Custom, Excise & Service Tax Tribunal
Vishal Gupta Director P S Raj Steel ... vs Rohtak on 5 October, 2018
1
Appeal No. E/60632-60634,61237-61243/2018
Customs, Excise & Service Tax Appellate Tribunal
SCO 147-148, SECTOR-17-C, CHANDIGARH-160017
~~~~~
Date of
Impugned
Sr. No Case No Impugned Passed By Appellant Respondent
Order Detail's Order OIA-12-CE- Commissioner of Vishal Gupta E/60632/2018- C.C.E. & S.T.-
1 COMMR-VMJ- 30/01/2018 Central Excise- Director P S Raj
DB Rohtak
RTK-2017 ROHTAK Steel Private Ltd
OIA-12-CE- Commissioner of
E/60633/2018- P S Raj Steel C.C.E. & S.T.-
2 COMMR-VMJ- 30/01/2018 Central Excise-
DB Private Ltd Rohtak
RTK-2017 ROHTAK
Deepak Gupta
OIA-12-CE- Commissioner of
E/60634/2018- Rormer Directro P C.C.E. & S.T.-
3 COMMR-VMJ- 30/01/2018 Central Excise-
DB S Raj Steel Private Rohtak
RTK-2017 ROHTAK
Ltd
OIA-12-CE- Commissioner of
E/61237/2018- C.C.E. & S.T.-
4 COMMR-VMJ- 29/01/2018 Central Excise and Rajender Kumar
DB Rohtak
RTK-2017-18 Service Tax-ROHTAK
OIA-12-CE- Commissioner of
E/61238/2018- Ms Bajaj Steel C.C.E. & S.T.-
5 COMMR-VMJ- 29/01/2018 Central Excise and
DB Tube Rohtak
RTK-2017-18 Service Tax-ROHTAK
OIA-12-CE- Commissioner of
E/61239/2018- Ms Triveni C.C.E. & S.T.-
6 COMMR-VMJ- 29/01/2018 Central Excise and
DB Agency Rohtak
RTK-2017-18 Service Tax-ROHTAK
OIA-12-CE- Commissioner of
E/61240/2018- Ms Lakhotiya C.C.E. & S.T.-
7 COMMR-VMJ- 29/01/2018 Central Excise and
DB Udyog Rohtak
RTK-2017-18 Service Tax-ROHTAK
OIA-12-CE- Commissioner of
E/61241/2018- C.C.E. & S.T.-
8 COMMR-VMJ- 29/01/2018 Central Excise and Ms Ravi Steels
DB Rohtak
RTK-2017-18 Service Tax-ROHTAK
OIA-12-CE- Commissioner of
E/61242/2018- Ms K G N S S C.C.E. & S.T.-
9 COMMR-VMJ- 29/01/2018 Central Excise and
DB Point Rohtak
RTK-2017-18 Service Tax-ROHTAK
OIA-12-CE- Commissioner of
E/61243/2018- Ms Bajaj Iron And C.C.E. & S.T.-
10 COMMR-VMJ- 29/01/2018 Central Excise and
DB Steels Rohtak
RTK-2017-18 Service Tax-ROHTAK
Represented by:
For Appellant (s) : Mr. Sudhir Mahlotra, Advocate For Respondent (s): Ms. Seema Arora, AR and Shri V. Gupta, AR CORAM :
Mr. Ashok Jindal, Hon'ble Member (Judicial) Mr. Anil G. Shakkarwar, Hon'ble Member (Technical) Date of Hearing:31.08.2018 Date of Decision:05.10.2018 ORDER No. A/63225-63234 / 2018 Per : Mr. Ashok Jindal The appellants are in appeals against the impugned orders wherein the duty has been demanded from M/s P. S. Raj Steel Pvt. Ltd. (in short 2 Appeal No. E/60632-60634,61237-61243/2018 M/s P.S) to the tune of Rs. 4,72,73,240/- alongwith interest for the period March 2011 to 20.06.2013 and various penalties were also imposed on the appellant company as well as co-appellants.
2. The facts of the case are that the appellant/M/s P.S. is engaged in the manufacture of Stainless Steel Pipes & Tubes who is registered with the central excise department having their head office at Hisar and also having their trading office at Motia Khan, Delhi. M/s P.S is also having their sister unit namely M/s Sheela Stainless Pvt. Ltd (in short M/s SSPL) having their office at Hisar and engaged in their trading of Iron & Steel Products and also having central excise registration as registered dealer. They are also having their sales office located at Motia Khan, Nabi Karim, New Delhi. The offices of the M/s P.S and M/s SSPL located in Delhi were not registered with the central excise department. The head office of M/s P.S and M/s SSPL is located in Hisar and the records of the both were maintained M/s P.S's office at Hisar. On 11.04.2013, a search was conducted at the premises to the M/s P.S and M/s SSPL. The factory of M/s P.S was found working. No variation in stock of inputs as well as finished goods were found in records of the stock maintained in the statutory records and no incriminating documents were recovered during the search of the factory premises of the appellant. Shri Deepak Gupta, Director of M/s SSPL was present in the office and two pen drives were recovered from possession of one Ms. Priyanka Jain, Office Executive. On the basis of two pen drives recovered from the possession of Ms. Jain, the print outs were taken and it 3 Appeal No. E/60632-60634,61237-61243/2018 was summarized that M/s P.S is engaged in clandestine removal of goods from their head office at Hisar as well as at their office at New Delhi. It was also alleged that the appellants were also engaged in issuing goodless invoices enabling to avail in admissible cenvat credit and it was also alleged that M/s P.S had undervalued their goods. On the basis of the chart, it was found that the quantity of 426.2365 MT was cleared by the M/s P.S as per invoice and the appellant has issued invoice as the quantity of 2181 MT only facilitate to avail inadmissible cenvat credit and it was also considered in the show cause notice that the appellants have received cash in their daily account as per the pen drive, therefore, the cash received has been taken as the receipt of the goods cleared clandestinely by the appellants and consequently the duty was demanded. In the pen drives recovered from M/s Priyanka Jain, the data allegedly found as under:-
(a) "Excelsheets" allegedly containing actual dispatch details.
There are total 958 entries in the "excelsheets". It has been alleged that:-
-the 154 entries exactly tallied with invoices issued.
-the 226 entries have corresponding invoices but with less value.
-the balance 578 entries have no corresponding invoice and alleged clandestine clearance.
(i) The duty of Rs. 2,47,19,535/- demanded on 1824.872 MT of impugned goods valued at Rs. 23,21,41,495/-
clandestinely cleared during the period 01.01.2012 to 09.04.2013 against the 578 entries in "excelsheets".
(ii) Alleged that the folder containing dispatch details in "excelsheets" format also contained "excelsheet" in the name "Delhi Office" and most of entries therein were in the name of "Vishal Ji Delhi". The duty of Rs. 95,52,999/- demanded on 4 Appeal No. E/60632-60634,61237-61243/2018 679.99 MT of impugned goods valued at Rs. Rs. 9,96,18,864/- clandestinely cleared during the period 01.01.2012 to 31.03.2012.
(b) "Daily account" allegedly containing scanned copies of daily account sheet stored data in two folders i.e. "Delhi Paper" & "Hisar Paper". It contains receipt of amount in cash or cheque on particular day. It also contains name of appellant and their buyer. The identity of the person mentioned therein could not be established as per department. It has been mentioned that evidences strongly suggest that amounts collected from persons/party were nothing but sale proceeds of appellant. As per folder "Daily Paper" amount of Rs. 9,74,60,825/- and as per folder "Hisar Paper" Rs. 71,52,650/- received. The duty of Rs. 95,95,013/- has been demanded (i.e. Rs. 89,49,777/- on receipt of cash under "Delhi Paper" and duty of Rs. 6,45,236/- on receipt of cash under "Hisar Paper". There is no quantity of impugned goods mentioned in the show cause notice.
5.1 There are 226 entries in "excelsheets" description in respect of which tally with invoices except gross value. It has been alleged undervaluation and duty of Rs. 28,13,716/- demanded.
6. It has been alleged that in follow up searches conducted on 20.06.2013 at the premises of M/s Vanita Hardware Store, Cuttak, M/s Balkishan & Sons, Gwalior and M/s Ravi Steels, Gwalior, it was found appellant had evaded duty on clandestine clearances from 11.04.2013 to 20.06.2013, the duty of Rs. 5,91,977/-.
7. It has been alleged that appellant had issued 261 invoices on payment of duty of Rs. 2,92,23,150/- against which no goods actually delivered as there are corresponding details in the excelsheets. It has been alleged that several such invoices issued by M/s SSPL. It has been further alleged that record of actual delivery from the factory of appellant was maintained in the form of "excelsheets", the natural corollary of which is that wherever invoices available in the records but details are not available in the "excelsheets", the invoices are "goodless" i.e. invoices has been issued without actual supply of goods and cevnat credit passed on irregularly.
5
Appeal No. E/60632-60634,61237-61243/2018 Therefore, it is alleged that the appellants were engaged in clandestine removal of goods without cover of invoices and later on, the invoices were issued to the parties to avail inadmissible cenvat credit and it was also found that the appellants were engaged in the undervaluation of their goods. Therefore, the impugned show cause notice was issued to demand duty amounting to Rs. 4,72,73,240/- alongwith interest and proposed penalty on all the appellants. The matter was adjudicated, allegations made in the show cause notice were confirmed. Consequently, the duty was demanded from M/s P.S to the tune of Rs. 4,72,73,240/- alongwith interest and penalty on all the appellant were imposed. Against the said order, the appellants are before us.
3. Ld. Counsel appearing on behalf of the appellants submits that the entire case has been built up against the appellants on the basis of data retrieved from pen drives were recovered from the private person and the pen drives were not sent to any accredited government laboratory for analysis/forensic examination, therefore, the data retrieved from pen drive and relied upon are in-defiance to provisions to Section 36 B of Central Excise Act, 1944 and Section 65 B of Indian Evidence Act, 1872.
4. He further submitted that the payment of duty has been confirmed in the impugned order as per the chart details herein below:-
Sr. Description Quantity (MT) Duty demanded
No. (in Rs.)
1. Clandestine Removal - Details as per Annexure-'D'- 1824.862 2,47,19,535/-
Page 167 SCN
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Appeal No. E/60632-60634,61237-61243/2018
2. Clandestine Removal [Delhi Office (Vishalji)]- Details 679.961 95,52,999/-
as per annexure - 'E'-Page 171 SCN
3. Duty Evasion after 11.04.2013 to 20.06.2013-Details 40.904 5,91,977/-
as per Annexure-'J'-Page 198 SCN
4. Receipt of cash amounts under Delhi Paper- Details 89,49,777/-
as per Annexure -'H'-Page 187 SCN
5. Receipt of cash amounts under Hisar Paper- Details 6,45,236/-
as per Annexure -'I'-Page 189 SCN
6. Undervaluation-Details as per Annexure -'C'-page- 1277.207 28,13,716/-
148 SCN
7. Total 3822.934 4,72,73,240/-
It is his submission that it has been held that the appellants cleared 1824.862 MT of Stainless Steel Pipe without payment of duty of Rs. 2,47,19,535/- against the 578 entries during the period 01.01.2012 to 09.04.2013 and the head office at Hisar was joint office of the M/s P.S and their sales office at Hisar and New Delhi of M/S SSPL. The Ld. Adjudicating authority erred in considering the entire data in excel sheets pertaining to clearance from the factory premises of M/s P.S. as it also contains the sales of other locations of M/s P.S. and also of M/s SSPL. Further, the adjudicating authority failed to appreciate that the excel sheets data not only pertains to clearances of M/s P.S. and others but it is also on record that the purchase orders received by Mr. Deepak Gupta and Mr. Vishal Gupta. The adjudicating authority further failed to appreciate that in case excel sheets are maintained as a record of sale, there was no requirement of mentioning sale as a separate column. There are certain details in the pro-forma pertains to order and the others are sale related details. It is pertinent to mention that for the entries against which sale is not reflected, cannot be construed goods thereto clandestinely cleared. 7
Appeal No. E/60632-60634,61237-61243/2018 Further, the adjudicating authority has erred in considering the entries against which no sale reflected, as clandestine removal. He further submitted that the adjudicating authority failed to appreciate that:
(a) The data in the 'Excelsheets' cannot be taken as the data of the dispatch or sale of goods.
(b) There are always some gaps between the quantities of the orders booked and the orders executed as impugned goods were sold in weight.
(c) There are instances of difference in the value at which the order booked and the value prevailing at the time of dispatch, due to fluctuation in raw material prices.
(d) The appellants were booking order/selling goods directly as well as through brokers; the invoices issued in a different name than the name mentioned in the 'Excelsheets' for the following reasons:
(i) The orders are invariable placed by an employee or a proprietor or partner or director, in which case the invoice were issued in the name of the firm or the company with which the person placing the order is associated. The person placed order also have more than one place of business in number of cases.
(ii) The orders were also placed by a broker for a particular company leading to the issuing of invoice in the name of the company to whom the goods were dispatched.8
Appeal No. E/60632-60634,61237-61243/2018
(iii) The person placed order on behalf of some other person and directed dispatch of goods to a different destination while seeking bill in the name of the buyer on whose behalf the order was placed.
He further submitted that the adjudicating authority has held that the appellants have developed the modus-operandi of clandestine removal of goods to one set of buyer & simultaneous the issue of goodless invoices to another set of buyers of facilitate them to avail inadmissible cenvat credit. The appellants had cleared goods to cover up of invoices simultaneously to convey their mistake they raised cenvatable goodless invoices of near equal quantity. To that effect, he submits that the adjudicating authority erred in holding that the excel sheets is in the name of "Delhi Office"
retrieved from pen drive revealed that there are 198 entries in said excel sheets against which no invoice available in the records. Further, held that appellants against 198 entries during the period 01.01.2012 to 31.03.2012 cleared impugned goods weighing 679.961 MT, without payment of duty of Rs. 95,52,999/-. In fact, the adjudicating authority has failed to appreciate that in the 'Excelsheets' data, the entries are in the name of Vishalji, connotes that these orders were booked through Mr. Vishal Gupta and Shri Vishal Gupta in his statement dated 12.07.2013 categorically stated that his name mentioned in the folder named 'Delhi Office' as orders were booked by him and it was his responsibility to receive the payments thereto. The impugned order has not taken into account this fact and 9 Appeal No. E/60632-60634,61237-61243/2018 erred in concluding that since no invoice issued from the factory of the M/s P.S in the name of Mr. Vishal Gupta, all the entries in the name of Vishalji in the 'Excelsheets' data are goods clandestinely removed. The adjudicating authority on one hand alleged that the entry in the name of Vishalji was goods sent to Delhi Office without payment of duty and on the other hand alleged that appellant issued goodless invoices to their own firms; there are alleged 57 goodless invoices issued by M/s P.S in favour of their Delhi Office and M/s SSPL Hisar and Delhi Office. It is his submission that the adjudicating authority erred in holding that the appellants effected clandestine clearances without payment of duty from 11.04.2013 to 20.06.2013. The said averments are based on recovery of some documents from M/s Vanita Hardware Store, Cuttack and M/s Ravi Steels, Gwalior and the statements of Mr. Pankaj Kumar Shaw and Mr. Balkrishan Aggarwal. The duty of Rs. 5,91,977/- has been arbitrarily demanded without corroboration on the ground that the goods in question were cleared from the factory of the appellants. There is nothing to support that the impugned goods were cleared from factory of appellants. The Ld. Adjudicating authority has further failed to appreciate that the appellant's Delhi Office was not holding central excise registration as registered dealer. They were not required to issue invoice as per Rule 11 of Central Excise Rules, 2002. The Delhi Office of appellant cleared goods against statutory invoices and the copy of GR's alongwith barrier receipt and VAT movement challan submitted to the Ld. Adjudicating Authority, they received payment 10 Appeal No. E/60632-60634,61237-61243/2018 against said clearances through banking channel. The appellants submitted copies of invoices issued by their Delhi Office during the period 12.04.2013 to 20.06.2013 to Ld. Adjudicating authority and also submitted a copy of billties which clearly shows that M/s Mahindra Hardware Store sold the material to M/s Vanita Hardware. The Ld. Adjudicating authority failed to appreciate that Delhi Office sold material to M/s Mahindra Hardware who inter-alia in turn sold the goods to M/s Vanita Hardware Store, Cuttak. He further submits that the adjudicating authority demanded duty of Rs. 95,95,013/- with respect to cash receipts shown in excel sheets under "Delhi Paper and Hisar Paper" for the period April 2011 to December 2011. It is his submission that the data retrieved from pen drive is neither credible nor admissible as evidence and there is no allegation in the show cause notice that this amount was received on account of clandestine removal of goods or undervaluation in respect of clearances made by the appellants. The show cause notice does not alleges that the cash receipts are of clandestine removal of goods or undervaluation of goods in respect of the clearance made by the appellants. Therefore, the said demand is not sustainable. Further, the adjudicating authority failed to appreciate that Delhi Paper and Hisar Paper represents the trading clearances of appellant's trading unit and M/s SSPL's trading unit. There is nothing brought on records that goods against alleged cash receipts which were clandestinely removed by the M/s P.S. He further submits that there is no variation in stock of inputs and finished goods found during the course of 11 Appeal No. E/60632-60634,61237-61243/2018 visit and verification on 11.04.2013 and no incriminating documents were recovered during the search of appellant's factory. There is no allegation regarding illicit purchase of raw material how the goods manufactured and cleared has not been brought on record. The appellants were not having production capacity to manufacture goods as alleged in impugned order. There are neither any statement of any consignor nor of transporter nor any flow back to substantiate purchase of raw material illicitly or excess consumption of electricity. He further submits that during the impugned period March 2011 to December 2012 were having 8 tube mills installed in the factory of the appellants which had an annual production capacity of 3200 MT and in January 2013, they installed another tube mill in their factory with an annual production capacity of 300 MT. This installed production capacity could be achieved at the maximum if the machines were running continuously without any break for a full year. These details were produced by the appellant in their ER-7 returns for the said period. There is no averments in the impugned order that the appellant had higher capacity than declared in the ER-7 returns. The appellants also furnished copy of the certificate from a Chartered Engineer whereas as per the impugned order it has been alleged that the total quantity 6430.1705 MT has been cleared by the appellants which is almost double of the total quantity of the production capacity installed in their factory, therefore, the demand on account of clandestine removal is not sustainable. He also submits that the adjudicating authority alleged that the appellant issued 12 Appeal No. E/60632-60634,61237-61243/2018 goodless invoices without supplying goods thereto. It is his submission that the appellant cleared the impugned goods to M/s Bhushan Power & Steel Ltd, Orrisha against 67 invoices and submitted said invoices alongwith copy of GR's transport document in Form VAT-D3, way bill, verification report during the transit, but same has not been examined by the adjudicating authority. It was also alleged in the show cause notice, the appellants have issued 57 number of so called "goodless invoices" to SSPL Hisar, SSPL Delhi and their appellant's office. The total quantity works out to 309.563 MT having total duty implication of Rs. 43,37,593/- out of these 57 invoices, 9 invoices in respect of 53.369 MT having duty implication of Rs. 6,35,149/- have been issued to the appellant but the adjudicating authority has failed to appreciate that it is neither realistic nor practical for the appellant issue "goodless invoices" to their Delhi Office and to M/s SSPL Delhi as they could not avail any cenvat credit being not registered dealer, moreover, for branch transfer to Delhi, appellant had to loose VAT credit @25% and for sale to SSPL Delhi they had to pay CST @2%, it prima- facie substantiate that the appellant had cleared goods alongwith invoices to their Delhi Location and to M/s SSPL, Delhi. This one hand negates the allegation that the 'Excelsheets' data is a record of dispatch of goods from the factory of the appellant and on the other hand corroborates the stand of the appellant that they cleared goods alongwith invoices. It is his submission that the appellants have issued goodless invoices to unregistered dealer who were not registered with the central excise 13 Appeal No. E/60632-60634,61237-61243/2018 department, therefore, the allegation of appellant issued goodless invoices to make available cenvat credit to consignee is misconceived, therefore, on the said amount, the demand is not sustainable. It is his submission that on one hand it is alleged some quantity of goods was removed clandestinely and on the other hand it is alleged that on a subsequent date a "goodless invoice" of almost the same weight was issued to the same party. It is his submission that the appellants have supplied goods and later on issued "goodless invoice" of the almost same quantity after a few days to same party.
5. With regard to the issue of undervaluation, the demand of Rs. 28,13,716/- has been confirmed. It is his submission that the perusal of chart reveals that it pertains to clearances against which genuine invoice of lower rate per kg. has been issued and value shown higher in excel sheet has been taken as undervalued, if the same is taken into consideration the total duty of works out of Rs. 8,49,099/-.
6. He further submits that principles of natural justice, has not been followed in terms of Section 9 D of the Central Excise Act, 1944. He also submitted that the extended period of limitation is not invokable in the facts and circumstances of the case and no penalty is imposable against the appellants.
7. On the other hand, the Ld. AR submitted that the modus-operandi of the appellant is that they cleared the goods clandestinely without payment of duty and payments for such clearances have been received in cash. 14
Appeal No. E/60632-60634,61237-61243/2018 Therefore, on the basis of cash receipts, it is clear that the goods stand cleared without payment of duty. He further submits that it is admitted by the appellants that the goods have been cleared clandestinely without payment of duty. Later on, the appellant issued goodless invoices enabling to avail inadmissible cenvat credit to various persons. As the appellant M/s P.S. has cleared the goods, therefore, the demands proposed in the show cause notice on account of clandestine removal of goods, is required to be confirmed.
With regard to the undervaluation of the goods, the learned AR drews our attention to the genuine invoices which have been issued by the appellants and the corresponding invoices issued, on the basis of which, the appellants have received the payment, it has been alleged that the appellants have undervalued the goods. Therefore, on the differential amount received by the appellants for the same goods supplied on the basis of invoices, the charge of undervaluation is proved and therefore, the appellants are liable to pay duty. In view of this, he prays that the impugned orders are to be confirmed.
8. On careful consideration of submissions of both sides, we find that in this case during the course of investigation neither stock variations were found and nor any incriminating documents were recovered during the search of factory premises of appellants. Only two pen drives were recovered from the possession of Ms. Priyanka Jain in the joint office of the appellant and data has been retrieved and on that basis, the case has been 15 Appeal No. E/60632-60634,61237-61243/2018 made out against the appellant. Section 36B of the Central Excise Act, 1944 deals with the situation of admissibility of documents and computer print outs as evidence. The Section 36B of CEA, 1944 is extracted herein below:-
"Admissibility of micro films, facsimile copies of documents and computer print outs as documents and as evidence.--
(1) Notwithstanding anything contained in any other law for the time being in force,--
(a) a micro film of a document or the reproduction of the image or images embodied in such micro film (whether enlarged or not); or
(b) a facsimile copy of a document; or
(c) a statement contained in a document and included in a printed material produced by a computer (hereinafter referred to as a "computer print out"), if the conditions mentioned in sub-section (2) and the other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be also a document for the purposes of this Act and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.
(2) The conditions referred to in sub-section (1) in respect of a 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 carried on over that period by the person having lawful control over the use of the computer;
(b) during the said period, there was regular supply to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived;
(c) throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of 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 reproduces or is derived from information supplied to the computer in the ordinary course of the said activities.16
Appeal No. E/60632-60634,61237-61243/2018 (3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether--
(a) by a combination of computers operating over that period; or
(b) by different computers operating in succession over that period; or
(c) by different combinations of computers operating in succession over that period; or
(d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly. (4) In any proceedings under this Act and the rules made thereunder where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say,--
(a) identifying the document containing the statement and describing the manner in which it was produced;
(b) giving such particulars of any device involved in the production of that document as may be appropriate for the purpose of showing that the document was produced by a computer;
(c) dealing with any of the matters to which the conditions mentioned in sub- section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.
(5) For the purposes of this section,--
(a) information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment;
(b) whether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities;
(c) a document shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means 17 Appeal No. E/60632-60634,61237-61243/2018 of any appropriate equipment. Explanation.--For the purposes of this section,--
(a) "computer" means any device that receives, stores and processes data, applying stipulated processes to the information and supplying results of these processes; and
(b) any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process."
We find that the procedure has been prescribed under Section 36B of the Act. In this case, the procedure laid down under Sub-sections 2, 3 & 4 of section 36B, has not been followed, in that circumstances, the data gathered from pen drives relied in toto and some of the invoices, are not admissible evidence. Therefore, on this sole ground, the show cause notice is not sustainable.
9. We further take note of fact that as per ER-7 returns, the appellant has shown their production capacity during the impugned period and as per the ER-7 returns it is clear that the maximum production capacity of the appellant is 3500 MT without any break. Admittedly, no factory work on 100% production capacity due to wear and tear. The production capacity on which the impugned order is demanding duty works out to 6430.1705 MT during the impugned period. By no stretch of imagination, such quantity of clandestinely cleared goods by the appellants could be manufactured during the impugned period. We also take note of the fact that no efforts have been made by the Revenue that how the raw material was procured by the appellants and how the goods were manufactured and how much electricity is used to manufacture such quantity of goods, if 18 Appeal No. E/60632-60634,61237-61243/2018 it is to be alleged that whatever quantity of goods they have shown cleared as per invoices then the investigation was required to be done with regards how the raw material was procured, how much labour was employed, how much a huge quantity can be manufactured. Moreover, there is no allegation of excess or shortage of raw material/finished goods at the time of search and no incriminating documents were recovered, in that circumstances, Revenue is required to prove their case as per the decision of this Tribunal in the case of Arya Fibers Pvt. Ltd. Vs. Commissioner of Central Excise, Ahmedabad-II 2014 (311) ELT 529 (Tri.- Ahmd.) wherein the paragraph 40 of the said order has observed as under:-
"40. After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and the submissions made before us, it is clear that the law is well-settled that, in cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following :
(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;
(ii) Evidence in support thereof should be of :
(a) raw materials, in excess of that contained as per the statutory records;
(b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty;
(c) discovery of such finished goods outside the factory;
(d) instances of sale of such goods to identified parties;
(e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him;
(f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty;
(g) statements of buyers with some details of illicit manufacture and clearance;
(h) proof of actual transportation of goods, cleared without payment of duty;19
Appeal No. E/60632-60634,61237-61243/2018
(i) links between the documents recovered during the search and activities being carried on in the factory of production; etc. Needless to say, a precise enumeration of all situations in which one could hold with activity that there have been clandestine manufacture and clearances, would not be possible. As held by this Tribunal and Superior Courts, it would depend on the facts of each case. What one could, however, say with some certainty is that inferences cannot be drawn about such clearances merely on the basis of note books or diaries privately maintained or on mere statements of some persons, may even be responsible officials of the manufacturer or even of its Directors/partners who are not even permitted to be cross-examined, as in the present case, without one or more of the evidences referred to above being present. In fact, this Bench has considered some of the case-law on the subject in Centurian Laboratories v. CCE, Vadodara [2013 (293) E.L.T. 689]. It would appear that the decision, though rendered on 3-5-2013, was reported in the issue of the E.L.T., dated 29-7- 2013, when the present case was being argued before us, perhaps, not available to the parties. However, we have, in that decision, applied the law, as laid down in the earlier cases, some of which now have been placed before us. The crux of the decision is that reliance on private/internal records maintained for internal control cannot be the sole basis for demand. There should be corroborative evidence by way of statements of purchasers, distributors or dealers, record of unaccounted raw material purchased or consumed and not merely the recording of confessional statements. A co- ordinate Bench of this Tribunal has, in another decision, reported in the E.L.T. issue of 5-8-2013 (after hearings in the present appeals were concluded), once again reiterated the same principles, after considering the entire case- law on the subject [Hindustan Machines v. CCE [2013 (294) E.L.T. 43]. Members of Bench having hearing initially differed, the matter was referred to a third Member, who held that clandestine manufacture and clearances were not established by the Revenue. We are not going into it in detail, since the learned Counsels on either side may not have had the opportunity of examining the decision in the light of the facts of the present case. Suffice it to say that the said decision has also tabulated the entire case-law, including most of the decisions cited before us now, considered them, and come to the above conclusion. In yet another decision of a co-ordinate Bench of the Tribunal [Pan Parag India v. CCE, 2013 (291) E.L.T. 81], it has been held that the theory of preponderance of probability would be applicable only when there are strong evidences heading only to one and only one conclusion of clandestine activities. The said theory, cannot be adopted in cases of weak evidences of a doubtful nature. Where to manufacture huge quantities of final products the assessee require all the raw materials, there should be some evidence of huge quantities of raw materials being purchased. The demand was set aside in that case by this Tribunal."
As all the elements cited herein above are missing, therefore, it cannot be alleged that the appellants are indulged in the activity of clandestine clearance of the goods.
10. We further take note of the fact that on the one hand it has been alleged that the appellant is clearing goods without cover of invoices and on the other hand it is alleged that the appellant is issuing with goodless invoices. In fact, the duty has to be demanded on the goods manufactured by the appellants. If the appellant is an issuing goodless invoice which 20 Appeal No. E/60632-60634,61237-61243/2018 means no goods have been manufactured by the appellant. Therefore, on that account, no duty can be demanded against the appellants. We also found that the appellant has explained the issue of goodless invoices but the adjudicating authority has not considered the defense reply of the appellant, therefore, also the impugned order lacks merits. We also take note of the fact that no cross examination of the persons whose statements have been relied upon by the adjudicating authority during the course of adjudication has been granted, therefore, the said statements cannot be relied upon as admissible evidence in the light of the decision in the case of Commissioner of Central Excise Delhi-I vs. Kuber Tobacco India Ltd. 2016 (338) ELT 113 (Tri.-Del.) wherein it has been held that the statements recorded under Section 14 of Central Excise Act 1944, if a statement of witness is to be relied upon, in that circumstances, the adjudicating authority is required to call the witness and to do examination-in-chief and thereafter to make an opinion that the statement is admissible and thereafter to offer for cross examination to the assessee. Admittedly, the said procedure has not been followed. Therefore, the statements recorded during the course of adjudication are not admissible evidence in terms of Section 9 (D) of the Act. Therefore, on that account also, the demand is not sustainable.
11. With regard to the issue of undervaluation, which the appellant has conceaded and stated that on that account, the duty of Rs. 8,49,099/- is payable, therefore, we are examining the issue in detail. We have seen 21 Appeal No. E/60632-60634,61237-61243/2018 that as the appellant has shown invoices, the price of the goods and corresponding invoices has been recovered which is having higher price to the same party of the same quantity, in that circumstances, the issue of undervaluation has been proved, therefore, on account of undervaluation, the appellants are liable to pay duty alongwith interest.
11. In view of the above discussion, we pass the following order.
(a) as conceaded by the appellants, the demand of Rs. 28,13,716/- on account of undervaluation is confirmed alongwith interest and as the appellants have paid a sum of Rs. 39,50,000/- during the course of investigation itself, therefore, the penalty is reduced to 25% of the duty confirmed.
(b) with regard to the rest of demand, i) the data recovered from the pen drive is not admissible as per Section 36B of the Act and ii) the revenue failed to prove the case of clandestine removal of goods, therefore, the impugned order is set-aside and no penalty imposable on the co-appellants.
12. In these terms, the appeals are disposed of.
(Pronounced on 05.10.2018)
(Anil G. Shakkarwar) (Ashok Jindal)
Member (Technical) Member (Judicial)
G.Y.