Custom, Excise & Service Tax Tribunal
Crackers India (Alloys)Ltd vs Coms C Ex, Cus & Service Tax - Bbsr-Ii on 7 May, 2025
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.1
Excise Appeal No.192 of 2012
(Arising out of Order-in-Original No.CCE/BBSR-II/No.60/Commissioner/2011 dated
28.12.2011 passed by Commissioner of Central Excise,Customs & Service Tax,
Bhubaneswar II)
M/s Crackers India (Alloys) Limited
(Plot No.380, Bomikhal, Bhubaneswar-751010)
Appellant
VERSUS
Commissioner of Central Excise,Customs & Service Tax,
Bhubaneswar II
(C.R.Building, Rajaswa Vihar, Bhubaneswar-751007)
Respondent
WITH Excise Appeal No.193 of 2012 (Arising out of Order-in-Original No.CCE/BBSR-II/No.60/Commissioner/2011 dated 28.12.2011 passed by Commissioner of Central Excise,Customs & Service Tax, Bhubaneswar II) Sri Srinivas Sahu, Director of M/s Crackers India (Alloys) Limited (Plot No.380, Bomikhal, Bhubaneswar-751010) Appellant VERSUS Commissioner of Central Excise,Customs & Service Tax, Bhubaneswar II (C.R.Building, Rajaswa Vihar, Bhubaneswar-751007) Respondent APPERANCE :
Shri K.K.Acharya, Advocate for the Appellant Shri S.Dey, Authorised Representative for the Respondent CORAM:
HON'BLE MR.R.MURALIDHAR, MEMBER (JUDICIAL) HON'BLE MR.K. ANPAZHAKAN, MEMBER (TECHNICAL) FINAL ORDER NO.76258-76259/2025 DATE OF HEARING : 20 FEBRUARY 2025 DATE OF PRONOUNCEMENT : 07 MAY 2025 2 Excise Appeal Nos.192,193/2012 Per R.Muralidhar :
The facts of the case are that the first appellant, Crackers India (Alloys) Ltd [Crackers for short], is manufacturer of sponge iron. In the course of search in the premises Ghogar Ispat Pvt. Ltd (GIPL, for short), a Pen Drive was seized on 26.03.2008. The said Pen drive contained Sponge iron purchase details from the Appellant, out of which some purchases thereof by GPIL were „Kachcha‟ transaction. The Pen Drive also contained "Production & Dispatch of Sponge Iron" for Sept. 2007, January 2008, February 2008and March 2008. The Production/Clearance figure in this File was differed from those shown in the RG-1 for the respective months. However the "Production 07-08- KILN-1", "Production 07-08- KILN-2" taken together tallied with the "Production & Dispatch of Sponge Iron" for Sept. 2007, January 2008, February 2008and March 2008. Therefore, Revenue concluded that the Production & Dispatch shown in this Excel sheet are the actual production AND NOT the RG-1 figures. Some more enquiries and investigations were carried out and the Show Cause Notice was issued demanding various sums as per the following Table :
Sl.No. Demand Amount Basis of Demand/
Appellant's Remarks
1. Rs.6,37,349/- On the basis of fake invoices issued /
signed by Muralidhar Ojha.
2. Rs.2,86,656/- On the basis of fake invoices issued /
signed by Muralidhar Ojha
Rs.9,24,005/- Admitted and already paid before SCN was
issued.
3. Rs.5,76,903/- Based on data contained in the Pen Drive
3
Excise Appeal Nos.192,193/2012
recovered from one M/s. Ghogar Ispat Pvt.
Ltd. In Mayurbhanj - No corroboration.
4. Rs.3,87,191/- Assuming the production taken for
computing cost of production of Sponge
Iron for May, 2008 as the actual production
and demanding duty on the differential -
No corroboration
5. Rs.60,064/- Based on quality control report of certain
consignment assumed to have been
dispatched - No corroboration
6. Rs.1,37,69,358/- Production log of Kiln was assumed as the
actual production and figures shown in the
production log book under the column
„Dispatch‟ has been assumed to be dispatch
from the factory, which could never have
been recorded by the production supervisor
- No corroboration
Rs,1,47,93,516/-
2. After due process, the Adjudicating authority confirmed the demands along with interest and penalty. Penalty was imposed on the second appellant. Being aggrieved the appellants have filed their appeals before the Tribunal.
3. The Ld Counsel appearing on behalf of the appellants makes the following submissions :
3.1. In respect of part of the demand , since the same would require detailed reconciliation, the appellants closed the issue by paying the Excise Duty of Rs.9,24,005 before issue of Show Cause Notice. They are not contesting the issue. Only the interest thereon, penalty thereon along with balance confirmed demand of Rs.1,47,93,516 along with interest and penalty thereon is being contested by the appellant. The Second appellant is contesting the penalty imposed on him. 4
Excise Appeal Nos.192,193/2012 3.2 In respect of the main demand of Rs.1,37,69,358/-, the Ld Advocate submits the the purported recovery of the „Pen Drive‟ is not from the premises of the appellant Crackers but from another party GPIL. The Revenue has not identified the author of the Pen Drive. The Pen Drive purportedly contains the "Production & Dispatch of Sponge Iron" for Sept. 2007, January 2008, February 2008and March 2008. The Production/Clearance figure in this File differed from those shown in the RG-1 for the respective months. However, the "Production 07-08- KILN- 1", "Production 07-08- KILN-2" taken together tallied with the "Production & Dispatch of Sponge Iron" for Sept. 2007, January 2008, February 2008 and March 2008. Therefore, Revenue concluded that the Production & Dispatch shown in this Excel sheet are the actual production AND NOT the RG-1 figures. The Pen Drive also contained two Excel files namely "Production 07-08- KILN-1", "Production 07-08- KILN-2". Sum total of daily production of Sponge Iron in Kiln-1 and Kiln-2 differed from the production shown in the Appellant‟s RG-1. As per the Department, this "discrepancy establishes beyond doubt" that the Appellant had suppressed manufacture of Sponge iron. Such conclusion has been arrived by assuming that Kiln out-put has to be all acceptable finished products, which is never the case on the ground, since on many occasions some production in the Kiln are rejected during quality check and those quantities are not recorded in the RG-1. In so far as PENDRIVE/CIAL/JRU/PRINTOUT/06 is concerned, it contained a folder "Sponge Iron Stock", details of which for the Month May 2008, found to be tallying one-to-one. The other folder therein - 5
Excise Appeal Nos.192,193/2012 Party-wise "Despatch-08-09" which was complete till June 2007, though the entries therein could have been complete till the date of search i.e. 16.07.2008. The SCN states that "The incompleteness of the report suggests that such report is not actual, but a manipulated one. Such report is prepared when all the parameters have cooled/died down and there is no trace left to find out the actual production and dispatch parameters". "Production & Dispatch of Sponge Iron" for March 2008 in the said Pen Drive, (Annexure-8C) tallied with the Production and Dispatch data contained in PENDRIVE/CIAL/JRU/PRINTOUT/02(Annexure-7F. But the figures of „Daily stock of Sponge Iron‟ (Annexure 7C) did not tally with the aforesaid two Print outs, though the figures in said Annexure 7C,tallied with the RG-1 figures.
3.3 In this connection, it is important to refer to the Observations in Paragraph 2.13 (running page 45-46), which is out and out perverse and above all it demonstrates the foreclosed mind set of the Department to confirm a hefty demand on the Appellant illegally and without any basis. Upon a plain reading of the above, it would be appreciated that the entire proceeding in this case is built with sheer assumptions and presumptions, without even an iota of corroboration and thus, not sustainable in the eye of law. It is the settled law that clandestine clearance is a serious charge and has to be proved with positive evidence which is lacking in this case.
3.4 He submits that except for the purported recovery of the Pendrive, without even identifying the author, from the premises of 6 Excise Appeal Nos.192,193/2012 some other party and recording some statements from the appellant‟s factory, no effort has been made by the Dept to corroborate their allegations. The Dept itself has taken that a part of the Production shown in the Pendrive was accounted for the RG 1 and the difference between the Excel Sheet production figure and the RG1 figure has been taken as the excess / unaccounted production of sponge iron to fasten the clandestine removal on the appellant, without any supporting evidence. He relies on the following case laws :
AMBICA ORGANICS Vs COMMR. OF C. EX. & CUS., SURAT-I 2016 (334) E.L.T. 97 (Tri.-Ahmd) [04-03-2015] PRINCIPAL COMMISSIONER OF CGST & CENTRAL EXCISE Vs SHAH FOILS LTD - 2020 (372) E.L.T. 632 (Guj.) 3.5 In respect of the confirmed demand of Rs.5,76,903/-, purportedly, in the course of search in the premises GIPL a Pen Drive was seized on 26.03.2008. The said Pen drive contained Sponge iron purchase details from the Appellant, out of which some purchases thereof by GPIL were „Kachcha‟ transaction. It is important to note that the such „Kachcha‟ transactions were never confronted with any person of the Appellant Company, whose statements were recorded. Besides there is no corroboration whatsoever to bring home the duty liability of the Appellant in respect of „Kachcha‟ transactions. Even to the extent that the investigation in the present case does not bring on record any evidence of removal of corresponding quantity of Sponge Iron from the Appellant‟s factory. This demand being made with reference to 7 Excise Appeal Nos.192,193/2012 documents seized from GIPL, a third party, and being wholly uncorroborated, is not sustainable in law.
3.6 In respect of the confirmed demand of Sl. No.4 - Rs.3,87,191/-
(Page 50 to 57 of the Paper Book), it was observed by the investigators that in the month of May 2008, the Appellant had worked out the „Cost of Production‟ by taking Production & Clearance of the said Month as 3,800 MT and 3,581 MT respectively, as against the RG-1 record of Production & Clearance being 3,460 MT and 3,312 MT respectively. Upon being asked, the Dy. General Manager (Prodn.)- P.K.Jena, stated that cost of production so determined „is provisional figure‟. The SCN questioned the cost of production so determined by the Appellant, by unfoundedly presuming that price of Sponge Iron remain static for a fairly longer period of time, why the appellant considered production of 3,800 MT as against the RG-1 figure of 3,460 MT and presumed that the Appellant‟s RG-1 figure "is not the actual figure". The same unfounded presumption was applied to the Month of August 2007. Thereafter, it is concluded that production figure recorded in Appellant‟s RG-1does not reflect the actual production, whereas the production figure as mentioned in the sized Pen drive is the actual production. With such unfounded presumption, and by assuming that removal of Sponge Iron during May 2008 was 3,581 MT (as against the RG1 record of 3,312 MT), it was alleged that the Appellant has short-paid Central Excise duty amounting to Rs.3,87,191/-. In the process, the settled law that unless rebutted, figures reflected in the statutory returns are preferred over those in private records.
8
Excise Appeal Nos.192,193/2012 3.7 In respect of the confirmed demand of Sl. No.5 - Rs.60,064/- (Page 57-58 of the Paper Book), it was found that all the Quality Control Reports of the Appellant Company tallied with the details of invoices, allegedly except those contained in Page No.16 to 19 of the seized document 25/DGCEI/JRU/CIAL/08. Such discrepancy was not confronted with any of the persons whose statements were recorded. Just because of that it has been held that the removals in page 16 to 19 (61.34 MT) have been cleared from the Appellant‟s factory without payment of duty applicable duty thereon amounting to Rs.60,064/-, without any corroborative evidence to that effect. 3.8 In respect of all the above demands, the Ld Counsel submits that even as the recorded statements were required to be reiterated before the Adjudicating authority by those persons, this procedure was not followed. The appellants themselves sought cross-examination of the concerned persons named in paragraph 9.5 of the impugned Order. This was declined by the Adjudicating Authority on the ground that they are employees of the Company and not outsiders and the documents relied upon stands corroborated with statutory records. 3.9 Apart from relying the Pen Drive and the recorded statements, no investigation was carried out by the Dept towards the purported buyers, cash purchase of inputs / raw materials, electricity consumption, cash sales of the finished goods, details of vehicles used towards inward and outward movements etc. No private records towards the cash transactions have been recovered. Thus, the corroborative evidence, 9 Excise Appeal Nos.192,193/2012 which is required to be brought in order to fortify the clandestine removal, has not been brought in by the Revenue.
4. In view of the above submissions, the Ld Counsel submits the confirmed demand along with the interest and penalty thereon may be held as not sustainable and the appeal may be allowed on this ground.
5. In respect of the duty demand of Rs.9,24,005, which has already been discharged by the appellant mainly in order to put an end to the litigation, though even in those cases the above arguments hold good, no interest is payable since, it is not specified that the shortage pertains to which period. Therefore, no interest is required to be paid. Also considering the fact that the amount has been paid before issue of SCN, no penalty can be imposed.
6. He relies on the following case law, wherein it is held that without bringing in the corroborative evidence, the allegation of clandestine removal, would not survive :
(a) Continental Cement Co. Vs. UOI [2014 (309) E.L.T. 411 (All.)
(b) Arya Fibres Pvt. Ltd. & Others Vs. CCE Ahmedabad-II [2014 (311) E.L.T. 529 (Tri. - Ahmd.)
(c) Sharma Chemicals Vs. CCE, Kolkata-II [2001(130) ELT 271
7. With reference to the penalty imposed on the second appellant, the Ld counsel submits that since the allegation against the appellant number one itself is not sustainable, the question of imposing penalty on the second appellant would not arise. Further, there is nothing to indicate that the second appellant‟s role has been specifically brought 10 Excise Appeal Nos.192,193/2012 out in the SCN or OIO to the effect that would require imposing of the penalty.
8. In view of the above submissions, the Ld Counsel prays that the impugned order may be set aside and the appeals may be allowed.
9. The Ld AR appearing on behalf of the Revenue submits that only in view of the detailed investigation taken up against another party GIPL, the modus operendi of the appellant came to light. He submits that the Pendrive recovered, clearly shows the details of the production and clearance of sponge iron on a month-wise basis. It is seen that the appellant is accounting for only a part of such clearances in the RG 1 which is the official record. The balance goods are being cleared without payment of Excise Duty on clandestine manner. Even in respect of the smaller demand amount, the same have been derived from the private records maintained by the appellant. This shows that the appellant has been concealing the actual transactions. The first appellant has admitted to irregularities and has paid Rs.9,24,005 and is not contesting the same. This shows that the goods in question were removed clandestinely without payment of Excise Duty. He reiterates the findings of the Adjudicating authority and justifies the confirmed demand and interest and penalty thereon. He prays that the appeal may be dismissed.
10. Heard both the sides. Perused the appeal papers and the submissions made by both the sides.
11. Admittedly, the proceedings against the present appellant number one is on account of investigation carried out in another unit by name 11 Excise Appeal Nos.192,193/2012 GIPL. It is alleged that in that unit one Pendrive was seized and from the data gathered from this Pendrive, it emerged that the appellant has been clearing the goods clandestinely. Thus, the prime evidence of the Revenue is the Pendrive and some recorded statements. The appellants have raised the point about the Pendrive being recovered from the premises of another party and the Dept has not come out with the author of this Pendrive.
12. We find that the issue as to Pendrive data on its own can be sufficient evidence to conclude the clandestine removal, has come up before various High Court and Tribunal in the following cases :
(i) Principal Commr CGST & Central Excise Vs Shah Foils2020(372) ELT 632(Guj) 6.8 Being aggrieved with the above O-I-O, the assessee and it‟s Directors, Shri Ramesh M. Shah and Shri Kartik R. Shah filed an appeal before the CESTAT, West Zone, Ahmedabad vide Appeals No. E/12274/2018; E/11436/2018 and E/11433/2018 respectively. The Hon‟ble CESTAT vide Final Order No. A/10120-10125/2019, dated 18-1-
2019 allowed all the appeals and set aside the impugned order dated 27-2-2018 mainly observing that :
(i) the charges of clandestine removal on the basis of pen drive data are not sustainable;
(ii) since already held that the pen drive data is not substantial evidence and no evidence of extra receipt has been produced in the form of person from whom such extra consideration was given, how it 12 Excise Appeal Nos.192,193/2012 was given and how it was received by assessee, therefore, the demand on account of undervaluation is not sustainable.
(iii) revenue has not proved the allegation with any evidence as it has to be shown by making investigation at the supplier‟s end, statements of suppliers and other corroborative evidences including receipt from suppliers, thus, the allegation on the ground of availment of CENVAT on the basis of invoice without receipt of goods are not sustainable.
7. With regard to sole evidence which has been relied upon by the Department is only pen driver data and statement of brokers which were even self contradictory, the Tribunal has held that :
"Though the statement of directors has also been relied upon by the department, but we found that even in some statements they have stated that the data found in pen drive do not belong to M/s. SFL and it belongs to M/s. Sankalp. Inspite of fact that some of the statements were recorded in presence of Snehil R shah who is director of M/s. Sankalp, but even then he was not questioned about such data. At least the officers could have recorded his statement to ascertain the truth. Even if the statements of director are considered inculpatory the same cannot be relied upon in absence of corroboration with material evidence as held in case of Tejwal Dyestuff Ind. v. Commissioner - 2007 (216) E.L.T. 310 (Tri.) and 2009 (234) E.L.T. 242 (Guj.). Thus the statement of directors cannot lead to inference that the goods stated in "Bombay Sales" ledgers are of Appellant. We also find that the brokers have even stated that they have taken the goods from Vasai Godown of 13 Excise Appeal Nos.192,193/2012 M/s. SFPL. In such case there is no reason to hold that the Appellant has dealt with M/s. SFL. Thus in both cases i.e. "Bombay Sales" and "Smi Cash Sales" apart from the statements which are even contradictory no corroborative evidence. The Appellant has placed reliance upon various judgments to canvas their point that in absence of corroborative evidence no demand can be made. We find that no corroborative evidence has been stated in show cause notice in the form of receipt of unaccounted raw material, transportation of unaccounted such raw material to SFL factory, consumption of unaccounted raw material, production of unaccounted finished goods, production record of unaccounted finished goods, use of consumables, extra labour and excess consumption of electricity, clearance of goods from the factory, receipt of cash from even a single person on account of alleged clandestine sale. We also find that the revenue did not undertake any investigation at the end of M/s. SFPL from where the clearance of goods has taken place. When the brokers had stated that the delivery was taken from Vasai Godown which was under the ownership of M/s. SFPL, the officers should have made investigation. Thus in such circumstances, the demand on account of clandestine removal cannot be made. In case of Davinder Sandhu Impex Ltd. - 2016 (337) E.L.T. 99 (Tri. - Del.), the tribunal has held that
6. In this case during the course of investigation, the statement was recorded and the statement given by Shri Baldev Singh, Managing Director admits that there is a shortage of 10 to 15% for manufacturing the final product and it is also admitted by Shri Baldev Singh that they 14 Excise Appeal Nos.192,193/2012 have cleared certain goods without payment of duty, but the said statement was retracted by Shri Baldev Singh who claims to be that same has been recorded under influence and duress, thereafter, another statement was recorded on 3rd May, 2005 which was also retracted on the same day, where also same statement recorded which is a typed one and it is the claim of the Revenue that same has been typed by Shri Dinesh Kumar (who is an employee of the appellant) in the office of the Department. To that effect, Shri Dinesh Kumar filed an affidavit on 1st August, 2006 that the statement has been typed by the officers of the Department themselves not by him and that said affidavit has not been controverted. Further, the cross-examination of Shri Ashwani Kapoor, Inspector on 3rd August, 2006 explaining that wastage on each stage of production have not been considered by the Adjudicating Authority. Moreover, the Knitwear Club, Ludhiana which is an independent body have also stated in their letter dated 19 May, 2005 that in normal course, there is a wastage of around 40% same has also not been considered by the Adjudicating Authority but without bringing any corroborative evidence apart from statement of Shri Baldev Singh demand has been confirmed."
8. With regard to onus to prove clandestine clearances by sufficient cogent, unimpeachable evidence, the Tribunal has held that :
"20. We also find that the onus to prove clandestine clearances has to be discharged by sufficient cogent, unimpeachable evidence as held in case of CCE v. Laxmi Engg. Works - 2010 (254) E.L.T. 205 (P & H), Shingar Lamps Pvt. Ltd. v CCE, Shingar Lamps Pvt. Ltd., 2010 (255) 15 Excise Appeal Nos.192,193/2012 E.L.T. 221 (P & H), Ruby Chlorates (P) Ltd. v. CCE, 2002 (150) E.L.T. 290 (T), CCE v. 2006 (204) E.L.T. 607 (T), CCE v. Gopi Synthetics Pvt. Ltd., 2014 (302) E.L.T. 435 (T), CCE v. Gopi Synthetics Pvt. Ltd., (311) E.L.T. 354 (T), Sharma Chemicals v. CCE, 2014 (310) E.L.T. 299 (Guj.), Aum Aluminium Pvt. Ltd. v. CCE, 2001 (130) E.L.T. 271 (T), Resha Wires Pvt. Ltd. v. CCE, 2014 2006 (202) E.L.T. 332 (T), Atlas Conductors v. CCE, 2008 (221) E.L.T. 231 (T), Vishwa Traders Pvt. Ltd. v. CCE, 2013 (287) E.L.T. 243 (Guj.), CCE Swati Polyester, 2012 (278) E.L.T. 362 (T), CCE v. Vishwa Traders Pvt. Ltd. 2015 (321) E.L.T. 423 (Guj.), Commissioner v. Swati Polyester - 2015 (321) E.L.T. A-217 (S.C.), Flevel International v. CCE, Akshay Roll Mills Pvt. Ltd., 2016 (332) E.L.T. 416 (Guj.), CCE v. Renny Steel Casting (P) Ltd., 2016 (342) E.L.T. 277 (T), Industrial Filter & Fabrics Pvt. Ltd. v. CCE, NGK Insulators Pvt. Ltd., Products Ltd., 2016 (337) E.L.T. 119 (T), CCE v.
Ganesh Agro Steel Industries, 2011 (264) E.L.T. 165 (P & H), CCE v. Sree Rajeswari Mills Ltd., 2012 (283) E.L.T. 563 (T), CCE v. 2014 (307) E.L.T. 131 (T), CCE v. Birla 2012 (275) E.L.T. 470 (T), UOI v. MSS Foods 2009 (246) E.L.T. 750 (T), CCE v. Sree Rajeswari Mills Ltd., 2011 (272) E.L.T. 49 (Mad.), Shardha Forge Pvt. Ltd. v. CCE, (T), TGL Poshak Corporation v. CCE, 2005 (179) E.L.T. 336 (T), Arya Fibres Pvt. Ltd. v. CCE, 2014 (311) E.L.T. 529 2002 (140) E.L.T. 187 (T). In view of said judgments we find that the charges of clandestine removal on the basis of pen drive data and sheets are not sustainable."
9. In view of the aforesaid findings of facts arrived at by the Tribunal, after considering the material placed before it, no question of 16 Excise Appeal Nos.192,193/2012 law much less any substantial question of law arises for consideration out of the impugned order and accordingly, the appeals are summarily rejected. No order as to cost.
(ii) Ambica Organics Vs Commr of C. ex & Cus, Surat -I, 2016(334)ELT 97(Ahd)
7. After hearing both the sides and on perusal of the records, I find that the Central Excise officers while visiting the factory of the appellant, recovered a USB drive in the appellant‟s premises. The USB drive was connected with computer and a printout was taken by the computer expert accompanied with the Central Excise officers. The printout gives the details of the certain sales (date-wise) commencing from 1-4-2005. The delivery challans for various chemicals for the month of December, 2005 and January, 2006 were found and seized during the search. The appellants disowned the contents of the printout and stated that it has manipulated the data base with motive, to take revenge from the partner and the firm for the refusal of the loan of Rs. 1 lakh sought by the Computer Operator. The appellant filed an affidavit disclosing this fact on 13-2-2006 i.e. immediately after the raid and a copy of the affidavit was also given to the investigating officer. The Central Excise officers attempted to corroborate the contents of the printout with the statements of 30 persons viz. buyers, transporters etc. The appellants requested for cross-examination of 30 persons which was rejected by the Adjudicating authority. The appellants contended that the statements are predrafted computer statements and it cannot be voluntary nature. After considering the submissions of the appellant, 17 Excise Appeal Nos.192,193/2012 the Commissioner (Appeals) allowed the crossexamination of 4 persons randomly selected. Three of them stated that they were made to sign the pre-drafted statements on a promise that no action shall be taken against them.
10. Learned Advocate submitted that the clandestine manufacture and removal of the goods cannot be upheld based on the printout of the data contained in the USB drive without following the requirement of condition of Section 36B of the Central Excise Act, 1944. Section 36B of the said Act provides admissibility of microfilms, facsimile copies of documents and computer printouts as documents and as evidence. Clause (c) of Section 36B(1) states that the statement contained in a document and included in a computer printout would be an evidence if the condition mentioned in the sub-section (2) and other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be the document for the purpose of this Act and the rules made thereunder and can be admissible in proceedings. Sub-section (2) of Section 35B provides the condition referred to in subsection (1) in respect of the computer printout shall be the following viz.
"(a) the computer printout 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;18
Excise Appeal Nos.192,193/2012
(b) during the said period, there was regularly supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement of the kind from which the information so contained is derived;
(c) throughout the material part of the said period, the computer was operational properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and
(d) the information contained in the statement reproduced or is derived from information supplied, to the computer in the ordinary course of the said activities."
Sub-section (4) of Section 36B requires issue a certificate in this behalf by a person occupying the responsible official position in relation to the operation of the relevant device or the management of the relevant activity (whichever is appropriate) shall be evidence in any matter stated in the certificate and for the purpose of the sub-section, which shall be sufficient for a matter to be stated to the best of the knowledge and the belief of the persons stating it. In the present case, the data was not stored in the computer. It is stated that the computer expert accompanied with the Central Excise officers had taken the printout from the USB drive by connecting to the computer. The officers had not obtained any certificate as required under Section 36B of the said Act. It is also noted that none of the conditions under Section 36B(2) of the Act, 1944 was observed. In such situation, it is difficult to 19 Excise Appeal Nos.192,193/2012 accept the printout as an evidence to support the clandestine removal of the goods. It is noted that the requirement of certificate under Section 36B(4) is also to substantiate the veracity of truth in the operation of electronic media. In the case of M/s. Premier Instrument & Controls Ltd. (supra), the Tribunal has held that the printout of the personal computer of the company‟s officer, had not fulfilled the statutory condition laid down under Section 36B(2) of the Act and the demand is not sustainable. The relevant portion of the said decision is reproduced below :
"9. On the demand of duty on waste and scrap, again the appellants have made out a strong case on merits. The demand covering the period November, 1993 to September, 1998 is based on certain computer printout relating to the period February, 1996 to September, 1998. These printouts were generated from a personal computer of Shri G. Sampath Kumar, a junior officer of the Company, whose statements were also recorded by the department. Admittedly, whatever facts were stated by Shri Sampath Kumar, in his statements, were based on the entries contained in the computer printouts. The statements of others, recorded in this case, did not disclose any additional fact. Therefore, apparently, what is contained in the computer printout is the only basis of the demand of duty on waste and scrap. The question now arises as to whether these printouts are admissible as evidence, in this case. Ld. Sr. Counsel has pointed out that the computer print-outs did not satisfy the statutory conditions. He has referred to the relevant provisions of Section 36B of the Central 20 Excise Appeal Nos.192,193/2012 Excise Act which deals with admissibility of computer printouts etc. as evidence and says that the statement contained in a computer printout shall be deemed to be a document for the purposes of the Act and the rules made thereunder and shall be admissible as evidence of the contents of its original, if the conditions mentioned in sub-section (2) and other provisions of the Section are satisfied in relation to the statement and the computer in question. Sub-section (2) reads as under :
"2. The conditions referred to in sub-section (1) in respect of the computer printout shall be the following, namely :
(a) the computer printout 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 regularly supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement of the kind from which the information so contained is derived;
(c) throughout the material part of the said period, the computer was in operation properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and 21 Excise Appeal Nos.192,193/2012
(d) the information contained in the statement reproduced or is derived from information supplied to the computer in the ordinary course of the said activities."
Ld. Sr. Counsel has argued that the above conditions were not fulfilled in respect of the computer printout taken from the personal computer of Shri Sampath Kumar. It appears from the statement of Shri Sampath Kumar and the averments in the memorandum of appeal that it is an admitted fact that Shri Sampath Kumar was the person having lawful control over the use of the computer. The computer was not shown to have been used regularly to store or process information for the purposes of any activities regularly carried on by the company. It was also not shown that information of the kind contained in the computer printout was regularly supplied by the Company to the personal computer of Shri Sampath Kumar in the ordinary course of activities. Again, it was not shown that, during the relevant period, the computer was operating in the above manner properly. The above provision also casts a burden on that party, who wants to rely on the computer printout, to show that the information contained in the printout had been supplied to the computer in the ordinary course of business of the company. We find that none of these conditions was satisfied by the Revenue in this case. We have considered the Tribunal‟s decision in International Computer Ribbon Corporation v. CCE, Chennai (supra). In that case, as in the instant case, computer printouts were relied on by the adjudicating authority for recording a finding of clandestine manufacture and clearance of excisable goods. It was found 22 Excise Appeal Nos.192,193/2012 by the Tribunal that the printouts were neither authenticated nor recovered under Mahazar. It was also found that the assessee in that case had disowned the printouts and was not even confronted with what was contained therein. The Tribunal rejected the printouts and the Revenue‟s finding of clandestine manufacture and clearance. We find a strong parallel between the instant case and the cited case. Nothing contained in the printouts generated by Sampath Kumar‟s PC can be admitted into evidence for non-fulfilment of the statutory conditions. It is also noteworthy that the computer printouts pertained to the period February, 1996 to September, 1998 only but the information contained therein was used for a finding of clandestine removal of waste and scrap for earlier period also, which, in any case, was not permissible in law. In the result, we hold that the entire demand of duty on waste and scrap is liable to be set aside."
11. Taking into consideration the overall facts and circumstances of the case, I find that the entire case was made out on the basis of statements of the buyers and the computer printout. Commissioner (Appeals) already held that the evidentiary value of the statements is weak. It is also noted that the statements of the 30 persons were mostly similarly pre-drafted. The investigating officers failed to comply with the conditions of Section 36B of the Act in respect of relying upon this computer printout. There is no adequate material available on record to establish the clandestine removal of goods. Therefore, the demand of duty solely on the basis of these materials cannot be sustained. Hence, as the clearance value was within the SSI exemption, 23 Excise Appeal Nos.192,193/2012 the confiscation of the goods cannot be sustained. So, the imposition of penalties are not warranted.
12. In view of the above discussion, the demand of duty along with interest and penalties on the appellants cannot be sustained. Accordingly, the impugned orders are set aside. All the appeals filed by the appellants are allowed."
13. We observe that in the above said case, it has been clearly held that reliance on pendrive without following proper procedure and without corroborating the computer data with other evidence, does not help the Revenue‟s case. The ratio laid down in the above cases would be applicable to the facts of the present case also.
14. We find that apart from heavily relying on the pendrive and recorded statements, the Revenue has made no effort to bring in corroborative evidence to fortify its claim of clandestine removal. There is no discussion about procurement of materials / inputs, the input - output ratio analysis, electricity consumption, statement of purported sellers of inputs , purported buyers of the finished goods, movement of vehicles and statement of such vehicle drivers / owners. While the Revenue is not required to bring in pinpoint and precise evidence but still efforts have to be made to ensure that sufficient evidence is produced in support of their case. From the present proceedings, we find that even within the pen-drive the Revenue claims that part of the same is accounted for in the RG 1 records and clearance has been made on payment of Excise Duty. The quantification has been done by comparing the RG 1 sales figures vis-à-vis the figures shown in the 24 Excise Appeal Nos.192,193/2012 Pendrive data and admittedly the author of the Pendrive is not known and no statement has been recorded to this effect from that person. The procedure prescribed under the statutory provisions have not been followed while relying on the data contained in the pendrive.
15. While the statements have been recorded from various persons, when the appellant sought the cross-examination of these persons, the same has been denied by the adjudicating authority. On this issue the High Court in the case of G-Tech Industries vs Union Of India And Anr - 2016 (339) E.L.T. 209 (P & H), vide the judgement rendered on 22 June, 2016, has held as under :
15. The rationale behind the above precaution contained in clause
(b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the gazetted Central Excise officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudicating authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned.
16. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a gazetted Central Excise officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure 25 Excise Appeal Nos.192,193/2012 prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the gazetted Central Excise officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1).
18. It is only, therefore,
(i) after the person whose statement has already been recorded before a gazetted Central Excise officer is examined as a witness before the adjudicating authority, and
(ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for crossexamination, can arise.
19. Clearly, if this procedure, which is statutorily prescribed by plenary Parliamentary legislation, is not followed, it has to be regarded, that the Revenue has given up the said witnesses, so that the reliance by the CCE, on the said statements, has to be regarded as misguided, and the said statements have to be eschewed from consideration, as they would not be relevant for proving the truth of the contents thereof."
26
Excise Appeal Nos.192,193/2012
16. Thus, the denial of cross-examination of the persons who have recorded the statement, makes these statements lose their evidentiary value. In the present case, therefore, the only evidence, which is also not as per the procedure prescribed under law is that of the pen-drive seized from the premises of another party.
17. Coming to the aspect of non-corroboration by way of other evidence, the case law of Hon‟ble Allahabad High Court in the case of Continental Cement Co. Vs. UOI [2014 (309) E.L.T. 411 (All.), would be useful for reference. The High Court has held as under :-
"12. 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.
(iv) To find out finished product receipt details from regular dealers/buyers.27
Excise Appeal Nos.192,193/2012
(vi) To find out the excess power consumptions. Thus, to prove the allegation of clandestine sale, further corroborative
13. evidence is also required. For this purpose no investigation was conducted by the Department. In the instant case, no investigation was made by the Department,
14. even the consumption of electricity was not examined by the Department who adopted the short cut method by raising the demand and levied the penalties. The statement of so called buyers, namely M/s. Singhal Cement Agency, M/s. Praveen Cement Agency; and M/s. Taj Traders are based on memory alone and their statements were not supported by any documentary evidence/proof. The mischievous role of Shri Anil Kumar erstwhile Director with the assistance of Accountant Sri Vasts cannot be ruled out.
15. In view of the above, we are of the opinion that when there is no extra consumption of electricity, purchase of raw materials and transportation payment, then manufacturing of extra goods is not possible. No purchase of raw material out side the books have been proved.
16 In the light of the above discussions and considering the totality of the case, we are satisfied that no case is made out for extra so called clandestine sale of the Portland Cement to the said parties. We are satisfied that the first appellate authority has rightly deleted the addition and cancel the penalties. Hence we hereby set aside the impugned order passed by the Tribunal and 28 Excise Appeal Nos.192,193/2012 restore the order passed by the first appellate authority, along with the reasons mentioned herein.
17. In the result, all the appeals filed by the appellants are hereby allowed."
18. In the case of Arya Fibres Pvt. Ltd. & Others Vs. CCE Ahmedabad-II [2014 (311) E.L.T. 529 (Tri. - Ahmd.), it has been held :
"9. It is well settled that the charge of clandestine manufacture of the dutiable goods and removal thereof without discharging the duty liable by an assessee, cannot be established on assumptions and presumptions. Such a charge has to be based on concrete and tangible evidence. In this context, reference may be made to Oudh Sugar Mills Ltd. v. Union of India- 1978 (2) E.L.T. (J 172) (S.C.), wherein the Apex Court has observed that demand of duty cannot be raised on the strength of assumptions and presumptions. There should be sufficient evidence of the removal of the goods alleged to have been manufactured and cleared without payment of duty. The charge of clandestine removal must be based on tangible evidence and not on inferences involving unwarranted assumptions. This very principle of law had been applied by the Tribunal in a number of cases and out of those, few are, Amba Cement and Chemicals v. CCE - 2000 (115) E.L.T. 502 (Tribunal) = 2000 (90) ECR 265, Gurpreet Rubber Industries v. CCE - 1996 (82) E.L.T. 347 and Madhu Foods Products v. CCE - 1995 (76) E.L.T. 197."29
Excise Appeal Nos.192,193/2012
19. In Nova Petrochemicals v. CCE, Ahmedabad-II, the Tribunal in its Final Order Nos. A/11207 - 11219/2013, dated 26- 9-2013, the Ahmedabad Bench has held 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 Revenues 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 sales 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 for in excess of what is necessary for manufacture of goods otherwise manufactured and validity cleared on payment of duty 30 Excise Appeal Nos.192,193/2012
(g) statements of buyers with some details of illicit manufacture and clearance;
(h) proof of actual transportation of goods, cleared without payment of duty
(i) links between the document recovered during the search and activities being carried on in the factory of production; etc.
20. As we have observed that entire case in respect of the all demands on different heads as observed in the table referred above, has been built up with miniscule evidence, with no corroborative evidence brought in whatsoever. Therefore, we have no hesitation to apply the ratio of the cited case laws in respect of Pendrive, non-allowing of cross-examination of the persons recording the statements, non- production of corroborative evidence, and set aside the impugned order on these counts in respect of the confirmed demands of Rs.1,47,93,916/-.
21. Since the demands are being set aside, the corollary interest and penalties also get aside.
22. So far as the uncontested demand of Rs.9,24,005/- is concerned, the appellant claims that they have paid the same before issue of SCN. Since the removals have been without payment of duty, as already admitted by the appellant, the appellant is required to pay the interest from the due date of payment for such clearances till the amount has been paid during the investigation. As the amount has been paid before issue of SCN, but the payment is admittedly for the unaccounted goods cleared, the penalty @ 25% of Rs.9,24,005/- is required to be paid. 31
Excise Appeal Nos.192,193/2012
23. The impugned Order is set aside towards the confirmed demand of Rs.1,47,93,516/- along with interest and penalty thereon. The penalty on the second appellant is set aside and appeal is allowed.
24. The appeals are disposed off thus. The appellant would be eligible for consequential relief, if any, as per law.
(Pronounced in the open court on 07.05.2025)
(R.Muralidhar)
Member (Judicial)
(K.Anpazhakan)
mm Member (Technical)