUR
(Appeal)]
Pilania Industries India Pvt Ltd Appellants
Kailash Agarwal Director
Vs.
C.C.E. & S.T.-Raipur Respondent
Appearance:
Shri A.K. Prasad, Surbhi Sinha, Advocate for the Revenue Shri M.R. Sharma, DR for the Respondent CORAM:
Hon'ble Mr. V. Padmanabhan, Member (Technical) Hon'ble Ms. Rachna Gupta, Member (Judicial) FINAL ORDER NO._52198-52199/2018_ Per V. Padmanabhan:
1. The present appeals challenge the Order-in-Original No. 12/2015 dated 17/03/2015. The appellant-assessee is engaged in the manufacture of excisable goods i.e. TMT Bars falling under Chapter 72 from raw materials i.e. MS Ingots/ Billets.
2. The DGCEI and local Central Excise Officers searched the factory premises of one company by the name M/s Shri Sita Ispat & Power Pvt. Ltd. (SSIPL) on 08.07.2011 and the residential premises of its two Directors, Shri Manoj Agarwal and Shri Kailash Agarwal on 09.07.2011.
3. During the search of the residential premises of Shri Kailash Agarwal, one laptop was found, which contained some data relating to consumption of raw materials, production and dispatch of finished 2 | E/52327-52328/2015-EX [DB] products of the appellant company (in which Shri Kailash Agarwal was also a Director) for the period 01.07.2011 to 07.07.2011. One external hard disc drive and two pen drives were also recovered from the residence, but nothing incriminating was found therein.
4. On the basis of the data in the laptop regarding removal of TMT Bars for the seven days, the department determined that a quantity of 445.590 MTs had been cleared without payment of duty and which had not been recorded in their RG-1. Shri Kailash Agarwal accepted this in his statement dated 9.7.2011 and paid the duty thereon of Rs. 14,14,324/- vide cheque of the same date.
5. In follow up action, the Central Excise officers searched the factory premises of the appellants on 20.7.2011. Stock taking was conducted and no discrepancies were found.
6. Subsequently on forensic examination of the seized laptop the department recovered three deleted files from it. The 1 st file contained figures of production and dispatch of finished goods for May 2011. The 2nd file contained similar data for June 2011 (up to 20th June) but did not contain any data relating to removals/dispatches. The 3rd file contained similar data for the period 01.07.2011 to 07.07.2011 but without any details relating to removals/dispatches.
7. These recovered files were shown to Shri Manoj Agarwal, Director of the appellant company, and in his two statements dated 29.08.2013 and 30.08.2013, he explained each of the files pointing out that entries have incorrectly been made and were, therefore, deleted. He also claimed that the laptop belonged to and was used by 3 | E/52327-52328/2015-EX [DB] Shri Sumit Agarwal, son of Shri Kailash Agarwal, the other Director of the Appellant Compnay.
8. Relying on the files from the laptop including the three deleted files, the department came to the conclusion that the appellants had clandestinely manufactured and removed 3909.12 MTs of TMT Bars during the period May, to July, 2011 involving duty of Rs. 1,34,43,801/-. The duty of Rs. 14,14,324/- already paid was proposed to be appropriated.
9. The Department has also alleged, on the basis of the same evidence, that during the same period the appellants had clandestinely removed 174.144 MTs of Mis-Rolls (Scrap) involving duty of Rs. 4,41,336/-.
10. The show cause notice also proposed to deny cum-duty benefits to the appellants on the ground that since no duty had been paid on the impugned goods, no abatement towards duty payable was permissible.
11. Penal provisions were invoked against the appellant company and its Director, Shri Kailash Agarwal.
12. The appellants raised a number of issues including the evidentiary value of the printouts taken from the seized laptop, but the Commissioner rejected all these contentions and confirmed the full demand of Rs. 1,38,85,137/-. He imposed equivalent penalty on the appellant company and a penalty of Rs. 30,000/- on Shri Kailash Agarwal. The above order stands challenged in the present set of appeals.
4 | E/52327-52328/2015-EX [DB]
13. In this connection we head Shri A.K. Prasad and Ms Surbhi Sinha, Ld. Advocates for the appellant and Shri M.R. Sharma, Ld. DR for the Revenue.
14. The Ld. Advocate assailed the impugned order with the following arguments:-
i. The computer printouts/data taken from the seized laptop are not admissible as evidence in view of non-compliance with the mandatory provisions of Section 36B of the Central Excise Act, 1944. In this connection he relied on the decision of the Hon'ble Supreme Court in the case of Anvar P.V. V/s P.K. Basheer Civil Appeal No. 4226 of 2012. He argued that the Apex Court has given the above judgment in the context of Section 65B of the Evidence Act which is pari materia with Section 36B of the Central Excise Act. He submitted that the conditions as required under Section 36B have not been satisfied in the present case and hence the data of printed out from the laptop/ cannot be used in evidence against the appellant. ii. The laptop did not belong to the appellant company but belonged to a third party, one Shri Sumit Agarwal. iii. Shri Manoj Agarwal, one of the Directors of the appellant company, has repeatedly mentioned in both his statements that the deleted files did not reflect the correct figures. He also gave specific instances where the deleted files showed no clearance of the finished goods whereas the daily stock account showed clearances. In other instances, the deleted 5 | E/52327-52328/2015-EX [DB] files showed no production of TMT Bars on a number of days whereas the daily stock account showed production.
The deleted files did not show the production from 21.06.2011 to 30.06.2011 whereas the daily stock did, etc. iv. He argued that clandestine clearances must be proved with clinching evidence but in the present case the Revenue has failed to provide tangible evidence regarding procurement of raw materials; excess electricity consumption or clearance of such alleged clandestinely cleared goods. No evidence of any money trail of the huge amount of cash in connection with the alleged sale of unaccounted goods have been brought on record. He further submitted that no investigation has been conducted at either the buyer's end or even transporters. Consequently, he submitted that the duty demand cannot be sustained. In this connection he relied on several judgments including:-
a. 2014 (309) ELT 411 (All) Continental Cement Company V/s Union of India.
b. 2016 (334) ELT 595 (All.) Triveni Engineering & Industries Ltd. vs. Commissioner of Central Excise, Allahabad.
v. He submitted that in any case the appellant will be entitled to cum duty benefit as has been held in the case of Meghdoot Gramaudyog Sansthan Seva [2014 (312) ELT 699 (Tri.-Del.)].
6 | E/52327-52328/2015-EX [DB]
15. The Ld. DR justified the impugned order. He submitted that the case of Revenue is built on the basis of data recovered from laptops recovered from the residence of the Director. Shri Kailash Agarwal has admitted in his statement to the truth of the data which were printed out in his presence. Consequently, he submitted that the demand may be sustained.
16. We have carefully considered the submissions made by both sides and also perused the record.
17. The investigation started through search of the residential premises of Shri Kailash Agarwal, Director. One laptop was seized from the residence. The laptop was opened in the presence of Shri Kailash Agarwal on the same day and the details pertaining to clearance of TMT Bars available in the laptop was printed out for the period 01/07/2011 to 07/07/2011. The resultant data when compared with the statutory records indicated a difference in the manufacture and clearance of finished products to the extent of 445.590 MT. The discrepancy was also accepted by Shri Kailash Agarwal in his statement who also deposited the duty due thereon to the extent of the Rs. 14,14,424/-.
18. The laptop was further subjected to forensic examination and certain deleted data files said to contain details of manufacture and clearance of finished products as well as stock and consumption of raw materials for the period May, June and July, 2011. The comparison of such data with statutory records resulted in the demand of Central Excise duty amounting to Rs. 1,38,85,137/-. It is pertinent to record that the alleged clandestine clearance during the 7 | E/52327-52328/2015-EX [DB] above three months has not been admitted. There is a statement recorded from Shri Manoj Agarwal, another Director to the effect that the deleted files in the laptop did not reflect the correct figures.
During the course of arguments in the present appeal, the evidentiary value of the data reflected from the laptop has been challenged for non-compliance of the provisions of Section 36B.
19. From the record of the case we note that the main evidence on which the case of the Revenue finds support is the data printed out from the laptop. On the date of the search, soon thereafter, the laptop has been opened and certain details of production and dispatch for the period 1-7 July, 2011 was printed out in the presence of Shri Kailash Agarwal, Director. In the statement recorded soon thereafter, he also admitted these figures and further has paid the duty liability in respect of 445.590 MT alleged to have been clandestinely cleared. Even though Shri Kailash Agarwal has subsequently alleged that his statement was recorded under duress, he has not spelled out which part of the statement he disowns. In the above circumstances, we are of the view that the details printed out on 09/07/2011 covering alleged clearances for the period 1-7 July, 2011 stands admitted and hence the duty liability has to be sustained against the appellant.
20. The demand of about Rs. 1.38 Cr. has been fastened on the appellant on the basis of the deleted files printed out from the laptop said to contain the details of production and clearance for the months of May, June and July, 2011. The forensic examination of the laptop does not appear to have been conducted in the presence of Shri 8 | E/52327-52328/2015-EX [DB] Kailash Agarwal, Director. Neither Shri Kailash Agarwal nor Shri Manoj Agarwal, Director admitted to the truth of such data. In fact Shri Manoj Agarwal, in his statement has claimed that the deleted data (subsequently printed out) did not reflect the correct figures of production and clearance.
21. It is also seen that Revenue has failed to carry out any further investigation into the allegation of clandestine clearance. Apart from the print out, no evidence has been brought on record regarding the unaccounted procurement of raw materials. No suppliers have been identified or investigated. Absolutely no investigation is on record regarding the buyers of such clandestinely cleared goods or transporters.
22. It is settled position of law that clandestine clearance is a serious charge and such allegations have to be proved by Revenue with reliable and tangible evidence. The Hon'ble Allahabad High Court in the case of Continental Cement Company 2014 (309) ELT 411 (All.) has observed:-
"12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects :
(i) To find out the excess production details.
(ii) To find out whether the excess raw materials have been purchased.
(iii) To find out the dispatch particulars from the regular transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from regular dealers/buyers.
(vi) To find out the excess power consumptions.
13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department."
9 | E/52327-52328/2015-EX [DB]
23. As discussed above, we are of the view that Revenue has not succeeded in establishing the charge of clandestine clearance and consequently, the demand of Central Excise duty amounting to Rs. 1,38,85,137/- merits to be set aside. The penalties imposed.
24. The clearance of a quantity of 445.590 MT stands admitted by Shri Kailash Agarwal and duty thereon amounting to Rs. 14,14,324/- already stands paid. We uphold the same. We also reduce the penalty imposed on Shri Kailash Agarwal to Rs. 3 Lakh.
25. In the result, the impugned order is modified as above and appeal is partly allowed.
(Order pronounced in the open court on_12/06/2018_) (Rachna Gupta) (V. Padmanabhan) Member (Judicial) Member (Technical) Rekha