Custom, Excise & Service Tax Tribunal
Jai Balaji Industries Ltd Unit Iii vs -Bolpur Commissionerate on 27 July, 2023
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Excise Appeal No. 75790 of 2022
(Arising out of Order-in-Original No. 47/2022/CE dated 21.07.2022 passed
by Additional Director General (Adjudication), Directorate General of GST
Intelligence, (Adjudication Cell), New Delhi.)
M/s Jai Balaji Industries Limited (Unit-III)
BEPIP Plot, Rajbandh, Banskopa, Durapur-713212.
...Appellant (s)
VERSUS
Commissioner of CGST & Central Excise, Bolpur Commissionerate
180, Santipally, Rajdanga, Main Road, Kolkata-700107.
. ...Respondent(s)
With Excise Appeal No. 75791 of 2022 (Arising out of Order-in-Original No. 47/2022/CE dated 21.07.2022 passed by Additional Director General (Adjudication), Directorate General of GST Intelligence, (Adjudication Cell), New Delhi.) M/s Jai Balaji Industries Limited (Unit-IV) BEPIP Plot, Rajbandh, Banskopa, Durapur-713212.
...Appellant (s) VERSUS Commissioner of CGST & Central Excise, Bolpur Commissionerate 180, Santipally, Rajdanga, Main Road, Kolkata-700107.
. ..Respondent (s)
And
Excise Appeal No. 75792 of 2022
(Arising out of Order-in-Original No. 47/2022/CE dated 21.07.2022 passed by Additional Director General (Adjudication), Directorate General of GST Intelligence, (Adjudication Cell), New Delhi.) Shri Aditya Jajodia, Director of M/s Jai Balaji Industries Limited (5, Bentink Street, 1st Floor, Kolkata-700001.
...Appellant (s) VERSUS Commissioner of CGST & Central Excise, Bolpur Commissionerate 180, Santipally, Rajdanga, Main Road, Kolkata-700107.
. ..Respondent(s) APPERANCE :
Shri K. K. Anand, Advocate & Shri S.K. Mahapatra, GM for the Appellant Shri S. Mukhopadhyay, Authorized Representative for the Respondent 2 Excise Appeal No. 75790-75792 of 2022 CORAM:
HON'BLE MR. ASHOK JINDAL, MEMBER (JUDICIAL) HON'BLE MR. K. ANPAZHAKAN MEMBER (TECHNICAL) FINAL ORDER No...76201-76203/2023 DATE OF HEARING : 05.07.2023 DATE OF PRONOUNCEMENT: 27.07.2023 PER K. ANPAZHAKAN :
Three appeals have been filed against the Impugned Order No. 47/2022/CE dated 21.07.2022 passed by the Additional Director General (Adjudication), Directorate General of GST Intelligence, (Adjudication Cell), New Delhi. The Impugned Order passed by the adjudicating authority is furnished below:
In respect of M/s.Jai Balaji Industies Ltd., Unit III.
(i)I confirm the demand of Central Excise Duty amounting to Rs.
41,34,85,585/- (Rupees Forty One Crore Thirty Four Lac Eighty Five Thousand Five Hundred Eighty Five Only) inclusive of Education Cess and H.S. Education Cess, as determined under sub-section 10 of Section 11A of the Central Excise Act, 1944 and order for recovery of the same.
(ii) Interest under Section 11AA of the Central Excise Act, 1944 (previously Section 11AB of the Central Excise Act, 1944) should be charged and recovered on the above demand;
(iii) I impose penalty of Rs.41,34,85,585/- Rupees Forty One Crore Thirty Four Lac Eighty Five Thousand Five Hundred Eighty Five only) on them in terms of provisions of Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. However, if the duty as determined under sub-section (10) of section 11A 3 Excise Appeal No. 75790-75792 of 2022 and the interest payable thereon under section 11AA is paid within thirty days of the date of communication of this order, the amount of penalty liable to be paid by such person shall be twenty five per cent of the duty so determined, subject to the condition that such reduced penalty is also paid within the period so specified. II. In respect of M/s Jai Balaji Industries Ltd., Unit-IV
(i)I confirm the demand of Central Excise Duty amounting to Rs.1,47,43,824/- (Rupees One Crore Forty Seven Lac Forty Three Thousand Eight Hundred Twenty Four only) inclusive of Education Cess and H.S. Ed. Cess) as determined under sub- section 10 of section 11A of the Central Excise Act, 1944 and order for recovery of the same.
(ii) Interest under Section 11AA of the Central Excise Act, 1944 (previously Section 11AB of the Central Excise Act, 1944) should be charged and recovered on the above demand;
(iii) I impose penalty of Rs.1,47,43,824/- (Rupees One Crore Forty Seven Lac Forty Three Thousand Eight Hundred Twenty Four only) on them in terms of the provisions of rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. However, if the duty as determined under sub-section (10) of section 11A and the interest payable thereon under Section 11AA is paid within thirty days of the date of communication of this order, the amount of penalty liable to be paid by such person shall be twenty five per cent 4 Excise Appeal No. 75790-75792 of 2022 of the duty so determined, subject to the condition that such reduced penalty is also paid within the period so specified. III. In respect of M/s Laxmi Narain Metallic Pvt. Ltd.,
(i) I confiscate the cash amount of Rs.41,40,000/- (Rs. Forty One Lakhs Forty thousand only) in terms of the provisions of Section 121 of the Customs Act, 1962 as made applicable to like matters of Central Excise vide Notification No. 68/63 dated 04.05.63 as amended and issued under Section 12 of the Central Excise Act, 1944.
(ii) I impose penalty of Rs.4,00,000/- (Rupees Four Lakhs) on them in terms of the provisions of Rule 26 of the Central Excise Rules,2002.
Other Noticees
(i)I impose penaty of Rs.5,00,00,000/- Rupees Five Crores) on Shri Ajit jajodia under Rule 26 of the Central Excise Rues, 2002.
(ii) I impose penalty of Rs.1,00,000/- (Rupees One Lakh) on Shri Girish Tikmani under Rule 26 of the Central Excise Rules, 2002.
2. Aggrieved against the impugned order, M/s Jai Balaji Industries Unit III(hereinafter referred as JBIL III/Appellant), Jai Balaji Industries Unit IV(hereinafter referred as JBIL IV/Appellant) and Shri Aditya Jajodia(herein after referred as Appellant) have filed these three appeals. Since all three appeals emanated from the same impugned order, they are taken up together for decision. 5
Excise Appeal No. 75790-75792 of 2022
3. The present appeal deals with the below mentioned confirmed demands and penalties in the impugned order, against the following three Appellants:
3.1 M/s Jai Balaji Industries Ltd., Unit-III, Durgapur (JBIL III) -
engaged in the manufacture of (i) Pig Iron (ii) MS Billets (iii) Alloy Billet (iv) Alloy Bloom (v) Sinter and (vi) Granulated Slag. Central Excise Duty of Rs. 41,34,85,585/- and equal amount of duty as penalty has been imposed on them in the impugned order. 3.2 M/s Jai Balaji Industries Ltd., Unit-IV, Durgapur (JBIL IV) - engaged in the manufacture of (i) TMT Bars (ii) Pig Iron(iii) MS Billets/Alloys Billets (iv) Sponge Iron (v) Ferro Alloy and (vi) Coke. Central Excise Duty of Rs.1,47,43,824/-and equal amount of duty as penalty has been imposed on them.
3.3 Shri Aditya Jajodia, is one of the Directors of both the companies JBIL III and JBIL IV. A penalty of Rs.5,00,00,000/- was imposed on him under Rule 26 of the Central Excise Rues, 2002.
4. Briefly stated facts of the case are as follows:
4.1 A search was conducted by the Directorate General of Central Excise Intelligence (hereinafter referred to as DGCEI) in the premises of JBIL-III on 17.07.2014. During the search, some loose papers/sheets were recovered and seized. In the dispatch section, five computers were found installed. Shri. Sushil Kumar Roy, Associate (Commercial) was working on one of the computers installed using a 8 GB Sandisk Brand pen drive. Another 4 GB Sandisk Brand pen drive was resumed from his shirt pocket. Certain 6 Excise Appeal No. 75790-75792 of 2022 printouts were taken from the said pen drives under a panchnama dated 17.07.2014.
4.2 A statement of Shri Sushil Kumar Roy, Associate (Commercial) of JBIL-III was recorded, in which he, interalia, stated that data sheet retrieved from pen drives were the details of Billets sold 'on bills' as well as 'without bill'; that whenever tax invoice number is not given, some of them might be without bill dispatches because in some of such cases, bills might have been issued from JBIL-IV, but entries were made in the pen drives only to keep account.
4.3 A statement of Shri Kanhaiya Agarwal, weighbridge in-charge of JBIL-III was recorded on 17.07.2014, wherein he, inter alia, stated that he used to make weighment of goods at the weigh bridge of all incoming raw material as well as of outgoing finished goods. On being asked to explain about the pink weighment slips and slip pad as recovered from JBIL-III, he stated that weight of the material which has to be cleared without invoices was being mentioned in these pink weighment slips which was later handed over to Shri. Sushil Kumar Roy.
4.4 On 17.07.2014, a search was also conducted at the Head Office of Jai Balaji Group in Kolkata. The officers took out printouts of some of the e-mails from company's mail -ID handled by Shri Diptendu Samui, who was working as Accounts officer. Two pen drives were recovered from the possession of Shri Anil Kumar Agarwal. The officers also resumed two laptops under a Panchnama.7
Excise Appeal No. 75790-75792 of 2022 4.5 A statement of Shri Diptendu Samui, Accounts Officer, was recorded wherein he was shown certain messages retrieved from his mobile phone.
4.6 on 17.07.2014, DGCEI officers also conducted search in the premises of JBIL-IV and recovered few pads containing pink slips and other documents, under a Panchnama .
4.7 A statement of Shri Raghunath Jhunjhunwala, weighbridge in- charge of JBIL IV was recorded, wherein he, inter alia, explained the procedure of weighment of raw materials and finished goods. He uses a pink slip for final weighment. He was shown pink slip Nos. 77, 79 both dated 18-08-2013 recovered from M/s. Baba Strips & Tubes Ltd on 3-04-2014 to which he stated that slip No. 77 & 78 was in his handwriting whereas slip No. 79 was in the handwriting of Rudra Tapas.
4.8 A statement of Shri Partho Sarkar, Associate Manager Excise of JBIL-IV was recorded wherein he stated that central excise duty was paid only on the invoices prepared and kept in statutory records. If invoice was not prepared for any consignment, no central excise duty was paid by JBIL-IV.
4.9 A statement of Shri Anup Kumar Aggarwal, former Vice- President(Commercial) of Group Company was recorded wherein he, inter alia, stated that while working with Jai Balaji Group he was looking after procurement of raw materials; that while directing the dispatch plan as per the direction of Shri Rajiv Jajodia, Director, he used to interact with weighbridge supervisors namely Shri Kanhaiya at Unit-III; that whether a particular consignment was to be 8 Excise Appeal No. 75790-75792 of 2022 dispatched with bill or without bill was decided by the Directors only; and that the payment for such dispatches was received in JBIL group in cheque or cash respectively.
4.10 The DGCEI officers visited the premises of M/s. Laxmi Narain Metallic Pvt Ltd., Kolkata, who was one of the buyers of JBIL-III and JBIL-IV and their godown on 20.02.2015. A statement of Shri Girish Tikmani Director of M/s. Laxmi Narain Metallic (P) Ltd was recorded on 20.02.2015, wherein he inter alia stated that during the course of search of their factory certain documents were recovered which showed that JBIL had sold Pig Iron on account of Shri Girish Tikmani on bill as well as without bill.
4.11 On 11.03.2015, the officers of DGCEI took printouts of Mix sales for the period 01-04-2012 to 30-09-2012 under a Panchnama. A second statement of Shri Sushil Kumar Roy, was also recorded after taking printout on 11-03-2015. He was confronted with the complete printouts which were retrieved on 17.07.2014, 28.11.2014 and on 11.03.2015 and also with his earlier statement recorded on 17.07.2014. He confirmed the same. He was also shown certain invoices and corresponding entries in the computer printout, as well as the four pink slips and corresponding entries in the computer printouts. He stated that the goods were dispatched from JBIL III without bill and without payment of central excise duty on the direction of their Director Shri Aditya Jajodia.
5. A Show Cause Notice dated 23.04.2015 was issued to all three Appellants and some others concerned with the duty evasion. In the Notice, duty has been demanded mainly on the basis of the 9 Excise Appeal No. 75790-75792 of 2022 printouts retrieved from the pen drives recovered on 17.07.2014. Duty has been demanded on Billets as well as on mixed sales. The entire duty demand except mixed sales for the period 01-07-2014 to 16-07-2014 was based on the printouts retrieved from the 4GB pen drive which was recovered from the pocket of Shri. Sushil Kumar Roy. The demands made in the Notice in respect of JBIL III and JBIL IV are tabulated as below:
JBIL-III Amount in Rs.
Year Value Central Excise Duty
payable.
2010-11 34,08,53,747 3,51,07,936
2011-12 57,71,79,937 5,94,69,656
2012-13 203,07,63,521 25,10,02,370
2013-14 28,79,12,957 3,55,86,042
2014-15 (upto 16-07- 26,14,85,272 3,23,19,581
2014)
Total 349,81,95,434 41,34,85,585
JBIL-IV
Amount in Rs.
Year Value Central Excise Duty
payable.
2012-13 10,26,81,499 1,26,91,433
2013-14 50,91,071 6,29,257
2014-15 (upto 16-0-2014) 1,15,14,033 14,23,134
Total 11,92,86,603 1,47,43,824
10
Excise Appeal No. 75790-75792 of 2022
5.1 The adjudicating authority passed the impugned order confirming the demands as mentioned in Para 1 supra. All the three appeals are against these demands confirmed in the impugned order dated 21.07.2022.
6. The Ld. Advocate appearing for the above said three Appellants advanced the following submissions:
(i) The impugned order has been passed without following the principles of natural justice.
(ii) The entire duty demand except for 01-07-2014 to 16-07-2014, is based on computer printouts which were retrieved from two pen drives on three dates i.e. on17-07-2014, 28-11-2014 and 11-03-
2015. Forensic Examination of both the pen drives was conducted on 05.07.2021, at the back of the Appellants. A perusal of this report dated 05.07.2021 reveals that no printouts were taken from the said two pen drives on any of the above three dates. Some files were created in the years 1996, 1998 or 2000 and some files contain only pictures and videos. Some files pertained to various individuals with whom JBIL III or JBIL IV did not have any connection. Though the Appellants made detailed submissions in respect of this Forensic Report in their further submissions dated 27-05-2022, the same have not been taken into account by the adjudicating authority. The Forensic Report dated 05.07.2021 was obtained by the department from their own expert and the same became part of the adjudication proceedings. The adjudicating authority was, therefore, bound to take the said Forensic Report dated 05-07-2021 into consideration while passing the impugned order. The Forensic Report dated 11 Excise Appeal No. 75790-75792 of 2022 05.07.2021 did not support the case of the department and hence the adjudicating authority ignored the same and did not give any finding on it.
(iii) The computer printouts taken from the pen drives can be relied upon as evidence to demand duty only when the conditions mentioned in Sub Section (2) of Section 36B are satisfied. The department did not identify any computer in which the information was allegedly fed by JBIL III or JBIL IV. The pen drive is a floating device susceptible to tampering and alterations and therefore such evidence has to be received with caution as held by the Hon'ble Supreme Court in the case of Tukaram S. Dighole Vs Manikrao Shivaji Kokate, reported in (2010) 4 S.C (329)
(iv) Pen drive is not a substantial evidence in the absence of corroborative evidence such as consumption of unaccounted materials, production of unaccounted finished goods, extra labour, extra consumption of electricity, clearance of goods from the factory, receipt of cash on account of alleged clandestine sales etc. All the above factors are conspicuous by its absence in the present proceedings. It has been held by the Hon'ble Gujarat High Court in the case of Principal Commissioner of CGST & Central Excise Vs. Shah Foils Ltd reported in 2020 (372) ELT 632 (Guj), that pen drive data is not substantial evidence in the absence of the aforementioned factors being present.
(v) As per the panchnama dated 17.07.2014, one 8 GB pen drive was attached with the computer, but the said computer was neither examined nor seized. Similarly, in respect of the second 4 GB pen 12 Excise Appeal No. 75790-75792 of 2022 drive, the department did not make any effort to ascertain from which computer the data was fed originally. The adjudicating authority has given a finding on this point in Para 22 of the Impugned Order that the computer on which the data was being fed had been identified, as the actual usage of the source was witnessed by the independent panchas in the act. Such type of findings do not fulfil the substantive and mandatory requirements of Section 36B. Section 36B(4) mandates that computer printouts taken from the computer must be signed by a person occupying a responsible official position in relation to the operation of the relevant device and a certificate is to be issued to that effect. No such procedure as mandated in Section 36B has been followed in this case.
(vi) JBIL-III and JBIL-IV have denied ownership of these two pen drives and the authenticity of the data therein. There is no statement recorded from any Director either of JBIL-III or JBIL-IV accepting the authenticity of the pen drives and the data contained therein. On the date of search Shri Gaurav Jajodia, Director of JBIL-III was present and his signature was obtained on the panchnama but his statement was not recorded on that date. Only two statements of Shri. Sushil Kumar Roy, Associate (Commercial) of JBIL-III and one statement of Shri Kanhaiya Agarwal, Weighbridge in-charge of JBIL-III were recorded. The statement of Shri Sushil Kumar Roy was not categorical regarding clandestine clearances with respect to the entries in the computer printouts . He had stated that in the computer printout, if tax invoice number was not given some of them might be 'without bill' despatches because in some of such 13 Excise Appeal No. 75790-75792 of 2022 cases, bills might have been issued from JBIL IV but entries were made in the pen drives only to keep account. However, this averment of Shri. Sushil Kumar Roy was not probed further. He has not categorically admitted that the bills without invoice numbers available in the computer printouts were clandestine clearances.
(vii) When the 4 GB pen drive was seized from the shirt pocket of Shri. Sushil Kumar Roy, the investigating offices should have recorded the statement of Shri Gaurav Jajodia to find out the ownership of the said pen drive. As regards the 8GB pen drive, merely because Shri. Sushil Kumar Roy was working on one of the computers and the said pen drive was attached with that computer, it does not mean that the said pen drive and the data contained therein belonged to JBIL. Further, Shri. Gautam Banerjee was also working on the same computer, but his statement was never recorded. He was not even summoned during the course of investigation. Further, merely because the computer printouts contained the data of recorded clearances also, it does not mean that where no invoice number was written against a particular entry, that established clandestine clearance of the goods mentioned therein by JBIL III or IV. Such presumption is not acceptable in the eyes of law. The onus to prove that these two pen drives belonged to JBIL III and contained accounted for and unaccounted for clearances of various goods was squarely on the Revenue. Since the evidence on record does not establish that these two pen drives were owned by JBIL III, no reliance can be placed on any information contained therein, as the 14 Excise Appeal No. 75790-75792 of 2022 said two pen drives do not fulfill the requirements of Section 36B of CE Act.
(viii) On the date of search 4 pink slips No. 65, 66, 68 and 71 were seized. The said pink slips showed clearances of four consignments of Pig Iron on which no central excise duty was paid according to the computer printout. The details of which are as under:-
Sl. Date Lorry Party Gross Tare Net Quality
No. No. Wt. Wt. Wt.
of
the
Pink
Slip
65 16.07.2014 WB- Girish 20.210 6.840 13.370 Pig
37B- Tikmani
7843
66 16.07.2014 WB- Girish 19.890 7.090 12.800 Pig
19A- Tikmani
0954
68 16.07.2014 WB- Manoj 33.930 9.410 24.520 Pig
61- Matal
8152
71 16.07.2014 WB- Girish 20.980 7.020 13.960 Pig
39- Tikmani
5232
TOTAL QUANTITY 64.65
MT
The Adjudicating Authority in para 23.1 of the impugned order has held that no invoices were issued against these pink slips, accordingly she concluded that the goods mentioned in these pink slips were clandestinely cleared. There is no evidence on record to 15 Excise Appeal No. 75790-75792 of 2022 prove that pink slips were prepared only when the goods were to be cleared without payment of duty. There were cases where even after preparation of pink slips, the goods were not transported due to several reasons such as break down of the vehicles, cancellation of orders etc, a fact which was explained by Shri. Sushil Kumar Roy and Sh. Kanhaiya Agarwal in their respective cross examination. The adjudicating authority has not accepted their submission that pink slips were made in respect of incoming raw materials as well as outgoing finished goods, on the ground that no other pink slips were found on the date of search. The investigation officers have not recorded any statement from either Sh. Girish Tikmani or M/s. Manoj Metal, whose names were mentioned in the pink slips as the receivers of the alleged clandestinely cleared four consignments of Pig Iron on 16.07.2014. The premises of M/s. Manoj Metal was never searched. The premises of the other buyer, namely, Shri Girish Tikmani, who was the director of M/s. Laxmi Narain Metalic Pvt Ltd was searched only after more than seven months later on 22-02-2015 and a statement of Shri Girish Tikmani was recorded. He was never confronted with the said three pink slips. He was not confronted even with the computer printouts. Hence, the findings of the adjudicating authority at Para 25 of the impugned order that the pink slips were only prepared where the goods were cleared without invoices, is not supported by any evidence and hence it cannot be accepted.
(ix) The adjudicating authority has relied upon report No. 14 dated 16.06.2014 containing Dispatch detail--1 and dispatch detail-2 and 16 Excise Appeal No. 75790-75792 of 2022 has held that the figures mentioned in Despatch-2 pertained to the clandestine clearance of 16-07-2014 i.e. a day prior to the search, whereas the details given in dispatch-1 pertained to the clearances of the same day which were cleared on payment of duty. Both these details appeared in the computer printouts, but no inquiries were conducted with regard to the alleged clandestine removal on the basis of the aforementioned two private records. No statement of any official of the JBIL III was ever recorded as to what is the purport of these two documents. It has not been proved by any acceptable evidence that Report no. 14 was prepared by the production staff. No statement from any employee of production department was recorded. Even the scribe of this report has not been identified. Though it has been stated that on 16-07-2014 four consignments of Pig Iron were cleared in clandestine manner, neither Shri. Girish Tikani nor Manoj Metals was confronted with the private records or the computer printouts or the pink weighment slips or the Report No.14. Pig Iron is a raw material in JBIL III. But no inquiry was conducted as to who consumed the said allegedly cleared Pig Iron without payment of Central Excise duty. If JBIL III would have clandestinely cleared 64.65 MT of Pig Iron on 16-07-2014, there was bound to be shortage of finished goods and raw materials on 17-07- 2014 i.e. on the date of search. But there was no such evidence of shortage of finished goods on record. Similar is the position with regard to document No. 58. The scribe of the document has not been identified and no inquiry was conducted as to what was the purport of the said document. However, Report No 14 and Document No 58, 17 Excise Appeal No. 75790-75792 of 2022 have been relied upon to demand duty, without any corroborative evidence.
(x) Various findings of the Adjudicating Authority on clandestine removal of finished goods by JBIL III have not been corroborated with corresponding investigation at the receiver's end. Had JBIL III clandestinely cleared finished goods of such huge quantity every day prior to 17-07-2014, there should be shortage of finished goods as well as raw materials on 17-07-2014 in JBIL III, but no such evidence has been brought on record to that effect. According to the Adjudicating Authority on 16-07-2014, four consignments weighing 64.65 MT of Pig Iron were cleared without invoice. Similarly two consignments weighing 26.53 of HPTM Cutting Pipes were cleared without invoice to JBIL IV. The officers of DGCEI had simultaneously visited JBIL IV also on 17-07-2014 and had drawn panchnama, but no discrepancy was found in the raw material or finished goods in JBIL IV. If JBIL III would have clandestinely cleared 26.53 MT of HPTM Cutting Pipes on 16.07.2014, the same would have been available on the very next day in JBIL IV. But, no effort was made by the investigation officers to corroborate their allegations of clandestine clearance. Similarly, JBIL III allegedly cleared Rubber weighing 73.42 MT on 15-07-2014 to JBIL IV. No enquiries were conducted by DGCEI in this regard either on 17-07-2014 or thereafter. Similar is the case with earlier dates. If the case of DGCEI is treated to be true, even on 15-07-2014 JBIL III cleared 16 consignments of Pig Iron weighing 251.33 MT to Girish Tikmany, Pawan Bansal, Deepak Dalmia, Manoj Metal Udyog and Saran Alloys 18 Excise Appeal No. 75790-75792 of 2022 Pvt Ltd and two consignments of Runner weighing 73.42 MT to JBIL IV but no investigation at all were made to that effect from the alleged recipients of Pig Iron from JBIL IV where simultaneous search was conducted on 17-07-2014. The details of said consignments are given in a tabular form as under:-
Sl. Name of the Item/Product Vehicle Quantity
No. party No.
1. Girish Tikmany Pig Iron WB 33 8895 14.18
2. Girish Tikmany Pig Iron WB 41B 15.21
1984
3. Girish Tikmany Pig Iron WB 410248 14.64
4. Girish Tikmany Pig Iron WB 37A 15.08
3529
5. Girish Tikmany Pig Iron WB 41 9219 14.3
6. Girish Tikmany Pig Iron WMK 5743 13.51
7. Pawan Bansal Pig Iron WB 39 3736 14.18
8. Pawan Bansal Pig Iron WB41 6494 14.35
9. Pawan Bansal Pig Iron WB 25A 14.94
0351
10. Pawan Bansal Pig Iron WB 61 7579 13.29
11. Pawan Bansal Pig Iron WB 39 8920 13.57
12. Pawan Bansal Pig Iron WB 41 7607 14.55
13. Pawan Bansal Pig Iron WB 03B 20.94
0055
14. Deepak Dalmia Pig Iron WB 41A 14.44
3149
15. Monoj Metal Pig Iron WB 37C 26.06
Udyog 1635
16. Saran Alloys Pvt. Pig Iron WB 39 5232 18.09
Ltd.
TOTAL 251.33
17. Direct Runner OR 09P 36.81
5670
18. Direct Runner OR 09P 33.61
5670
TOTAL 70.42
GRAND TOTAL 321.75
(xi) If we take into account the alleged clandestine clearance for the last sixteen days prior to the search of the unit, JBIL III was alleged to have cleared 129 consignments without payment of Central Excise duty during the said short period of time out of the total 743 consignments which were cleared during this period from 01.07.2014 to 16.07.2014. Even prior to the said period, they were allegedly 19 Excise Appeal No. 75790-75792 of 2022 clearing the goods without payment of Central excise duty during the last more than four years i.e. w.e.f. 1-4-2010, on regular basis. If such allegations are accepted to be true, it was the bounden obligation on the part of the investigating officers to have intercepted some consignments which were allegedly being cleared without payment of central excise duty.
(xii) The duty demand of Rs.96,45,018/- from JBIL III and Rs. 14,62,149/- from JBIL IV is not sustainable on the GR Slag generated involuntarily during the process of manufacture. Even otherwise, GR Slag is exempt from Central Excise Duty in terms of Sl No. 6 of Notification 4/2006-CE dated 01.03.2006, superseded by Notification 12/12-CE dated 07.03.2012, serial no. 37. This Tribunal in the case of Aggarwal Channel Mills Pvt. Ltd. Vs CCE Raipur, 2015 TIOL 2372 and in JBIL Group's own case at their Raipur Unit as reported in M/s. Jai Balaji Industries Ltd Vs. CE and Service Tax, Raipur 2017-TIOL-2560-CESTAT-DEL has clearly laid down that GR Slag was only a by-product and exempt from duty.
(xiii) The duty demand of Rs. 2,11,98,601/- on Runners, Rs.1,45,48,113/- on HPTM Cutting Pipe/HPTM Broken Pipe and of Rs.1,51,491 on Ladle and Ladle Jam confirmed in the impugned order is not sustainable as there is no evidence in the Show Cause Notice about the alleged clearance of these products. The allegation is that majority of these item were cleared by JBIL III to JBIL IV. No inquiries were conducted either from JBIL III or JBIL IV regarding these items as would be evident from the various statements recorded. JBIL III recycles Runners hence the question of its clearance to JBIL IV without invoices does not arise. Similarly other items were waste materials. It was alleged that in some cases Ladle and Ladle Jam was cleared to one party M/s. SYM Single 20 Excise Appeal No. 75790-75792 of 2022 Alloy Pvt. Ltd. but no inquiries were conducted from them. HPTM Cutting Pipe arising during the manufacture of Ductile Pipe and the same are recycled. No evidence brought on record that JBIL IV had used these waste products in the manufacture of finished goods.
(xiv) The computer printouts contained several abbreviations which have been attributed to clearances of Billets by JBIL III. JBIL III were selling their final product under the description Alloy & Non-Alloy Billets. They never sold the billets by using any abbreviations, which is clearly evident from the invoices issued. Further, out of total duty demand of Rs. 6,71,71,822.00 on this count, the duty of Rs. 6,60,27524-00 pertained to the alleged clearances of Billets with different descriptions by JBIL III to JBIL IV as detailed in the chart below:
TOTAL Row DUTY NET W.T AMOUNT EXCISE E.CESS H.E.CESS Labels INCLUDI NG CESS 100 LCEQ 20.310 682,416 68,242 1,365 682 70,289 100 MS 1598.140 51371411 5137141 102743 51371 5291255 100 MS 500 64.380 2,253,300 225,330 4,507 2,253 232,090 100 CRS 131.370 4,597,950 459,795 9,196 4,598 473,589 130 55.450 52Cr4MO2V 1,746,675 174,668 3,493 1,747 179,908 130 55SI7 359.180 13,821,444 1,573,499 31,470 15,735 1,620,704 130 CRS 536.210 18,954,901 2,068,557 41,371 20,686 2,130,613 130 MS 3308.080 10,086,41 10,389,00 98,771,773 201,728 100,864 4 6 130 MS 500 13314.860 43,846,19 45,161,58 438,461,955 876,924 438,462 6 2 130 SAE 19.470 1008 654,192 65,419 1,308 654 67,382 130CRS 106.720 3,991,328 399,133 7,983 3,991 411,107 Grand 19514.17 635,307,34 64,104,3 1,282,08 66,027,5 Total 641,044 0 5 92 8 24 21 Excise Appeal No. 75790-75792 of 2022
(xv) Billet is a raw material to manufacture TMT Bars. JBIL IV apart from manufacturing Billets also manufactures TMT Bars. If JBIL IV would have received the alleged quantity of Billets from JBIL III, the same would have been used in the manufacture of TMT Bars. There is no duty demand on JBIL IV on proportionate quantity of TMT Bars which would duly demonstrate that no reliance could be placed on the computer printouts. Further, no inquiries were conducted either from JBIL III or from JBIL IV to this effect.
(xvi) There is a duty demand on Tundish Jam to the extent of 5634.9 MT during the period 2010-11 to 2012-13 involving duty of Rs. 2,74.339.89/- and on Billets Scrap on 3793.25 MT involving duty of Rs. 1,88,629.41/- during the period 2010-11 to 2013-14 which JBIL III allegedly cleared to the JBIL IV . However, neither any supportive evidence was brought on record nor any statements were recorded to substantiate this allegation. Since these products are used as raw material there is no proportionate duty demand on proportionate quantity of finished goods from any of the two units. (xvii) The proceedings of cross examination which were conducted before the Adjudicating Authority clearly demolish the whole case set up by the DGCEI. During the cross examination, most of the witnesses have retracted their earlier statements. In the impugned order, the adjudicating authority has held that if the statements were recorded under threats and duress, it is not understood as to what prevented them from retracting their statements within a reasonable period of time. She further held that all the statements of the concerned persons were supported by documentary evidences. 22
Excise Appeal No. 75790-75792 of 2022 However, a perusal of Section 9D of the Central Excise Act, 1944 clearly establishes that unless a person who has made the statement is examined as a witness before the Adjudicating Authority, no reliance can be placed on any statement recorded under section 14 of the Central Excise Act. Any statement recorded under Section 14 of the Central Excise Act could be admitted in evidence only after the process of examination and cross examination is completed as provided under Section 9D. For undertaking this exercise, it is not necessary that a person should have retracted from his statement. If the argument of the Adjudicating Authority is accepted, then the provisions of Section 9D would become otiose. This cannot be the intention of the legislature.
(xviii) The Tribunal in the case of Ambica Organics Vs. CCE & Customs, Surat-1, reported as 2016 (334) ELT 97 (Tri. - Ahmd), was dealing with a case where the entire case of clandestine removal was based upon some computer prints out and certain statements of buyers. The party therein requested for cross examination of 30 persons but Commissioner (Appeals) allowed cross examination of only four persons which were randomly selected. The said four witnesses resiled from their original statements and stated that they were made to sign on the promise that no action shall be taken against them. The Revenue had preferred appeal against this order before the Hon'ble Gujarat High Court, wherein it has been held that when the four witnesses had disowned their original statements, the Tribunal was justified in setting aside the demand, which was confirmed based on these statements.
23
Excise Appeal No. 75790-75792 of 2022 (xix) Once it came on record that various statements recorded from the witnesses were not of voluntary in nature but were obtained under pressure, the same could not be admitted in evidence by the Adjudicating Authority. The same clearly lost its evidentiary value. Once these statements are excluded from evidence, no reliance could be placed on the computer printouts and other evidences, as per the law laid down by the Hon'ble Delhi High Court in the case of CCE Vs Vishnu and Co. Ltd., reported in 2016 (332) ELT 796 (Del). (xx) Reliance is also placed on the following two High Court Judgments to stress their submission that the statements recorded without following the procedure as set out in Section 9D of the Central Excise Act, 1944 has no evidentiary value :-
i) G-Tech Industries Vs. Union of India reported in 2016 (339) ELT 209 (P&H) wherein it has been held that the use of the word "shall" in Section 9D(1), makes it clear that, the provisions contemplated in the sub-section are mandatory. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is that the statements recorded during investigation has every chance of having been recorded under coercion or compulsion. 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. Para 16 of this judgment 24 Excise Appeal No. 75790-75792 of 2022 clearly lays down the procedure to admit the evidences recorded under section 14 of the Central Excise Act.
ii) The Hon'ble Chhattisgarh High Court in the case of Hi Tech Abrasives Ltd vs. Commissioner of C.Ex. &Cus., Raipur reported in 2018 (362) ELT 961 (Chhattisgarh) while dealing with a case wherein procedure laid down under Section 9D of the Central Excise Act was not followed while adjudicating the case by the Adjudicating Authority, held in clear terms that unless the procedure laid down under Section 9D of the Central Excise Act is followed in letter and spirit, no statement including the statement of Director which was of inculpatory in nature can be relied.
(xxi) The investigation officers did not conduct any investigation either from the mine owners or from the Railways or from any transporter to substantiate their allegation that JBIL III and JBIL IV have procured any unaccounted raw material from them or transported it without invoice. The Railways being a government organization, there was absolutely no scope for transportation of any unaccounted raw material. The entire quantity of Iron Ore and other minerals products/raw materials were transported through valid railway receipts and only a few raw materials were transported through trucks or similar transport vehicles. There was absolutely no investigation from any supplier of raw materials that they ever sold the raw materials either to JBIL III or JBIL IV without invoices and received any cash from them. Similarly, no investigation was 25 Excise Appeal No. 75790-75792 of 2022 conducted from any of the transporters to the same effect. It is on record that from the aforementioned basic raw material JBIL III or JBIL IV, manufacture Sponge Iron, Pig Iron, Ferro Alloys and Billets as the case may be. Sponge Iron and Pig Iron were their intermediate products and JBIL III was also selling large quantities of Pig Iron to outside parties on payment of Central Excise duty. As far as Billets were concerned the same were manufactured out of Sponge Iron or Pig Iron and also sometimes these two raw materials were mixed. The other raw materials required to manufacture Billets are Ferro Manganese& Ferro Silicon. The extraction and sale of Iron Ore are governed by various legislations both at the levels of Centre and State Governments. JBIL III and JBIL IV process the entire quantity of Iron Ore procured from the State of Orissa. The licensing and sale of Iron Ore in the State of Orissa is governed by the OMPTS Rules, 2007. They procure minerals by filing Form-L which allows them to remove Iron Ore from a particular mine.
Thereafter, they have to file Form-I which is a permit for the license other than mine owners. It also mentions quantity and quality of minerals/ore which are to be transported. They also filed monthly returns which contained consolidated quantity of various mineral products procured and consumed in a particular month. This return also contained opening and closing stocks. The Iron Ore or mineral products could be procured only under the signature of Deputy Director of Mines. An Inspector was always posted in each mine to oversee lifting of the Iron Ore 26 Excise Appeal No. 75790-75792 of 2022 and other mineral products, so that the sale was carried out strictly as per the form-L and Form-I. Thus, there is no possibility of procuring unaccounted raw materials which could enable JBIL III and IV to indulge in clandestine manufacture and clearance of finished goods (xxii) It is submitted that even procurement of coal, which is required to manufacture Sponge Iron is largely controlled by the Central Government. Both Pig Iron and Sponge Iron are used captively in JBIL III plant for the manufacture of MS Billets. The coal is largely procured from different sources like Eastern Coalfields Ltd. (ECL), Mahanadi Coalfields Ltd (MCL) and also through E-auction. Both ECL and MCL are Central Government controlled and the coal linkage facility also allotted to JBIL under Fuel Supply Agreement (FSA) like Iron Ore, Coal. Coal is mostly transported through Railways. Therefore, there is no scope for procurement of coal as a raw material in clandestine manner.
(xxiii) With regard to JBIL IV, they have the facility of Coke Oven Plant. In Coke Oven Plant, the basic raw material is coking coal and the finished product is coke. JBIL IV have imported coking coal for the purpose of production of coke in coke oven Plant. Sometimes JBIL IV have also directly imported Coke for the purpose of production of Pig Iron in their Blast Furnace Plant. Coke is the basic raw material (Fuel) for the purpose of production of Pig Iron. During the alleged period of clandestine removal, JBIL IV have imported the coking coal 27 Excise Appeal No. 75790-75792 of 2022 and coke for the production of Pig Iron. No case has been made out that JBIL IV had procured various raw materials including coke in clandestine manner.
(xxiv) The Adjudicating Authority has negated this very vital submission on an untenable ground at Para 28 of the impugned order by holding that during the course of search, some messages were found in the in-box of the mobile phone of Shri Diptendu Samui, Accounts officer, which indicated purchase of a small quantity of 25 MT of scrap on payment of cash. The adjudicating authority considered these were enough evidences for the clandestine purchase and receipt of raw materials in cash, required for manufacture of such huge quantity of finished goods alleged to have been manufactured and clandestinely cleared. This finding has absolutely no credibility as Shri. Diptendu Samui was working as an Accounts Officer in the head office of Jai Balaji Group which owns five different units manufacturing various types of iron and steel products. It is submitted that since scrap/ melting scrap is purchased from very small suppliers, hence the payments to them are sometimes made in cash but the same are duly accounted for in their books of accounts. In the present proceedings there were only two messages showing purchase of scrap of only 15 MT and 10 MT, totally 25 M.T of scrap purchased in cash. Shri Diptendu Samui in his cross examination had categorically stated that both the above entries of purchase of 25 M.T. of scrap was accounted for in their books of records. It is strange 28 Excise Appeal No. 75790-75792 of 2022 and intriguing that the Adjudicating Authority has confirmed the duty demand of more than 41 Crores on the basis of the alleged purchase of 25 MT of scrap in cash. Even those two consignments of scrap were duly accounted for in their books of accounts.
(xxv) During the entire investigation not even a single transaction in unaccounted cash was found. In the case of clandestine removal there cannot be any dispute that all the transactions including purchase of raw materials, employment of labour, electricity, transportation of raw materials, conversion of raw material into finished goods, transportations of the same are undertaken through unaccounted cash. In the case of JBIL-III, the case of the Revenue is that JBIL III sold unaccounted goods valued around Rs. 350 crores to various buyers in clandestine manner. If JBIL III would have indulged into cash transactions of such high magnitude, there should have some evidence to that effect. However, no cash was seized from JBIL III during investigation. Further in order to manufacture goods worth Rs. 350 Crores, JBIL III would have required raw materials of almost the same amount, which JBIL III would have purchased in cash and transported to their factory in clandestine manner. This would have meant that in order to undertake clandestine removal of such a huge quantity of finished goods, JBIL III would have indulged in cash transactions of around Rs. 700 Crores during a period of little over four years. There is not even an iota of evidence brought by the investigation to this effect. 29
Excise Appeal No. 75790-75792 of 2022 (xxvi) JBIL III & IV in their further submissions dated 27.05.2022 before the adjudicating authority cited the Final Order No. 75583-75585/2020 dated 12-11-2020 passed by this Tribunal in JBIL III's own case. In this case also, duty was demanded on the basis of some data relating to unaccounted transactions recorded in external Hard Drives recovered from the secret office of one of their buyers namely M/s .Shree Parasnath Re-Rolling Mills Ltd, Durgapur (M/s.SPMRL). Printouts of the contents of the hard discs were taken in the presence of authorized signatory of M/s. SPRML and independent witnesses. Certain statements were recorded. Duty was demanded from JBIL III alleging that during the period 01-02-2012 to 25-12- 2012 they have cleared 13683.05 MT of M.S. Billets to M/s. SPRML without payment of duty. This case was made out on the basis of printouts taken from hard disc seized from the secret office of M/s. SPRML. The duty demanded was confirmed by the Commissioner of Central Tax and GST, Bolpur, but on appeal this Tribunal has set aside the demands on the basis of the following findings:-
i. That though the employees of the purchaser had accepted having received goods from JBIL III without payment of duty but when it was not accepted by the supplier it could not be concluded that there was any clandestine removal on the part of the supplier (JBIL III). Further, cross examination of those employees were not allowed, therefore, no reliance could be placed on their statements.( Cross examination was allowed 30 Excise Appeal No. 75790-75792 of 2022 in this case is the only difference. Otherwise, on facts, both cases are similar).
ii. That JBIL would have required huge quantity of raw materials like iron ore, lam coke, steam coal, manganese and scrap. No evidence has been gathered to show the illegal and clandestine procurement of the said raw materials. The department did not produce any evidence of consumption of electricity, deployment of labour and production of such M.S. Billets. Without any investigation conducted in that direction, thereto without taking stock of raw materials and finished goods immediately after evidence was found at the end of M/s.
SPRML, allegation of clandestine removal could not be sustained. The statement of Shri Aditya Jajodia, Managing Director, was not even recorded and it is surprising to see that while alleging clandestine removal of that magnitude responsible senior person like the Managing Director was not even questioned.
iii. That one of the Annexure relied upon by the department contained Truck Nos. No investigation regarding the transportation at least, of which some evidence, in the form of Truck numbers, was available with the department, was conducted.
iv. That allegation of removal of huge quantity of 13,683.05 MT valued at Rs. 52.00 Crores, the department should have established the purchase of raw material, consumption of electricity, deployment of labour, arrangement of 31 Excise Appeal No. 75790-75792 of 2022 transportation, receipt at the customers' end and financial transactions, receipt of money in respect of not even a single transaction in the hand of JBIL-III has been proved with evidence.
v. There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;
vi. 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 far in excess of what is necessary for manufacture of goods otherwise manufactured and validity cleared on payment of duty.
g. Statements of buyers with some details of illicit manufacture and clearance;32
Excise Appeal No. 75790-75792 of 2022 h. Proof of actual transportation of goods, cleared without payment of duty i. Links between the documents recovered during the search and activities being carried on in the factory of production; etc. It is submitted that the facts and circumstances of the present appeal are similar to that of the case wherein the Final Order No.75583-75585/2020 was passed by this Tribunal. No appeal has been preferred by the department against this order meaning thereby that the department has accepted the findings of the Tribunal which has attained finality.
(xxvii) Accordingly, relying on the above said decision by this tribunal in their own case and the various other decisions cited by them in their written submissions, they prayed for setting aside the demand of duty and penalties imposed against the Appellants in the impugned order.
(xxvii) The Appellant Shri. Aditya Jajodia made separate submission against imposition of penalty on him under Rule 26 of the Central Excise Rules, 2002. He stated that the Adjudicating Authority has discussed his role in commission of the offence in Para 37 of the impugned order and held that he has failed to participate in the investigation and also failed to come up with proper explanation regarding the documentary evidences recovered during the search and adduce proper evidence to establish that he was not involved in the act of clandestine removal of excisable goods. The adjudicating authority further 33 Excise Appeal No. 75790-75792 of 2022 stated that he is the Director and the key person of the Appellant companies and it is impossible that such large scale clearances of excisable goods without issue of Central Excise Invoices would have escaped his attention. In absence of any convincing arguments and evidences from his side, the Adjudicating Authority found that he was concerned with transporting, removing, depositing, keeping, concealing, selling and purchasing of excisable goods, which he had knowledge, or reason to believe that hey were liable for confiscation. Therefore, penalty was imposed on him under Rule 26 of the Central Excise Rules, 2002.
He stated that the allegation of non appearance for repeated summons by the investigation has not been supported with any credible evidence. The adjudicating authority has not given as to what are the dates of these summons and whether these summons were served upon the said persons. If the investigating officers were of the view that repeated summons were issued to the Director and employees of M/s. JBIL III and IV, it was incumbent upon them to have given the details of the said summons. Therefore, vague allegations of non appearance for the summons did not advance the case of DGCEI. In their further submissions dated 27.05.2022 he has categorically stated before the Adjudicating Authority that proper replies were given to all the summons. However, the Adjudicating Authority while passing the impugned order has not taken into consideration the submissions made by him. He was never summoned with regard to the present proceedings. Therefore, the findings of the Adjudicating Authority 34 Excise Appeal No. 75790-75792 of 2022 in the impugned order are factually incorrect. Without prejudice to the above submissions, he stated that there is no evidence on record to show that he was in any way concerned with transporting, removing, depositing, keeping, concealing, selling and purchasing of excisable goods, which he had knowledge, or reason to believe that they were liable for confiscation. JBIL III and IV have already made detailed submissions that the duty demand on both the units is not sustainable on various grounds. He reiterated the said grounds and contended that since no duty demand is sustainable against JBIL III and IV, the question of penal action against him does not arise at all. Accordingly, he prayed for setting aside the penalty imposed on him.
7. The Ld. A.R. stated that the data recovered from the two pen drives clearly establish clandestine clearance of the goods by JBIL III and JBIL IV. This is corroborated by the statements from Shri. Sushil Kumar Roy, Associate (Commercial) and Shri. Kanhaiya Agrwal, weighbridge in charge of JBIL III on the date of search. Regarding reliability of the data recovered in the form of computer printouts from the pen drives, he stated that the pen drives were taken from the shirt pocket of Shri. Sushil Kumar Roy and from the computer operated by him. So, he is the owner of the data and his statement has been recorded certifying the data, which satisfies the requirement for Section 36B to admit those computer print outs as evidence for demanding duty. Regarding the statements retracted during cross examination, he stated that the statements recorded were not retracted for a considerably long time, which establishes that the 35 Excise Appeal No. 75790-75792 of 2022 statements were not recorded under duress. The retraction during cross examination was only an afterthought. To comply with the provisions of Section 9D of the Central Excise Act, 1944, cross examination was allowed at the time of personal hearing by the adjudicating authority. Hence, the conditions required under Section 9D has been followed and the statements can be relied upon to confirm the demands. Accordingly, he prayed for rejecting the appeals files by the Appellants.
8. Heard both sides and perused the appeal records.
9. We observe that the issue involved in these appeals is clandestine removal of goods without payment of Central Excise duty. The charge of clandestine removal is a very serious charge which entails serious consequences which are both civil and criminal in nature. Hence before levelling such serious charge of clandestine removal of goods, there must be sufficient evidence on record leading to conclusive proof of production of goods, their removal from the factory by any mode of transportation and clandestine clearances to buyers. The onus to establish such clandestine activities, resulting in confirmation of demand is placed heavily on the Revenue and is required to be discharged by production of sufficient, cogent and tangible evidences. The said allegation has to be proved by bringing on record evidences procurement of all the raw materials clandestinely in proportionate quantity and it must be proved to whom the goods have been sold. In their submissions, the Appellants cited various loopholes in the investigation and argued that the demands made in the impugned order are not sustainable. In order to analyze the evidences available 36 Excise Appeal No. 75790-75792 of 2022 on record to substantiate the allegations made by Revenue and the submissions made by the Appellants to counter the findings of the adjudicating authority in the impugned order, we frame the following questions:
10. The issues to be decided in this appeal are:
(i) Whether evidences available on record substantiate that the Appellants are the owners of the two pen drives and the data contained therein?
(ii) Whether the computer printouts taken from the pen drives recovered during the search can be relied upon as evidence to demand duty?
(iii) Whether the conditions mentioned in Section 36B has been followed in this case or not, to rely upon the computer printouts as evidence?
(iv) Whether the procedure as set out in Section 9D of the Central Excise Act, !944 was followed in this case or not? If not followed, then whether the statements recorded under Section 14 of the Central Excise Act, 1944 can be relied upon to demand duty ?
(v) Whether the statements not retracted within a reasonable time, but retracted at the time of cross examination, has any evidentiary value?
(vi) Whether the allegations of clandestine clearance of finished goods by JBIL III and JBIL IV are sustainable without any corresponding investigation to corroborate the claim, at the receiver's end?37
Excise Appeal No. 75790-75792 of 2022
(vii) Whether the demands confirmed in the impugned order on clandestine clearance of finished goods is sustainable in the absence of any evidence of procurement of the major raw materials such as Iron Ore and Coal, without invoices?
(viii) Whether penalty is imposable on the Appellant companies and it's Director, on the basis of the evidences available on record?
(i) Whether evidences available on record substantiate that the Appellants are the owners of the two pen drives and the data contained therein?
11. It is on record that the entire duty demand, except for 01-07-2014 to 16-07-2014, is based on the two pen drives recovered on the date of search on 17.07.2014, resumed from the shirt pocket of Shri. Sushil Kumar Roy. The computer printouts have been taken on three dates, namely, 17-07-2014, 28-11-2014 and 11-03-2015. The Forensic Examination of both the pen drives was conducted on 05-07- 2021, though without the presence of the Appellants. A perusal of this report reveals that no printouts were taken from the two pen drives on any of the above three dates. The Appellants stated that they have made detailed submission about this Forensic Report in their further submissions dated 27-05-2022, but the same have not been taken into account by the adjudicating authority. We observe that this Forensic Report was obtained by the department from their own expert and hence it became part of the adjudication proceedings. The adjudicating authority was, therefore, bound to take the said Forensic Report dated 05-07-2021 into consideration and given her findings in the impugned order. However, we find that the 38 Excise Appeal No. 75790-75792 of 2022 adjudicating authority has not given any findings about this report. The Appellant stated that a perusal of the said Forensic Report by the adjudicating authority would have revealed to her that the said report did not contain any information regarding the alleged clandestine removal of the finished goods. Some files in the pen drives appeared to have containing only pictures and videos and certain files were created in the year 1996 or 1998 or 2000, whereas JBIL III had started its production only w.e.f. 30-03-2007. The Forensic Report dated 05.07.2021 reveal that some files were accessed on 17-07- 2014, 28-11-2014 and 11-03-2015 but it did not show that on the said three dates any printouts were taken. The Appellant further stated that various files pertained to various individuals with whom the JBILIII or JBIL IV did not have any connection even remotely, were found in the Report dated 05.07.2021. We observe that the adjudicating authority has not given any findings on this Report. We observe that the entire duty demand is based upon the computer printouts taken from these two pen drives, The Forensic Report questions the very existence of the computer printouts and the adjudicating authority has not given any finding on this report. Not giving any finding on the Forensic Report dated 05.07.2021 would only lead to the conclusion that the said Report did not support the case of the department and hence the adjudicating authority ignored the same and has not give any finding on it.
11.1 We observe that one pendrive was recovered from the pocket of Shri. Sushil Kumar Roy and the other one was attached with the computer where he was working. The pen drive is a floating device. 39
Excise Appeal No. 75790-75792 of 2022 Just because it is recovered from his shirt pocket does not mean that he is the owner of all the data available therein .It very clear from the statement dated 17.07.2014 of Shri. Sushil Kumar Roy that Shri. Gautam Banerjee also works on the computer, but no statement was recorded from him. No statement was recorded from Shri Gaurav Jajodia, Director who was available in the factory on the date of search to confirm the ownership of the pen drive. When the Forensic Report dated 05.07.2021 revealed that some files were accessed on 17-07-2014, 28-11-2014 and 11-03-2015 but it did not show that on the said three dates any printouts were taken, the investigation should have ascertained the reasons for this discrepancy. When the Appellant raised the issue before the adjudicating authority, she should have given a finding on this point, as the data available in the pen drives is the basis for the entire demand. However, the adjudicating authority has chosen not to give any findings on this report. In view of the above, we hold that the Revenue has not established the ownership of the pen drives and consequently the existence of such computer printouts and the data contained therein. Accordingly, the answer to question No (i) above is negative.
(ii)Whether the computer printouts taken from the pen drives recovered during the search can be relied upon as evidence to demand duty?
(iii)Whether conditions mentioned in Section 36B has been followed in this case to rely upon the computer printouts as evidence?
12. We observe that the entire demand except for 01-07-2014 to 16- 07-2014, is based on the data resumed from the two pen drives 40 Excise Appeal No. 75790-75792 of 2022 recovered on the date of search on 17.07.2014. Computer printouts have been taken on three dates, namely, 17-07-2014, 28-11-2014 and 11-03-2015, from the pen drives. In their submissions, the Appellants stated that the computer printouts can be admitted in evidence only when the conditions mentioned in sub-section (2) of Section 36B and the other provisions contained in this section are satisfied. For ready reference the said Section 36B is reproduced below:
"36B. Admissibility of micro films, facsimile copies of documents and computer printouts 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 printout"), 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 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;41
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(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.
(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 commuters 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 tht 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 documents containing the statement and describing the manner in which it was produced.
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Excise Appeal No. 75790-75792 of 2022
(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 he supplied to a computer if it is supplied thereto in any appropriate form and whether it is no 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 of any appropriate equipment. Explanation.- for the purposes of this section.-
(a) "computer" means any device that receives, stores and processed 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.] "
12.1 A perusal of sub section (2) of Section 36B of the Act reproduce above, clearly mandates that the same can be admitted as evidence 43 Excise Appeal No. 75790-75792 of 2022 only when the computer in which the data was fed is owned by the person against whom the evidence is being used. We observe that the department did not identify any computer in which the information was allegedly fed by JBIL-III or JBIL-IV. The department relied upon the data resumed form two pen drives. The pen drive is a floating device and has no evidentiary value on its own and can be admitted as evidence only when it strictly fulfills the conditions specified in Section 36B of the Central Excise Act. We observe that the Hon'ble Apex Court in the case of Tukaram S. Dighole vs. Manikrao Shivaji Kokate reported in (2010) 4 Supreme Court Cases 329 held that electronic devices such as Pen Drive with fast development in the electronic techniques, are more susceptible to tampering and alterations by transposition, excision, etc which may be difficult to detect and therefore such evidence has to be received with caution.
The relevant Para of the judgment is reproduced below:
"20. The second issue, in our opinion, is or greater importance than the first one. It is well settled that tape-
records of speeches are "documents" as defined in Section 3 of the Evidence Act and stand on no different footing than photographs. See Ziyauddin Burhanuddin Bukhari Brijmohan Ramdass Mehra and Ors. MANU/SC/0277/1975 :
(1976) 2 SCC 17. There is also no doubt that the new techniques and devices are the order of the day. Audio and video tape technology has emerged as a powerful medium through which a first-hand information about an event can be gathered and in a given situation may prove to be a crucial piece of evidence. At the same time, with fast development in 44 Excise Appeal No. 75790-75792 of 2022 the electronic techniques, the tapes/ cassettes are more susceptible to tampering and alterations by transposition, excision, etc. which may be difficult to defect any, therefore, such evidence has to be received with caution, though it, would neither be feasible nor advisable to lay down any exhaustive set or rules by which the admissibility of such evidence may be judged but it needs to emphasized that to rule out the possibility of any kind of tampering with the tape, the standard of proof about its authenticity and accuracy has to be more stringent as compared to other documentary evidence."
12.2 We observe that pen drive is not a substantial evidence in the absence of corroborative evidence. The Appellants contended that corroborative evidences such as consumption of unaccounted materials, production of unaccounted finished goods, extra labour, extra consumption of electricity, clearance of goods from the factory, receipt of cash on account of alleged clandestine sales are required to substantiate clandestine clearance. We observe that all the above factors are conspicuous by its absence in the present proceedings. The investigation has not established the availability of any of the above mentioned corroborative evidences, to substantiate their allegations.
12.3 It has been held by the Hon'ble Gujarat High Court in the case of Principal Commissioner of CGST & Central Excise Vs. Shah Foils Ltd reported in 2020 (372) ELT 632 (Guj), that pen drive data is not substantial evidence in the absence of the aforementioned factors being present. The relevant part of the order is reproduced below:
45
Excise Appeal No. 75790-75792 of 2022 "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 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 46 Excise Appeal No. 75790-75792 of 2022 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 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 47 Excise Appeal No. 75790-75792 of 2022 cannot be made. In case of Davinder Sandhu Impex Ltd. - 2016 (337) E.L.T. 99 (Tri. - Del.), the tribunal has held that -
In this case during the course of investigation, the statement was 6. 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 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 :-
48
Excise Appeal No. 75790-75792 of 2022 We also find that the onus to prove clandestine clearances has "20. 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, 2002 (150) E.L.T. 290 (T), CCE v. Shingar Lamps Pvt. Ltd., 2010 (255) E.L.T. 221 (P & H), Ruby Chlorates (P) Ltd. v.
CCE, 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., 2014 (310) E.L.T. 299 (Guj.), Aum Aluminium Pvt. Ltd. v. CCE, 2014 (311) E.L.T. 354 (T), Sharma Chemicals v. CCE, 2001 (130) E.L.T. 271 (T), Resha Wires Pvt. Ltd. v. CCE, 2006 (202) E.L.T. 332 (T), Atlas Conductors v. CCE, 2008 (221) E.L.T. 231 (T), Vishwa Traders Pvt. Ltd. v. CCE, 2012 (278) E.L.T. 362 (T), CCE v. Vishwa Traders Pvt. Ltd. 2013 (287) E.L.T. 243 (Guj.), CCE Swati Polyester, 2015 (321) E.L.T. 423 (Guj.), Commissioner v. Swati Polyester - 2015 (321) E.L.T. A-217 (S.C.), Flevel International v. CCE, 2016 (332) E.L.T. 416 (Guj.), CCE v. Renny Steel Casting (P) Ltd., 2012 (283) E.L.T. 563 (T), CCE v. Akshay Roll Mills Pvt. Ltd., 2016 (342) E.L.T. 277 (T), Industrial Filter & Fabrics Pvt. Ltd. v. CCE, 2014 (307) E.L.T. 131 (T), CCE v. Birla NGK Insulators Pvt. Ltd., 2016 (337) E.L.T. 119 (T), CCE v. Ganesh Agro Steel Industries, 2012 (275) E.L.T. 470 (T), UOI v. MSS Foods Products Ltd., 2011 (264) E.L.T. 165 (P & H), CCE v. Sree Rajeswari Mills Ltd., 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, 2005 (179) E.L.T. 336 (T), Arya Fibres Pvt. Ltd. v. CCE, 2014 (311) E.L.T. 529 (T), TGL Poshak Corporation v. CCE, 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."
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Excise Appeal No. 75790-75792 of 2022
9.In view of the aforesaid findings of facts arrived at by the Tribunal, after considering the material placed before it, no question of 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."
12.4. Section 36B (4) mandates that any computer printout has to be signed by a person occupying a responsible official position in relation to the operation of the relevant device and a certificate is to be given to that effect. This is required to establish the ownership of the data recovered from the computer device. In the present case, we observe that neither the mandatory conditions of Section 36B(2) have been complied with nor there is any certificate on record as mandated under Section 36B(4). During the course of panchnama dated 17-07- 2014 drawn at the premises of JBIL-III, Shri Sushil Kumar Roy was found working on the computer located in the dispatch section and the device on which the data was being stored was the 8 GB pen drive. The other pen drive was also recovered from the pocket of Shri Sushil Kumar Roy. We observe that the adjudicating authority has wrongly presumed that the computer in which Shri Sushil Kumar Roy was working was the source of all data and the requirement of Section 36B (4) stand satisfied . A pen drive is a floating device. It cannot be assumed that the company's data was not being stored in the company's computer hard-drive but was being stored in a pen drive. In his statement dated 17.07.2014, Shri Sushil Kumar Roy categorically stated that Shri. Gautam Banerjee, the other Associate of the company also makes entry in the computer, but no statement 50 Excise Appeal No. 75790-75792 of 2022 was recorded from him. There is no statement from any Director either of JBIL-III or JBIL-IV accepting the authenticity of the said data. Even on the date of search Shri Gaurav Jajodia, Director of JBIL-III was present whose signature was obtained on the panchnama but his statement was never recorded.
12.5 We observe that JBIL-III and JBIL-IV have vehemently denied ownership of these two pen drives and the authenticity of the data therein. Only two statements of Shri Sushil Kumar Roy, Associate (Commercial) of JBIL-III and one statement of Shri Kanhaiya Agarwal, weighbridge in-charge of JBIL-III were recorded. The statement of Shri Sushil Kumar Roy regarding clandestine clearances in respect of entries in the computer printouts was not categorical. He had stated that in the computer printouts, when tax invoice number was not given some of them 'might be' without bill despatches because in some of such cases bills might have been issued from JBIL IV but entries were made in the pen drives only to keep account. In his statement, Shri. Sushil Kumar Roy only says that the entries without tax invoice number might be meant for despatches without bill. There was no categorical admission by him. He also says that inrespect of some of such cases bills might have been issued from JBIL IV, but entries were made in the pen drives only to keep account. This statement was given on the date of search om 17.07.2017. However, we observe that this averment of Shri Sushil Kumar Roy was not probed further.
12.6. In support of their contention that the computer printouts resumed from the pen drives is not an admissible evidence, unless 51 Excise Appeal No. 75790-75792 of 2022 the mandatoty procedure prescribed in Section 36 B is followed, the Appellants cited various decisions. In the case of Ambica Organics Vs Commissioner of C.Ex& Cus, Surat-I reported in 2016(334)ELT 97(tri-Ahmd), It has been held as under:
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 pre-drafted computer statements and it cannot be voluntary nature. After considering the submissions of the appellant, the Commissioner (Appeals) allowed the cross-examination 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. 52
Excise Appeal No. 75790-75792 of 2022
8. For the purpose of proper appreciation of the case, the relevant portion of the findings of the Commissioner (Appeals) is reproduced below : -
"4.5 Another contention of the appellant is that department has brought artificial evidence in the form of 30 statements from the buyer parties. The appellant stand is that the statements of the 30 parties are pre-drafted computer statements and involuntary. Four of the buyers (randomly selected) deposed before me. Three of them stated before me that they were made to sign a pre-drafted statement on a promise that no action shall be taken against them. One of them stated that his statement was voluntary. In the statements it has been recorded that these person stated that they received the textile auxiliary chemicals without invoice and against cash payments. Statement of these 30 persons (most of them Processors) are against their own interest as it makes them liable for penal action for purchasing dutiable goods on which duty was not paid. However, no show cause notice is given to these persons who have admitted to have received the impugned goods without bills. This fact gives credence to the allegations made by the appellant that the statements were not voluntary. It is apparent that the thirty statements have been recorded under a promise that no action shall be taken against them. Under these facts and circumstances, the evidentiary value of these thirty statements is considerably weakened. However, the solid evidence in the form of electronic records (USB Drive) and the computer printout from the same are sufficient to nail the appellant."
9. The Commissioner (Appeals) observed that the evidence in the form of electronic record (USB drive) the computer printout are strong evidence to establish the clandestine removal of the goods. It is seen that the said printout of the data in the USB drive contained the details of raw material and finished goods along with the names and addresses of the suppliers and the purchasers of the 53 Excise Appeal No. 75790-75792 of 2022 finished goods. It is seen that the statements were recorded to corroborate the contents of the printout and the Commissioner (Appeals) had held that the said statements has no strong evidentiary value. Shri Anil Gupta, Partner of the appellant firm had stated that he was not aware of the details contained in the USB drive.
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 sub-section (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;
(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;54
Excise Appeal No. 75790-75792 of 2022
(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 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 : -
55
Excise Appeal No. 75790-75792 of 2022 "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 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;56
Excise Appeal No. 75790-75792 of 2022
(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
(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 57 Excise Appeal No. 75790-75792 of 2022 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 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, the confiscation of the goods cannot be sustained. So, the imposition of penalties are not warranted 58 Excise Appeal No. 75790-75792 of 2022 12.7. In the case of Anvar P.V. Vs. P.K. Basheer reported at 2017 (352) ELT 416 (SC), The Hon'ble Supreme Court has held as under:
13. Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure prescribed under Section 65B. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the Section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub-section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under Section 65B(2). Following are the specified conditions under Section 65B(2) of the Evidence Act :
(i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer;
(ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity;
(iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and
(iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity.
14. Under Section 65B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied :
(a) There must be a certificate which identifies the electronic record containing the statement;
(b) The certificate must describe the manner in which the electronic record was produced;
(c) The certificate must furnish the particulars of the device involved in the production of that record;
(d) The certificate must deal with the applicable conditions mentioned under Section 65B(2) of the Evidence Act; and 59 Excise Appeal No. 75790-75792 of 2022
(e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device.
15. It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, Compact Disc (CD), Video Compact Disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice.
16. Only if the electronic record is duly produced in terms of Section 65B of the Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to Section 45A - opinion of examiner of electronic evidence.
17. The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65B of the Evidence Act are not complied with, as the law now stands in India.
12.8. Section 65B of Evidence Act is parimateria with Section 36B of the Central Excise Act, 1944. From the above observation of the Hon'ble Apex Court, we find that unless the conditions of Section 65B(2) of the Evidence Act, which is parimateria with Section 36B(4) of the Central Excise Act are complied with, no reliance can be placed on any computer printouts . Admittedly, the procedure set out in Section 36B has not been followed in this case. Thus, following the judgement of the Hon'ble Apex Court and the other decisions cited above,we hold that the data resumed from the computer print out alone cannot be relied upon to demand duty, without any corroborating evidence. Accordingly, the answer to Question Nos (ii) and (iii) above are in the negative.
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(iv). Whether the procedure as set out in Section 9D of the Central Excise Act, !944 was followed in this case or not? If not followed, then whether the statements recorded under Section 14 of the Central Excise Act, 1944 can be relied upon to demand duty ?
(v) Whether the statements not retracted within a reasonable time, but retracted at the time of cross examination, has any evidentiary value?
13. The next evidence relied upon by the adjudicating authority to confirm the demands in the impugned order are the statements recorded on the date of search and subsequently during the course of investigation. The statements recorded and the contents therein are given below in brief:
13.1 A statement of Shri Sushil Kumar Roy, Associate (Commercial) of JBIL-III was recorded in which he inter alia stated that data sheet retrieved from pen drives were the details of Billets sold 'on bills' as well as 'without bills'; that whenever tax invoice number is not given some of them 'might be' for without bill dispatches because in some of such cases, bills might have been issued from JBIL-IV but entries were made in the pen drives only to keep account. We find that this statement is not very categorical about the clandestine clearances.
13.2 A statement of Shri Kanhaiya Agarwal, weighbridge in-charge of JBIL-III was recorded on 17.07.2014, wherein he inter alia stated that he used to make weighment of goods at the weigh bridge of all incoming raw material as well as of outgoing finished goods. On being asked to explain about the pink weighment slips and slip pad 61 Excise Appeal No. 75790-75792 of 2022 as recovered from JBIL-III, he stated that weight of the material which has to be cleared without invoices was being mentioned in these pink weighment slips which was later handed over to Shri Sushil Kumar Roy. This statement was later retracted y him during cross examination before the adjudicating authority.
13.3. On 17.07.2014, a search was also conducted at the Head Office of Jai Balaji Group in Kolkata. The officers took out printouts of some of the e-mails from company's mail -ID handled by Shri Diptendu Samui, who was working as Accounts officer. Two pen drives were recovered from the possession of Shri Anil Kumar Agarwal. The officers also resumed two laptops under a Panchnama.
13.4. A statement of Shri Diptendu Samui, Accounts Officer, was recorded wherein he was shown certain messages retrieved from his mobile phone. In the present proceedings, there were only two messages showing purchase of scrap of only 15 MT and 10 MT, totally 25 M.T of scrap purchased in cash. Shri Diptendu Samui in his cross examination had categorically stated that both the above entries of purchase of 25 M.T. of scrap was accounted for in their books of records.
13.5 A statement of Shri Raghunath Jhunjhunwala, weighbridge in-
charge of JBIL IV was recorded, wherein he, inter alia, explained the procedure of weighment of raw materials and finished goods. He uses a pink slip for final weighment. He was shown pink slip Nos. 77, 79 both dated 18-08-2013 recovered from M/s. Baba Strips & Tubes Ltd on 3-04-2014 to which he stated that slip No. 77 & 78 was in his handwriting whereas slip No. 79 was in the handwriting of Rudra Tapas.
62
Excise Appeal No. 75790-75792 of 2022 13.6 A statement of Shri Partho Sarkar, Associate Manager Excise of JBIL-IV was recorded wherein he stated that central excise duty was paid only on the invoices prepared and kept in statutory records. If invoice was not prepared for any consignment, no central excise duty was paid by JBIL-IV. No further investigation was conducted to substantiate this evidence.
13.7 A statement of Shri Anup Kumar Aggarwal, former Vice- President(Commercial) of Group Company was recorded wherein he, inter alia, stated that while working with Jai Balaji Group he was looking after procurement of raw materials; that while directing the dispatch plan as per the direction of Shri Rajiv Jajodia, Director, he used to interact with weighbridge supervisors namely Shri Kanhaiya at Unit-III; that whether a particular consignment was to be dispatched with bill or without bill was decided by the Directors only; and that the payment for such dispatches was received in JBIL group in cheque or cash respectively.
13.8 None of the persons who have given the statements as mentioned above have retracted their statements initially. The Appellants asked for cross examination of the witnesses whose statements have been relied upon to demand duty. The cross examination conducted by the adjudicating authority and the replies given by the witnesses during cross examination are furnished below:
13.9 The gist of cross-examination of various witnesses is as under:-
13.9.1 Sushil Kumar Roy in respect of statement 17-07-2014 63 Excise Appeal No. 75790-75792 of 2022
(i) The pen drive in question was provided to him by Mr Gautam Banerjee who was an associate like him in the company.
(ii) All the entries, which were found in the pen drives, were not made by him.
(iii) These entries were made by other associates like Shri Gautam Banerjee, Shri Samiran Bose and Shri Krishanu Bhattacharya.
(iv) The data which was fed by him in the pen drives was fed on different computers.
(v) He was pressurized to make these statements.
(vi) He was told by the officers that if he did not make such statements, he would be arrested, but there would be no inconvenience if he stated as mentioned in the statements.
(vii) That despite the entries in the pen drives about clearance of any consignments there was possibility of like order getting cancelled, the vehicle developing breakdown etc.
(viii) Where some of the entries of duty payment had been left blank, he could not say with certainty that no duty was paid in cases of such goods as there was a possibility that duty had been paid on these goods later.
(ix) When he was confronted with 3 pink weighment slips no 65, 66 & 67 all dated 16-07-2014 and asked whether he had made entries in pen drives in respect of these weighment slips, to which he answered that the relevant entries were made by Shri Gautam Banerjee who was another Data Entry Operator.
(x) That inculpatory portions of his statements were recorded by the officers under pressure.
(xi) He had no idea whether the goods were cleared to Shri Girish Tikmani without payment of duty.
64
Excise Appeal No. 75790-75792 of 2022 13.9.2 Kanhaiya Aggarwal in respect of statement 17-07- 2014 The pink slips were prepared in all cases where computer slips was generated.
(i) The question of clearances of goods without payment of duty on the strength of pink slips did not arise as his role was limited to weighment of the goods and issuance of weighment slips.
(ii) He categorically stated that he was asked to say that the goods were cleared without payment of duty.
(iii) In some cases the goods were not cleared after
weighment due to various reasons such as
breakdown of the vehicle.
(iv) Not responsible for the dispatch of the goods.
13.9.3. Raghu Nath Jhunjhunwala in respect of statement dated 17-11-2014
(i)That there were occasions when the vehicle broke down and when some orders were cancelled the goods did not leave the factory despite issuance of pink slips.
(i) Pink slip number 77 which was in his handwriting he was subsequently informed by Shri Partho Sarkar that the said goods were rejected.
(ii) Denied any practice that he used to write year 2003 instead of 2013.
(iii) The purport of his answer to question No.9 and stated that he had made the said averment on the basis of some documents of M/s. Baba Strips and he was forced to write accordingly.
13.9.4 Partho Sarkar in respect of statement17-11-2014 65 Excise Appeal No. 75790-75792 of 2022
(i) He was never asked by anyone to prepare the invoice without the pink coloured weighment slips. He also denied that he was asked by anyone not to record any production in the production records. He also denied having been asked by anyone not to record any raw material received in the factory.
(ii) That there were instances where pink slips were issued but no invoice was issued as due to break down of vehicle or order having been cancelled.
13.9.5 Shri Diptendu Samul in respect of statement dated 17- 07-2014 Wherever some message of payment on cash was cited in the Show Cause Notice it was clarified by Shri Diptendu Samul that the said purchase was accounted for in their records.
13.9.6 Anup Kumar Agarwal in respect of statement 11-12-
2014
(i) He was responsible only for procurements of raw
materials. Hence he was not in a position to
comment about dispatches.
(ii) Denied having dealt with the sale of finished goods
by JBIL or any dispatches of the goods.
(iii) Stated that he had left JBIL at the time recording of his of the statement. He was advised by the DGCEI officials to tender the statement as they desire so that he was free from further investigation.
(iv) Stated that his statement was dictated by DGCEI officials.
13.9.7 Girish Tikmani in respect of statement dated 29-02- 2015 66 Excise Appeal No. 75790-75792 of 2022 He used to receive Pig Iron from JBIL III on the basis of invoices and weighment slips and was making payments to them through RTGS and cheques.
(i) That he was never confronted with any computer printouts by the investigating officers while recording his statement dated 20-2-2015.
(ii) Denied having received any goods from JBIL III without any bill.
(iii) When confronted with the portion of the statement wherein he had stated having received the goods without bills from JBIL III he stated that he was surrounded by many officers and he was under
great stress when he wrote his statement.
(iv) Informed that he had retracted from his statement on the very next day and brought on record notarized affidavit dated 21-2-2015.
13.10. From the above, we observe that during the course of cross examination, most of the persons who have given the statements retracted their statements. In the impugned order, the adjudicating authority has held that if the statements were recorded under threats and duress, it is not understood as to what prevented them from retracting their statements within a reasonable period of time. She further held that all the statements of the concerned persons were supported by documentary evidences. Accordingly, she justified in demanding duty by relying upon these statements. However, a perusal of Section 9D of the Central Excise Act, 1944 clearly establishes that unless a person who has made the statement is examined as a witness before the Adjudicating Authority, no reliance can be placed on any statement recorded under section 14 of the Central Excise Act. Any statement recorded under Section 14 of the 67 Excise Appeal No. 75790-75792 of 2022 Central Excise Act could be admitted in evidence only after the process of examination and cross examination is completed under Section 9D. For undertaking this exercise, it is not necessary that a person should have retracted from his statement. If the argument of the Adjudicating Authority is accepted, then the provisions of Section 9D would become irrelevant. This cannot be the intention of the legislature. In this case, the adjudicating authority has allowed cross examination on selective basis. But, she has not taken into account the retractions made by them during cross examination. 13.11. The Appellants stated that the procedure set out under Section 9D is a mandatory procedure and without following this procedure no reliance can be placed on any statement recorded under Section 14 of the Central Excise Act, 1944. We agree with the contention of the Appellants. In the case of G-Tech Industries Vs Union Of India reported in 2016(339) ELT 209 (P&H), the Hon'ble Punjab and Haryana High Court has given an elaborate findings regarding the procedure to be followed under Section 9D. The relevant Part of the judgement is reproduced below:
3. The petitioner seeks, by means of the present writ petition, to challenge Order-in-Original No. V(29)15/ce/Commr.Adj/Chd-
II/44/2015, dated 4-4-2016 issued by respondent No. 2 whereby respondent No. 2 has confirmed differential Central Excise Duty (hereinafter referred to "as duty") demand of ` 7,08,38,008/- with interest and equivalent penalty. It is contended that the impugned order-in-original has been passed in flagrant violation of Section 9D of the Central Excise Act, 1944 (hereinafter referred to as "the Act") by relying upon the statements recorded under Section 14 of the Act without first admitting them in evidence in accordance with the procedure prescribed in this regard by Section 9D(1)(b) of the Act. 68
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4. In view of the fact that the case of the petitioner is essentially premised on Section 9D of the Central Excise Act, 1944, it would be appropriate to reproduce the said provision, in extenso, thus :
"9D. Relevancy of statements under certain circumstances. -
(1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, -
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The provision of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court."
5. A plain reading of sub-section (1) of Section 9D of the Act makes it clear that clauses (a) and (b) of the said sub-section set out the circumstances in which a statement, made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of inquiry or proceeding under the Act, shall be relevant, for the purpose of proving the truth of the facts contained therein.
6. Section 9D of the Act came in from detailed consideration and examination, by the Delhi High Court, in J.&K. Cigarettes Ltd. v. CCE, 2009 (242) E.L.T. 189 (Del.) = 2011 (22) S.T.R. 225 (Del.). Para 12 of the said decision clearly holds that by virtue of sub-section (2) of Section 9D, the provisions of sub-section (1) thereof would extend to adjudication proceedings as well.
7. There can, therefore, be no doubt about the legal position that the procedure prescribed in sub-section (1) of Section 9D is required 69 Excise Appeal No. 75790-75792 of 2022 to be scrupulously followed, as much in adjudication proceedings as in criminal proceedings relating to prosecution.
8. As already noticed herein above, sub-section (1) of Section 9D sets out the circumstances in which a statement, made and signed before a Gazetted Central Excise Officer, shall be relevant for the purpose of proving the truth of the facts contained therein. If these circumstances are absent, the statement, which has been made during inquiry/investigation, before a Gazetted Central Excise Officer, cannot be treated as relevant for the purpose of proving the facts contained therein. In other words, in the absence of the circumstances specified in Section 9D(1), the truth of the facts contained in any statement, recorded before a Gazetted Central Excise Officer, has to be proved by evidence other than the statement itself. The evidentiary value of the statement, insofar as proving the truth of the contents thereof is concerned, is, therefore, completely lost, unless and until the case falls within the parameters of Section 9D(1).
9. The consequence would be that, in the absence of the circumstances specified in Section 9D(1), if the adjudicating authority relies on the statement, recorded during investigation in Central Excise, as evidence of the truth of the facts contained in the said statement, it has to be held that the adjudicating authority has relied on irrelevant material. Such reliance would, therefore, be vitiated in law and on facts.
10. Once the ambit of Section 9D(1) is thus recognized and understood, one has to turn to the circumstances referred to in the said sub-section, which are contained in clauses (a) and (b) thereof.
11. Clause (a) of Section 9D(1) refers to the following circumstances :
(i) when the person who made the statement is dead,
(ii) when the person who made the statement cannot be found,
(iii) when the person who made the statement is incapable of giving evidence,
(iv) when the person who made the statement is kept out of the way by the adverse party, and 70 Excise Appeal No. 75790-75792 of 2022
(v) when the presence of the person who made the statement cannot be obtained without unreasonable delay or expense.
12. Once discretion, to be judicially exercised is, thus conferred, by Section 9D, on the adjudicating authority, it is self-evident inference that the decision flowing from the exercise of such discretion, i.e., the order which would be passed, by the adjudicating authority under Section 9D, if he chooses to invoke clause (a) of sub-section (1) thereof, would be pregnable to challenge. While the judgment of the Delhi High Court in J&K Cigarettes Ltd. (supra) holds that the said challenge could be ventilated in appeal, the petitioner has also invited attention to an unreported short order of the Supreme Court in UOI and Another v. GTC India and Others in SLP (C) No. 21831/1994, dated 3-1-1995 [since reported in 1995 (75) E.L.T. A177 (S.C.)], wherein it was held that the order passed by the adjudicating authority under Section 9D of the Act could be challenged in writ proceedings as well. Therefore, it is clear that the adjudicating authority cannot invoke Section 9D(1)(a) of the Act without passing a reasoned and speaking order in that regard, which is amenable to challenge by the assessee, if aggrieved thereby.
13. If none of the circumstances contemplated by clause (a) of Section 9D(1) exists, clause (b) of Section 9D(1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D(1), viz.
(i) the person who made the statement has to first be examined as a witness in the case before the adjudicating authority, and
(ii) the adjudicating authority has, thereafter, to form the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
14. There is no justification for jettisoning this procedure, statutorily prescribed by plenary parliamentary legislation for admitting, into evidence, a statement recorded before the Gazetted Central Excise officer, which does not suffer from the handicaps contemplated by clause (a) of Section 9D(1) of the Act. The use of the word "shall" in Section 9D(1), makes it clear that, the provisions contemplated in the sub-section are mandatory. Indeed, as they 71 Excise Appeal No. 75790-75792 of 2022 pertain to conferment of admissibility to oral evidence they would, even otherwise, have to be recorded as mandatory.
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 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). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice.
17. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede cross-examination, and cross-examination has to precede re-examination.
18. It is only, therefore,-
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(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 cross- examination, 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.
20. Reliance may also usefully be placed on Para 16 of the judgment of the Allahabad High Court in C.C.E. v. Parmarth Iron Pvt Ltd., 2010 (260) E.L.T. 514 (All.), which, too, unequivocally expound the law thus :
"If the Revenue choose (sic chose?) not to examine any witnesses in adjudication, their statements cannot be considered as evidence."
21. That adjudicating authorities are bound by the general principles of evidence, stands affirmed in the judgment of the Supreme Court in C.C. v. Bussa Overseas Properties Ltd., 2007 (216) E.L.T. 659 (S.C.), which upheld the decision of the Tribunal in Bussa Overseas Properties Ltd. v. C.C., 2001 (137) E.L.T. 637 (T).
22. It is clear, from a reading of the Order-in-Original dated 4-4- 2016 supra, that Respondents No. 2 has, in the said Orders-in- Original, placed extensive reliance on the statements, recorded during investigation under Section 14 of the Act. He has not invoked clause (a) of sub-section (1) of Section 9D of the Act, by holding that attendance of the makers of the said statements could not be obtained for any of the reasons contemplated by the said clause. That being so, it was not open to Respondent No. 2 to rely on the said statements, without following the mandatory procedure contemplated by clause (b) of the said sub-section. The Orders-in- 73
Excise Appeal No. 75790-75792 of 2022 Original, dated 4-4-2016, having been passed in blatant violation of the mandatory procedure prescribed by Section 9D of the Act, it has to be held that said Orders-in-Original stand vitiated thereby.
23. The said Order-in-Original, dated 4-4-2016, passed by Respondent No. 2 is, therefore, clearly liable to be set aside.
24. In view of the above facts and circumstances, the impugned Order-in-Original dated 4-4-2016 passed by respondent No. 2 stands set aside. Resultantly, the show cause notice issued to the petitioner is remanded to respondent No. 2 for adjudication de novo by following the procedure contemplated by Section 9D of the Act and the law laid down by various judicial Authorities in this regard including the principles of natural justice in the following manner :-
(i) In the event that the Revenue intends to rely on any of the statements, recorded under Section 14 of the Act and referred to in the show cause notices issued to Ambika and Jay Ambey, it would be incumbent on the Revenue to apply to Respondent No. 2 to summon the makers of the said statements, so that the Revenue would examine them in chief before the adjudicating authority, i.e., before Respondent No. 2.
(ii) A copy of the said record of examination-in-chief, by the Revenue, of the makers of any of the statements on which the Revenue chooses to rely, would have to be made available to the assessee, i.e., to Ambika and Jay Ambey in this case.
(iii) Statements recorded during investigation, under Section 14 of the Act, whose makers are not examination-in-chief before the adjudicating authority, i.e., before Respondent No. 2, would have to be eschewed from evidence, and it would not be permissible for Respondent No. 2 to rely on the said evidence while adjudicating the matter. Neither, needless to say, would be open to the Revenue to rely on the said statements to support the case sought to be made out in the show cause notice.
(iv) Once examination-in-chief, of the makers of the statements, on whom the Revenue seeks to rely in adjudication proceedings, takes place, and a copy thereof is made available to the assessee, it would be open to the assessee to seek permission to cross-examine the persons who have made the said statements, should it choose to 74 Excise Appeal No. 75790-75792 of 2022 do so. In case any such request is made by the assessee, it would be incumbent on the adjudicating authority, i.e., on Respondent No. 2 to allow the said request, as it is trite and well-settled position in law that statements recorded behind the back of an assessee cannot be relied upon, in adjudication proceedings, without allowing the assessee an opportunity to test the said evidence by cross-examining the makers of the said statements. If at all authority is required for this proposition, reference may be made to the decisions of the Hon'ble Supreme Court in Arya Abhushan Bhandar v. U.O.I., 2002 (143) E.L.T. 25 (S.C.) and Swadeshi Polytex v. Collector, 2000 (122) E.L.T. 641 (S.C.).
25. The writ petition is allowed in the aforesaid terms. 13.12. Once it duly came on record that various statements recorded from the witnesses were not of voluntary nature but were recorded after putting undue pressure upon the witnesses the same could not be admitted in evidence by the Adjudicating Authority. The same clearly lost its evidentiary value. Once these statements are excluded from evidence no reliance could be placed on the computer printouts and other evidences. The law laid down in the Delhi High Court, in the case of C.C.E Vs. Vishnu and Co. Ltd reported in 2016 (332) ELT 793 (Del), is reproduced below:
41. What the above submission overlooks is the 'reliability' of such statements. Once it is shown that the maker of such statement has in fact resiled from it, even if it is after a period of time, then it is no longer safe to rely upon it as a substantive piece of evidence. The question is not so much as to admissibility of such statement as much as it is about its 'reliability'. It is the latter requirement that warrants a judicial authority to seek, as a rule of prudence, some corroboration of such retracted statement by some other reliable independent material. This is the approach adopted by the CESTAT and the Court finds it to be in consonance with the settled legal position in this regard.75
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42. The contention that it is the responsibility of the noticees to produce the witnesses for cross-examination is a strange one considering that they are witnesses of the Department and that their statements are being relied upon by the Department in support of the SCNs. Since it is relying on such statements, it is the responsibility of the Department to ensure their presence for cross-examination. As already mentioned, whenever such witnesses (i.e. six of them) were produced for cross-examination they resiled from their earlier statements.
43. It is not a matter of mere coincidence that none of the witnesses who were cross-examined stood by their earlier statements. It is one thing to overlook this feature on the premise that all of them were under the pressure and control of the noticees. The other approach is to view this with some caution and ask what might be the case if the remaining witnesses were also produced for cross-examination? Importantly, what would be the prejudice caused to the noticees, in such circumstances, by their non-production for cross-examination? Thus a doubt is created in favour of the noticees when such witnesses do not turn up for cross-examination. It is the latter approach that has weighed with the CESTAT. That, in view of this Court, was a possible approach and does not render its order perverse on that score.
13.13. In the case of Hi Tech Abrasives Ltd Vs Commissioner of C.Ex and Cus, Raipur, reported in 2018 (362) ELT 961 (Chattisharh), the Hon'ble High Court has held that unless the procedure laid down in Section 9D of the Central Excise Act, 1944 is followed in letter and spirit, no reliance can be placed on any statement recorded under Section 14 of the Central Excise Act, 1944. The relevant part of the judgement is reproduced below:
9. Findings on Substantial Questions of Law (i) & (ii) :
We shall decide the first two substantial questions of law as they are overlapping. The submission of counsel for the appellant has been that firstly, the Director's statement was not admissible and secondly it cannot be treated as admission because in reply to Show Cause Notice, the said statement was stated to have been obtained under duress. We shall first examine the legal position with regard to the admissibility of the statement of Director which admittedly was taken during search operations by the investigation officers.76
Excise Appeal No. 75790-75792 of 2022 9.1At the outset, it needs to be clarified that during the course of argument, Learned Counsel for the parties agreed that second substantial question of law is with regard to legality of procedure adopted by the adjudicating authority and not the Tribunal as such because the Tribunal has only exercised appellate jurisdiction. This is quite obvious from orders passed by the Tribunal, the appellate authority and pleadings/ground in the appeal. There is no dispute that the adjudicating authority did not record the statement of the Director Mr. Narayan Prasad Tekriwal and the basis of the finding recorded by the adjudicating authority as well as Customs, Excise and Service Tax Appellate Tribunal, has been the statement of the Director as recorded by the investigation officer during investigation.
Section 9D of the Central Excise Act of 1944 reads as under :
Section 9D - Relevancy of statements under certain circumstances. A statement made and -- (1) signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, -
When the person who made the statement is (a) dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or when the person who made the statement is (b) examined as a witness in the case before the Court and the Court is of the opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice.
The provisions of sub-section (1) shall, so (2) far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before the Court.
On scanning the anatomy of the said provision, we find that the statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of inquiry or proceeding under the Act shall be relevant for the purposes of proving truth of the facts which it contains only when it fulfills the conditions prescribed in clause (a) or as the case may be, under clause (b).77
Excise Appeal No. 75790-75792 of 2022 While clause (a) deals with certain contingencies enumerated therein, clause (b) provides that statement made and signed would be relevant for the purposes of proving the truth of the facts contained in that statement only when the person whom made the statement is examined as witness before the Court. (her, the adjudicating authority).
9.2At this juncture, we need to notice the provision contained in Section 9D which provides that sub-section (1) shall, as far as may be, applied in relation to the proceedings under the Act, other than the proceeding before the court, as they apply in relation to proceeding before the Court. This provision when read in juxtaposition, the small clauses (a) and (b) under sub-section (1), requirement of law of recording of examination as witness would be in relation to the proceedings before the adjudicating authority.
9.3A conjoint reading of the provisions therefore reveals that a statement made and signed by a person before the Investigation Officer during the course of any inquiry or proceedings under the Act shall be relevant for the purposes of proving the truth of the facts which it contains in case other than those covered in clause (a), only when the person who made the statement is examined as witness in the case before the court (in the present case, Adjudicating Authority) and the court (Adjudicating Authority) forms an opinion that having regard to the circumstances of the case, the statement should be admitted in the evidence, in the interest of justice.
9.4The legislative scheme, therefore, is to ensure that the statement of any person which has been recorded during search and seizure operations would become relevant only when such person is examined by the adjudicating authority followed by the opinion of the adjudicating authority then the statement should be admitted. The said provision in the statute book seems to have been made to serve the statutory purpose of ensuring that the assessee are not subjected to demand, penalty interest on the basis of certain admissions recorded during investigation which may have been obtained under the police power of the Investigating authorities by coercion or undue influence.
9.5Undoubtedly, the proceedings are quasi criminal in nature because it results in imposition of not only of duty but also of penalty and in many cases, it may also lead to prosecution. The 78 Excise Appeal No. 75790-75792 of 2022 provisions contained in Section 9D, therefore, has to be construed strictly and held as mandatory and not mere directory. Therefore, unless the substantive provisions contained in Section 9D are complied with, the statement recorded during search and seizure operation by the Investigation Officers cannot be treated to be relevant piece of evidence on which a finding could be based by the adjudicating authority. A rational, logical and fair interpretation of procedure clearly spells out that before the statement is treated relevant and admissible under the law, the person is not only required to be present in the proceedings before the adjudicating authority but the adjudicating authority is obliged under the law to examine him and form an opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. Therefore, we would say that even mere recording of statement is not enough but it has to be fully conscious application of mind by the adjudicating authority that the statement is required to be admitted in the interest of justice. The rigor of this provision, therefore, could not be done away with by the adjudicating authority, if at all, it was inclined to take into consideration the statement recorded earlier during investigation by the Investigation officers. Indeed, without examination of the person as required under Section 9D and opinion formed as mandated under the law, the statement recorded by the Investigation Officer would not constitute the relevant and admissible evidence/material at all and has to be ignored. We have no hesitation to hold that the adjudicating officer as well as Customs, Excise and Service Tax Appellate Tribunal committed illegality in placing reliance upon the statement of Director Narayan Prasad Tekriwal which was recorded during investigation when his examination before the adjudicating authority in the proceedings instituted upon show cause notice was not recorded nor formation of an opinion that it requires to be admitted in the interest of justice. In taking this view, we find support from the decision in the case of Ambica International v. UOI rendered by the High Court of Punjab and Haryana.
Reliance has been placed by the Counsel for the Revenue on the decision in the matter of Commissioner of Central Excise v. Kalvert Foods India Private Limited (Laws (SC) 2011 838) = 2011 (270) E.L.T. 643 (S.C.). That decision turned on its own facts. In para 19 of the judgment, it was concluded as below :
79
Excise Appeal No. 75790-75792 of 2022 We are of the considered opinion that it "19. is established from the record that the aforesaid statements were given by the concerned persons out of their own volition and there is no allegation of threat, force, coercion, duress or pressure being utilized by the officers to extract the statements which corroborated each other. Besides the Managing director of the Company of his own volition deposition the amount of Rs. 11 lakhs towards excise duty and therefore in the facts and circumstances of the present case, the aforesaid statement of the Counsel for the Respondents cannot be accepted. This fact clearly proves the conclusion that the statements of the concerned persons were of their volition and not outcome of any duress."
Accordingly, on the first and second question of law, we hold that the statement of the Director could not be treated as relevant piece of evidence nor could be relied upon without compliance of Section 9D of the Act. The two questions of law accordingly, stand answered in that mannert statements recorded without following the procedure as set out in Section 9D of the Central Excise Act, 1944 has no evidentiary value :-
13.14. From the above discussion and the decisions cited above, we observe that the statements recorded cannot be relied upon to demand duty, unless the procedure set out in Section 9D are followed. None of the statements recorded in this case conclusively establish any clandestine clearance. During cross examination all of them retracted their earlier statements. Hence, the evidentiary value of the statements have to be examined in the light of the decisions cited above.
13.15. We observe that on the date of search statements were recorded only from Shri. Sushil Kumar Roy and Shri. Kanhaiya Agarwal. There was no statement recorded from any Director either of JBIL-III or JBIL-IV accepting the authenticity of the pen drives and the data contained therein. The statement of Shri Sushil Kumar Roy 80 Excise Appeal No. 75790-75792 of 2022 was not categorical regarding clandestine clearances with respect to the entries in the computer printouts . He had stated that in the computer printout, if tax invoice number was not given some of them 'might be' without bill despatches because in some of such cases, bills might have been issued from JBIL IV but entries were made in the pen drives only to keep account. However, this averment of Shri. Sushil Kumar Roy was not probed further. They have all retracted their statements during the course of cross examination. The adjudicating authority has brushed aside the retractions as an afterthought. In view of the decisions cited above, we agree with the contention of the Appellants that the retracted statements have no evidentiary value, without any corroborating evidence. The corroborating evidence relied upon by the Revenue in this case is the data recovered from the pen drives. As discussed in the Paras supra, the data available in the pen drives cannot be relied upon as they have not satisfied the conditions set out in Section 36B of the Central Excise Act. Thus, we observe that there is no corroborative evidence brought in by the Revenue to substantiate the retracted statements. In view of the discussion above and by following the decisions cited above, we hold that the demands in the impugned order cannot be confirmed on the basis of the statements recorded as they have not fulfilled the procedure set out in Section 9D of the Central Excise Act, 1944. Thus, the answer to Question No
(iv) and (v) are in the negative.81
Excise Appeal No. 75790-75792 of 2022
(vi) Whether the allegations of clandestine clearance of finished goods JBIL III sustainable without any corresponding investigation to corroborate the claim, at the receiver's end? 14.1 Duty has been demanded in the impugned order on account of clandestine clearance on many finished goods manufactured by them. The adjudicating authority has relied upon evidences such as the data recovered from the two pen drives and the pink slips recovered on the date of search to confirm the demands in the impugned order. We, now analyze the various evidences relied upon by the adjudicating authority to confirm the demands in the impugned order. 14.2 On the date of search i.e. on 17-07-2014, 4 pink slips No. 65, 66, 68 and 71 were seized. The said pink slips allegedly showed clearances of four consignments of Pig Iron on which no central excise duty was paid according to the computer printout, the details of which are furnished as under:-
Sl. No. of Date Lorry Party Gross Tare Net Wt. Quality the Pink No. Wt. Wt.
Slip
65 16.07.2014 WB-37B- Girish 20.210 6.840 13.370 Pig
7843 Tikmani
66 16.07.2014 WB-19A- Girish 19.890 7.090 12.800 Pig
0954 Tikmani
68 16.07.2014 WB-61- Manoj 33.930 9.410 24.520 Pig
8152 Matal
71 16.07.2014 WB-39- Girish 20.980 7.020 13.960 Pig
5232 Tikmani
TOTAL QUANTITY 64.65
MT
14.3 In the impugned order, the Adjudicating Authority has held that against these pink slips no invoices were issued as has been clearly 82 Excise Appeal No. 75790-75792 of 2022 mentioned in the data retrieved from the pen drives 'No invoice issued'. The case of JBIL III is that there were cases where even after preparation of pink slips the goods were not transported due to several reasons such as break down of the vehicles, cancellation of orders etc,. We observe that this fact was explained by Shri Sushil Kumar Roy and Sh. Kanhaiya Agarwal in their respective cross examination. They stated that pink slips were prepared for incoming raw materials also. However, the adjudicating authority has not accepted this submission that pink slips were made in respect of incoming raw materials and outgoing finished goods on the ground that no such pink slips were found on the date of search. We find that there is no evidence available on record to prove that pink slips were prepared only when the goods were to be cleared without invoices.
14.4. The Appellants stated that the department has not brought in any evidence to corroborate the allegation that the said goods figuring in the aforementioned four pink slips were clandestinely cleared on 16-07-2014. This is evident from the fact that no statements were recorded either Sh. Girish Tikmani or M/s. Manoj Metal on the issue of alleged clandestine clearance of the four consignments of Pig Iron on 16.07.2014. The premises of M/s. Manoj Metal was never searched. The premises of the other buyer, namely, Shri Girish Tikmani, who was the Director of M/s. Laxmi NarainMetalic Pvt Ltd was searched only after more than seven months later, on 22-02-2015. He was never confronted with the said three pink slips.
In fact, he was not confronted even with the computer printouts. Hence, we observe that the conclusion drawn by the adjudicating 83 Excise Appeal No. 75790-75792 of 2022 authority that the pink slips were only prepared when the goods were cleared without invoices, is not substantiated by any evidence. 14.5 Another evidence which has been relied upon as corroborating evidence by the Revenue to demand duty in the impugned order is certain private records, such as report no 14 dated 16.07.2014 and document No. 58. The adjudicating authority has relied upon report No. 14 dated 16-06-2014 containing Dispatch detail--1 and dispatch detail-2 and has held that the figures mentioned in Despatch-2 pertained to the clandestine clearance of 16-07-2014 i.e. a day prior to the search whereas the details given in dispatch-1 pertained to the clearances of the same day which were cleared on payment of duty. 14.6. Reliance has also been placed on a written sheet which contained the details of Pig Iron removed with "bill" and by "others" for the month of April, 2014 & May, 2014. Based on the entries of the above mentioned hand written sheet, a chart has been prepared by the investigation, which is as under:-
28.06.2014 Month Item Bill Others Total April Pig 9970.97 1707.61 11678.58 May Pig 6603.62 1053.11 7656.73 From the above chart, the adjudicating authority concluded that during the month of April 2014 and May 2014, 9970.97 MT and 6603.62 MT of Pig Iron respectively, had been sold with bills, for which proper Central Excise invoices has been issued. The case of the department is that in the month of April, 2014, 1707.61 MT of Pig Iron and in the month of May, 2014, 1053.11 MT of Pig Iron was found to be dispatched without invoices as reflected in page No. 58, 84 Excise Appeal No. 75790-75792 of 2022 supra. These figures were also matching with the computer printouts and the adjudicating Authority also concurred with this in her findings in the impugned order.
14.7. We observe that no inquiries were conducted with regard to the alleged clandestine removal on the basis of the aforementioned two private records. No statement of any official of the JBIL III was ever recorded as to what is the purport of these documents. It has not been proved by any acceptable evidence that Report no. 14 was prepared by the production staff. No statement from any employee of production department was recorded. Even the scribe of this report has not been identified. Though it has been stated that on 16-07-
2014 four consignments of Pig Iron were cleared in clandestine manner, three to Shri Girish Tikmani and one to M/s. Manoj Metal, no follow up action was taken. The consignments mentioned in the pink slips were said to have been cleared only day earlier. If the clandestine clearance has actually happened, this would have been easily verified with the customers whose names were available in the pink slips. M/s. Manoj Metal was never summoned and no enquiries were conducted from the transporters. A statement of Shri Girish Tikani was recorded on 22.02.2015, but he was never confronted with the private records or the computer printouts or the pink weighment slips or Report-14 or the contents of page -58. The Pig Iron is a raw material but no inquiry was conducted as to who consumed the said goods allegedly cleared without payment of Central Excise duty. If JBIL III would have clandestinely cleared 64.65 MT of Pig Iron on 16-07-2014 there was bound to be shortage 85 Excise Appeal No. 75790-75792 of 2022 of finished goods and raw materials on 17-07-2014 i.e. on the date of search. But there is no such evidence on record. Similar is the position with regard to document No. 58. The scribe of the document has not been identified and no inquiry was conducted as to what was the purport of the said document. Thus, we hold that the said documents do not substantiate clearance of any goods clandestinely. 14.8. In the impugned order the adjudicating authority has relied upon some papers seized at S.No. 5 of the Panchnama dated 17.07.2014, which contained page 1 to 59. The Appellants stated that these page numbers have been marked by the DGCEI officials themselves. JBIL-III has no means to know as to whether the documents being relied upon were actually part of the said miscellaneous file. They contended that none of their employees of JBIL III was confronted with the documents on 17-07-2014 or thereafter. There are no signatures at page No. 54. There are signatures on page No. 58 but one cannot make it whose signatures are there and no date is mentioned under the said signatures. It cannot be made out whether the said signatures were already there or obtained during investigation. Accordingly, they contended that no reliance can be placed on the private records purportedly seized on 17.07.2014 from JBIL-III. We observe that the Revenue has not conducted any investigation with any of the officers or staff of JBIL III, to identify the scribe and the source of the data. In the absence of any proof about the authenticity of the data, duty cannot be demanded based on this unverified data.
86
Excise Appeal No. 75790-75792 of 2022 14.9. In the impugned order, the adjudicating authority has given the findings that JBIL III have clandestinely cleared finished goods of high quantity every day prior to 17-07-2014. The Appellants contended that had there been such clandestine clearance for such a long period, there bound to have been shortage of finished goods as well as raw materials during the course of search on 17-07-2014, but no such evidence has been brought on record to that effect. According to the Adjudicating Authority even on 16-07-2014 four consignments weighing 64.65 MT of Pig Iron were cleared without invoice. Similarly two consignments weighing 26.53 of HPTM Cutting Pipes were cleared to JBIL IV. The officers of DGCEI had also visited simultaneously JBIL IV on 17-07-2014 and had drawn panchnama, but no discrepancy was found in the raw material or finished goods. If the JBIL III would have cleared 26.53 MT of HPTM Cutting Pipes, the same would have been available next day in JBIL IV, but no effort was made in this regard by the investigation to seize the said quantity of HPTM Cutting Pipes. Similarly, JBIL III allegedly cleared Rubber weighing 73.42 MT on 15-07-2014 to JBIL IV. No enquiries were conducted by DGCEI in this regard either on 17-07-2014 or thereafter. Similar is the case with earlier dates. On 15-07-2014 also, JBIL III have cleared 16 consignments of Pig Iron weighing 251.33 MT to Girish Tikmany, Pawan Bansal, Deepak Dalmia,Manoj Metal Udyog and Saran Alloys Pvt Ltd and two consignments of Runner weighing 73.42 MT to JBIL IV but no investigation at all were made to that effect from the alleged recipient of Pig Iron from JBIL IV where simultaneous search was conducted on 17-07-2014. 87
Excise Appeal No. 75790-75792 of 2022 14.10. If we take into account the alleged clandestine clearance for the last sixteen days prior to the search of the unit of JBIL III, 129 consignments were allegedly cleared clandestinely without payment of Central Excise duty during the said short period of time, out of the total of 743 consignments which were cleared during this period from 01.07.2014 to 16.07.2014. Even prior to the said period, they were allegedly clearing the goods without payment of Central excise duty during the last more than four years i.e. w.e.f. 1-4-2010 on regular basis. If such allegations are accepted to be true, it was the bounden obligation on the part of the investigating officers to have intercepted some consignments which were allegedly being cleared without payment of central excise duty. . We find merit in the contention of the Appellants. It must be appreciated that clandestine removal cannot be achieved in a thin air. If a party actually indulges in clandestine removal of finished goods on regular basis, the same can be done only by transporting the same from one place to another place. It is an accepted position that the iron and steel products are of very bulky nature. A perusal of various Annexures to the show cause notice where the duty has been demanded shows that all sorts of vehicles were allegedly used to effect clandestine removal as the net weight of such consignments vary from 9 MT to 42 MT. Various types of vehicles ranging from 6 tyres to 14 tyre vehicles are used to transport such materials. A perusal of computer printouts and Annexure 1 to 3 to show cause notice reveal that against all the consignments allegedly cleared without invoices, vehicle numbers on which these consignments were allegedly transported have been duly 88 Excise Appeal No. 75790-75792 of 2022 mentioned therein. If the case of the DGCEI is treated to be true that the DGCEI had an intelligence that JBIL III indulged in clandestine removal of finished goods on regular basis, the investigating agency had an ample opportunity to intercept atleast some of these consignments which were being allegedly cleared without payment of duty. But, DGCEI did not make even a slightest attempt in this direction which was absolute necessary to give any credibility and veracity to these allegations.
14.11. Regarding some of the other demands confirmed in the impugned order, we observe that duty of Rs. 96,45,018/- has been demanded from JBIL III and Rs. 14,62,149/- from JBIL IV on GR Slag. The Appellants contended that these demands are not sustainable as GR Slag is generated involuntarily during process of manufacture. It is on very few occasions the GR Slag fetches commercial value when the same is sold to a cement unit. Normally the GR Slag is used for land filling. Such type of Slag has no commercial value and cleared the same without any consideration. The transport vehicles which bring raw materials to the factory of JBIL III or JBIL IV after off-loading the said raw material, load GR Slag in the same vehicle. Annexure 1 to the Show Cause Notice contained names of the purported buyers but no enquiry was conducted from them as to whether they had paid any consideration on the receipt of such GR Slag. Even otherwise GR Slag was exempt from Central Excise Duty in terms of Notification 4/2006-CE dated 01.03.2006, serial no 6 thereof which was superseded by Notification 12/12-CE dated 07.03.2012 serial no. 37. This Tribunal in the case of 89 Excise Appeal No. 75790-75792 of 2022 Aggarwal Channel Mills Pvt. Ltd. Vs CCE Raipur, 2015 TIOL 2372 and in JBIL Group's own case at their Raipur Unit as reported in M/s. Jai Balaji Industries Ltd Vs. CE and Service Tax, Raipur 2017-TIOL-2560-CESTAT-DEL has clearly laid down that GR Slag was only a by-product and exempt from duty. We observe that GR Slag is exempted from Central Excise duty vide Notification 4/2006, as amended. Also, the investigation has not brought in any evidence to prove that the said goods have been vleared without payment of duty. Hence, the demand confirmed in the impugned order on this count is not sustainable.
14.12. The Appellants contended that duty demand of Rs. 2,11,98,601/- on Runners, Rs.1,45,48,113/- on HPTM Cutting Pipe/HPTM Broken Pipe and of Rs.1,51,491 on Ladle and Ladle Jam confirmed in the impugned order is not sustainable as there is absolutely no evidence in the Show Cause Notice itself about the alleged clearance of these products. The allegation is that majority of these item were cleared by JBIL III to JBIL IV. However, no inquiries were conducted either from JBIL III or JBIL IV regarding these items as would be evident from perusal of various statements. We observe that JBIL III recycles Runners hence the question of its clearance to JBIL IV without invoices does not arise. Similarly other items were also waste materials. It was alleged that in some cases Ladle and Ladle Jam was cleared to one party by name M/s. SYM Single Alloy Pvt. Ltd. but no inquiries were conducted from them. HPTM Cutting Pipe arising during the manufacture of Ductile Pipe and same are 90 Excise Appeal No. 75790-75792 of 2022 recycled. No evidence was brought on record that JBIL IV had used these waste products in the manufacture of finished goods. 14.13. The Appellants cited the following judgments wherein it has been categorically laid down that when the names of the buyers were available in the seized records it would be incumbent on the investigation to make inquiries from the buyers for establishing clandestine removal:-
(i) Vandana Art Prints Pvt. Ltd. & Others Vs. Commissioner of Central Excise, Surat-1reported at 2005-TIOL-1437-CESTAT- Mum- (para 4(iii).
(ia) Commissioner of Central Excise &Customs Vs. Vandana Art Prints Pvt. Ltd., reported at 2008(221) ELT 27 (Guj.) (para 2)
(ii) Suntrek Aluminium P. Ltd. Vs. Commissioner of Customs and Central Excise & Service Tax, Rajkot reported at 2013 (288) ELT 500 (Guj). (para 6, 7).
(iii) Kumar Cotton Mills (P) Ltd. Vs. Commissioner of Central Excise, Ahmedabad reported as2008 (229) ELT 273 (Tri.-Ahmd.) (para 6)
(iv) Nidhi Auto Pvt Ltd Vs. CCE, Noida-1 reported in 2020 (33) GSTL 419 (Tri.-All) wherein, in para 6 it has been categorically held that if author of diary is not identified and if his statement is not recorded then such diary is not admissible evidence.
(v) Principal Commissioner of CGST & Central excise Vs. Shah Foils Ltd reported in 2020 (372) ELT 632 (Guj), in this case under similar circumstances the Hon'ble Gujarat High Court has upheld the order of the Tribunal wherein duty demand on the charges of clandestine removal on the basis if pen drive data and sheets was set aside on the ground that there was no corroborative and substantial evidence on record.
14.14. In the case of Vandana Art Prints Pvt. Ltd. & Others Vs. Commissioner of Central Excise, Surat-1reported at 2008 (221) E.L.T. 27 (Guj.),it has been held as under:
91
Excise Appeal No. 75790-75792 of 2022 "2. The short controversy involved in this appeal is whether there can be a duty demand on the basis of clandestine removal of goods. While considering the factual aspects, the Tribunal has considered this issue as under :-
"This demand is based on two dairies seized from Shri Maheshkumar Satyanarayan Jhawar and on his statement as well as the statement of Shri Sushilkumar Poddar, Director of the assessees company. The job work charges have been computed on above basis at Rs. 62,49,339/-. Shri Maheshkumar Satyanarayan Jhawar stated that two decimal points have been shifted in the two diaries whereas Shri Sushilkumar Poddar has stated that they were shifting the decimal point by one place. For example, 117.7 mtrs should be read as 1177 mtrs and the bill amount would be Rs. 4708/- instead of Rs. 470.80. Thus, it is noted that there is a dichotomy between the two statements. In such a situation where difference between two statements would seriously affect the duty liability of VAPPL, the Department should have obtained corroboration from the merchant manufacturers who allegedly got the goods processed without payment of duty by paying job charges as above. There is no independent evidence to establish that VAPPL had cleared any manmade fabrics (processed) without payment of duty. It is important to note that out of eight merchant manufacturers, whose statements were recorded in respect of demand of Rs. 26,94,890/- based on delivery challans, five are common to duty demand calculated in Annexure-F to the show cause notice. These are (i) M/s. Sripati Synthetics, (ii) M/s. Annapurna Synthetics, (iii) M/s. Vardhaman Fabrics, (iv) M/s. Vipin Silk Mills and (v) M/s. Neha Synthetics. It is on record that Central Excise Officers searched the premises of merchant manufacturers and recorded their statements when they were only asked about the receipt of the goods under 621 delivery challans without payment of duty. The two diaries seized from Shri Maheshkumar Satyanarayan Jhawar, on the basis of which duty demand of Rs. 79,39,162/- has been calculated, were with the Department on 25-11-1998 and his statement was immediately recorded. The statement of Shri Sushilkumar Poddar was also recorded immediately thereafter and therefore, when the Officers visited the 92 Excise Appeal No. 75790-75792 of 2022 premises of the merchant manufacturers and recorded their statements, they were already in the possession of diaries, and the statements of Shri Jhawar and Shri Poddar had already been recorded. In spite of this, none of the five merchant manufacturers named above were questioned about the entries of job charges in those diaries. Another aspect to be noticed is that the Commissioner has dropped the proceedings for penalty against 8 merchant manufacturers in respect of clearance under 621 delivery challans (covering the demand of Rs. 26,94,890). This lends credence to the stand of the appellants that the charge of clandestine clearance is not satisfactorily established. We also note that no penal action was proposed against the merchant manufacturers in respect of payment of job charges shown in the diaries.
In these circumstances, the material on record is not sufficient to hold that the department has discharged the burden of proving clandestine removal 14.15 In the case of Suntrek Aluminium P. Ltd Vs Commissioner of Customs and Central Excise, Rajkot, reported in 2013(288) ELT 500 (Guj), it has been held that statements alone not sufficient to demand duty on clandestine clearances. The relevant paras of the decision are reproduced as under.
6.1 For coming to the conclusion that there was a clandestine removal of goods, the only material on which heavy reliance was placed by the Department was the statement of the Director Shri Sandeep R. Patel recorded on 1st July, 2008 under section 14 of Act. The same came to be retracted by affidavit dated 26th July, 2008, the relevant portions from the retracting affidavit are reproduced hereinbelow :
At the entire of the investigation and after made punchnama as per them version, they called two persons from out side and taken signature of these two persons on punchnama along with me.93
Excise Appeal No. 75790-75792 of 2022 After completion as above, in my utter surprise they to record my statement at weedy hours without issuing me "SUMMONS"
- as required under law - till this date. I politely refused for the same. But they have taken me under coercion and duress for statement proceeding. For buy peace from the officers, I have surrendered myself for strenuous exercise held by officers at weedy ours as to myself was exhausted during the material time.
"During the course of statement proceeding, they started to interrogate me in context to our involvement in suppression of production as well as cleared our product without issuing invoices or Bills and thereby our firm has suppressed aggregate clearance value and not followed the C. Ex. Law & procedure and accordingly they have recorded my statement as per them palatable version," is contrary to the correct facts. The statement recording from me on dated 1-7-2008, was under coercion, threat and duress. The same is not accepted to me and I retract the same by this affidavit.
Further, "the allegation of Central Excise Officers, regarding to our involvement in suppression of production and made clearance without issuing Bills/Invoices to our customers and recovered some over and above amount, by way of incriminate nature through "Angaliyas" is contrary to correct; facts. They have forcibly extracted my statement as per them palatable version, as according to above, is taken under the threat, coercion, duress and undue hardship of the department. The same is retracted and discarded by me through this affidavit.
Furthermore, in proceeding my statement, the inquiry officer, forcibly extracted my statement in the matter of M/s. Sundhal Aluminum, Ahmedabad, M/s. Shreeji traders, Ahmedabad, M/s. Swami Aluminum, Surat, in context to supply of our product and for that we have received extra consideration from the said parties through Angaliyas, is totally unworthy and outlandish to the correct facts. The correct fact is that, we have received consideration from these parties, in normal practice, which known under commercial parlance. Hence, the inquiry officers have extracted my statement as per them version in nexus to above is retracted by this affidavit.94
Excise Appeal No. 75790-75792 of 2022 Further, I make it clear by this affidavit that, the copy of statement is not given to me at the material time, so I exactly do not remember that what has been mentioned in the said statement recorded from me, because I was under the undue hardship and covered by beleaguered position of the Central Excise officers, I was in embracement situation at the material time. And hence, they have taken my signature on the statement or like wise on the other documents, was not exactly under my knowledge and belief. So I solemnly affirm and clarify that the contents whatsoever written and taken my signature thereon may not be considered true, sound minded and under normal circumstance as they had often given reference of arrest to me."
6.2 The confession or self-incriminatory statement made would come within the purview of Section 24 of the Evidence Act, 1972, the same being relevant, is produced hereunder :
"24. Confession caused by inducement;, threat or promise, when irrelevant in criminal proceeding. - A confession made by an accused person is irrelevant in a criminal proceeding, If the making of the confession appears to the court to have been caused by any inducement, threat or promise, having reference to the charge against the accused person, proceeding from a person in authority and sufficient in the opinion of the court, to give the accused person grounds, which would appear to him reasonable, for supposing that by making it he would gain any advantage or avoid any evil of a temporal nature in reference to the proceedings against him."
6.3. Section 14 of the Central Excise Act, 1944 which is similarly worded as Section 108 of the Customs Act, 1962, deals with the powers of the empowered Central excise officers to summon persons to give evidence and produce documents in any inquiry which such officer is making for any purposes of the Act. The principles regarding evidentiary value of confessional statements got recorded under such provision are laid down by the Courts. In CCE v. Duncan Agro Industries Ltd. [(2000) 7 SCC 53 = 2000 (120) E.L.T. 280 (S.C.)] with 95 Excise Appeal No. 75790-75792 of 2022 reference to Section 108 of the Customs Act, the Apex Court opined as under :
"12.... The inculpatory statement made by any person under Section 108 is to non-police personnel and hence it has no tinge of inadmissibility in evidence if it was made when the person concerned was not then in police custody. Nonetheless the caution contained in law is that such a statement should be scrutinized by the court in the same manner as confession made by an accused person to any non-police personnel. The court has to be satisfied in such cases, that any inculpatory statement made by an accused person to a gazetted officer must also pass the tests prescribed in Section 24 of the Evidence Act. If such a statement in impaired by any of the vitiating premises enumerated in Section 24 that statement becomes useless in any criminal proceedings."
6.4 It was held that a statement recorded by the Customs Officer under Section 108 of the Customs Act, though admissible in evidence, the Court has to test whether the inculpating portions were made voluntarily or whether it is vitiated on account of any of the premises envisaged in Section 24 of the Evidence Act. 6.5 The law with regard to confession regarding the confession retracted afterwards was discussed by the Apex Court in Vinod Solanki v. Union of India and Others reported in (2008) 16 SCC 537 = 2009 (233) E.L.T. 157 (S.C.) = 2009 (13) S.T.R. 337 (S.C.) by observing that it is trite law that evidence brought on record by way of confession, which stood retracted, must be substantially corroborated by other independent and cogent evidence. The Apex Court further observed as under :
"A person accused of commission of an offence is not expected to prove to the hilt that confession had been obtained from him by any inducement, threat or promise by a person in authority. The burden is on the prosecution to show that the confession is voluntary in nature and not obtained as an outcome of threat, etc. if the same is to be relied upon solely for the purpose of securing a conviction. With a view to arrive at a finding as regards the voluntary nature of statement or otherwise of a confession which has since been retracted, the court must bear in mind the attending circumstances which would include the time of retraction, the nature thereof, the 96 Excise Appeal No. 75790-75792 of 2022 manner in which such retraction has been made and other relevant factors. Law does not say that the accused has to prove that retraction of confession made by him was because of threat, coercion, etc. but the requirement is that it may appear to the court as such."
"Whereas mere retraction of a confession may not be sufficient to make the confessional statement irrelevant for the purpose of a proceeding in a criminal case or a quasi-criminal case but there cannot be any doubt whatsoever that the court is obligated to take into consideration the pros and cons of both the confession and retraction made by the accused. It is one thing to say that a retracted confession is used as a corroborative piece of evidence to record a finding of guilt but it is another thing to say that such a finding is arrived at only on the basis of such confession although retracted at a later stage."
6.6 The statement in question dated 1-7-2008, if examined closely in light of the above test, as seen from the copy thereof which is on record of the appeal at page 11, it was admittedly written by the Inspector, Central Excise, Morbi and the appellant stated to have put his signature below the same. When the said statement was read, it contained repeatedly made self-incriminatory statements and confessions about receiving of amount in cash through Angadia without receipts in the last financial year. A direct confession was also recorded in that statement to the effect that non-maintaining of accounts was with an intention to evade the duty. Having regard to the kind and nature of confessions mentioned in the statement, a bare reading thereof would give an impression that various statements were extracted by force and not voluntarily made. Apart that statement was retracted by the said Director by affidavit dated 26th July, 2008, it is also on record of the Appeal. 6.7 More importantly the statement in question was too weak to be relied on as evidence on law, in absence of any corroboration thereof by cogent evidence. The show cause notice mentioned the details of different firms such as Paresh Metals, Rajkot, M/s. Mangalm Metals, Ahmedabad, M/s. Krishna Metals, Ahmedabad, M/s. Sunil Metals, Ahmedabad, M/s. Harish Metals etc., to allege that the raw materials were received by the appellant from those firms. However, statement of none of the above parties was recorded which could have corroborated the statement relied on, except that the statement of 97 Excise Appeal No. 75790-75792 of 2022 the proprietor of M/s. Harish Metals, Morbi was recorded who stated that the scrape was sold to the appellant as per the credit practice and competition without bills. The solitary statement could not be said to be a cogent and convincing piece of evidence which validly corroborate the confessional statement in the statement of the Director, more particularly when the said statement of M/s. Harish Metals was not referred to and discussed in the show cause. Therefore, it was the sole statement of the Director Sandip bhai which was uncorroborated, and which was taken as base for the action against the appellant, when no evidentiary value could have been attached in light of what is stated above. Moreover, the confessional statement was retracted within reasonable time. Therefore also, the said confession could not have been used as a piece of evidence and there was no basis for inference and conclusion about clandestine removal of goods thereof.
6.8 It was further noticed that the failure on part of the appellant to produce accounts was in course of the process of investigation. The assessee's case was that it was maintaining the register and the entries wore being made therein about receipt and clearances of goods and the same was produced at the time of personal hearing but the authority rejected if viewing the same as an afterthought. The regular accounts under the excise law were not maintained by the assessee considering that since the exemption limit in the said Notification applied to it, maintaining of accounts for the excise purpose was not required. It is not disputed that the assessee was otherwise maintaining the accounts for the purpose of other laws like Sales Tax Act, Sales Tax Registration and its accounts were audited in accordance with the provisions of the Companies Act, 1956. In the Order-in-Original dated 17-6-2009, the adjudicating authority itself observed that there were no statutory records or excise records as they were dispensed with by the department since 2000 as a measure of simplification and the every manufacturer was required to maintain his own records and to device to his own record keeping method depending upon the accounting requirements. In this view and given the facts and circumstances of the case, the conclusion that the assessee had deliberately not maintained the accounts under the excise law could not stand and such a finding could be said to be baseless.
98
Excise Appeal No. 75790-75792 of 2022 6.9 Even if the case of the department is taken at its best value, admittedly the total clandestine clearance was below the limit of 1.5 crores specified in the notification dated 1-3-2003. The clearance value of the goods alleged to have been clandestinely removed upto 1st July, 2008 was Rs. 76.65 lakhs and even if the maximum goods of the value of Rs. 20 lakhs is accepted as stated by the Director in his said statement dated 1-7-2008, the total value comes to Rs. 96.65 lakhs, which is well under the exemption limit. There is also force in the submission of the appellant that the finding regarding clandestine removal was on the basis of goods which were lying in the factory premises at the time of inspection, and that there was no material or evidence establishing the actual clearance of goods, much less clandestine clearance.
6.10 Curiously, the adjudicating authority in the Order-in- Original accepted the position recording in paragraph No. 18 of the order as under, yet ultimately passed the order of confiscation and penalty holding that the exemption notification benefit was not to be given to the appellant and that there was clandestine removal :
"It is correctly contended by the notice that their clearance value was to the tune of Rs. 76.65 lakhs up to 1-7-2008 as per records and as admitted by the Director, they had clandestinely cleared goods to the tune of Rs. 20 lakhs upto that period. Therefore, their total clearance value up to 1-7-2008 should be considered as Rs. 96.65 lakhs. Thus, their total clearance value was well below the exemption limit. However, for confiscation of unaccounted goods and imposition of penalty there is no need to show leniency looking at the gravity of the case in light of the admission made by the Director of the notice under Section 14 of the Central Excise Act, 1944.
6.11 In the impugned order, the Tribunal mechanically concluded that on investigation, it was found that the assessee was not maintaining proper accounts and the Director also admitted that there was no accounted stock in the factory, which would be to the tune of Rs. 76,65,000/- upto 1st July, 2008 and the admitted aggregated value of the clearance of the goods worth Rs. 96,65,000/-. It was stated 99 Excise Appeal No. 75790-75792 of 2022 by the learned Tribunal that since the appellant was not maintaining the accounts, they cannot take shelter under the fact that they were small scale industry and fell below the clearance limit of Rs. 1,50,000/- and that progressive total clearance of the goods is not known and is ambiguous.
7. In light of the foregoing discussion, approach of the Central Excise Authority was erroneous and the findings arrived at by the learned Tribunal were not tenable at law. Once the sole basis of confessional statement adopted by the Authority in basing the case against the assessee was found to be an unreliable piece of evidence, inferences and conclusions about clandestine removal of goods fail to sustain. They were rendered in the realm of propositions and suppositions. It could not be said that the assessee deliberately not maintained the accounts with an intention to evade the duty.
14.16 In the case of Kumar Cotton Mills (P) Ltd. Vs Commissioner of Central Excise, Ahmedabad, reported in 2008(229) ELT 273 (Tri-
Ahmd), it has been held that demand of duty cannot be held merely on the basis of some entries available in the private registers.
Positive, tangible evidences are required to confirmed demands on clandestine removal. The demands cannot be made on assumptions and presumptions. The relevant portion of the decision is as under:
"6. After considering the submissions made by both sides and after going though the impugned order, we find that the demand stand confirmed against the appellant on the basis of entries made in the so-called lot register read with statement of the Director, though the appellants have denied that such lot register belong to them, in as much as they used the letter 'K' for allotting lot number and the word 'W' was never used by them, we find that said lot register, in any case, is a private document. We have seen the said lot register giving details of the clearances along with the name and address of the buyer. Surprisingly enough, neither of the buyers, whose names and addresses were available 100 Excise Appeal No. 75790-75792 of 2022 in the said register, stand contacted by the Revenue and no efforts have been made by them to find out and ascertain the correct position from the said buyers, by investigating them and by recording their statements. This failure on the part of the officers definitely act as fatal to the Revenue's case, in as much as it is well settled law that the entries in the private record cannot be made the sole basis for upholding the allegations of clandestine removal unless there is a corroborative independent evidence on record. Similarly, statement made by the Director does not stand corroborated in any material particular from any other independent source. The gist of all the decisions relied upon by the learned advocate is to the effect that the allegations of clandestine removal are required to be established beyond doubt, by production of positive, tangible and independent corroborative evidence and such findings should not be arrived at on the basis of assumptions and presumptions. As we have already observed that inspite of the availability of names and addresses of the buyers, the officers have not bothered to conduct investigations at their end, so as to establish the Revenue's case, we are of the view that the sufficient evidence does not exist in the present case, so as to uphold the findings of clandestine activity against the appellant."
14.17 In view of the above findings, we hold that the investigation has failed to establish the alleged clandestine clearance of goods by the Appellants and hence the demands confirmed in the impugned order are not sustainable. Accordingly, answer to the Question (vi) is in the negative.
(Vii) Whether the demands confirmed in the
impugned order on clandestine clearance of
finished goods is sustainable in the absence of any evidence of procurement of the major raw materials such as Iron Ore and Coal, without invoices?
101
Excise Appeal No. 75790-75792 of 2022 15.1 The Appellants contended that clandestine clearance of such huge quantity of finished goods require raw materials for manufacturing the same. Iron Ore is the major raw material for their finished products. They argued that DGCEI did not conduct any investigation either from the mine owners or from the Railways or from any transporter to substantiate their allegation that JBIL III and JBIL IV have procured any unaccounted raw material from them or transported without invoice. The Railways being a government organization, there was absolutely no scope for transportation of any unaccounted raw material. The entire quantity of Iron Ore and other minerals products/raw materials were transported through valid railway receipts and only a few raw materials were transported through trucks or similar transport vehicles. There was no investigation from any supplier of raw materials that they ever sold the raw materials either to JBIL III or JBIL IV without invoices and received any cash from them. Similarly, no investigation was conducted from any of the transporters to the same effect. It is on record that from the aforementioned basic raw materials, JBIL III or JBIL IV might have manufactured Sponge Iron, Pig Iron, Ferro Alloys and Billets as the case may be. Sponge Iron and Pig Iron were their intermediate products and JBIL III was also selling large quantities of Pig Iron to outside parties on payment of Central Excise duty. As far as Billets were concerned the same were manufactured out of Sponge Iron or Pig Iron and also sometimes these two raw materials were 102 Excise Appeal No. 75790-75792 of 2022 mixed. The other raw materials required to manufacture Billets are Ferro Manganese& Ferro Silicon.
15.2 From the Annexures to the Show Cause Notice, we find that duty has been demanded on various finished goods said to have been cleared clandestinely. Annexure-14 to the Notice is regarding duty demand on Billets to the extent of 50,465.20 MT. This chart below shows the requirements of various raw materials as required to manufacture this much quantity of billets:-
Quantity Requirement Requirement Requirement Requirement Requirement of Billets of Sponge of Pig Iron of Ferro of Ferro of Silicon (MT) Iron (MT) (MT) Manganese Silicon (MT) Manganese (MT) (MT) 50,465.20 28,320.27 31,076.89 31.75 178.82 698.75 15.3. Similarly Annexure-15 is related to JBIL IV with regard to alleged clandestine removal of 4236.56 MT of Pig Iron. The various raw materials required for manufacture of this much quantity of Pig Iron are as under:-
Quantity Requirement Requirement Requirement Requirement of Pig of Iron Ore of Sinter of Coal & of Iron (MT) (MT) Coke (MT) Limestone & (MT) Dolomite (MT) 4236.56 2281.38 5758.37 3158.97 297.69 MT 15.4. With regard to duty demand on Pig Iron from JBIL III, the chart below shows the alleged clandestine removal of Pig Iron to the extent of 57,793.66 MT and requirement of various raw materials:-
Years Pig Requireme Requireme Requireme Requirem Requireme Requir Iron nt of Iron nt of Iron nt of ent of nt of Lime ement Ore Ore Pallet Sinter Coke Stone of Dolom ite 2011- 1,022. 261.98 - 1,600.39 616.01 - 7.57 12 91 103 Excise Appeal No. 75790-75792 of 2022 2012- 44,958. 5,780.66 241.05 47,376.56 35,046.28 199.77 405.8 13 01 6 2013- 5,115. 379.74 72.74 4,768.58 3,504.10 57.73 114.2 14 41 7 2014- 6,697. 1,648.26 93.49 10,503.20 4,948.00 851.63 406.3 15 33 1 (upto July-
2014) TOTA 57,793. 8,070.63 407.29 64,248.73 44,114.3 1,109.14 934. L:--> 66 8 00 15.5. We observe that the investigation has not brought in any evidence regarding purchase of any of the raw materials required for manufacture of such huge quantity of finished goods. There was absolutely no investigation from any supplier of raw materials that they ever sold the raw materials either to JBIL III or JBIL IV without invoices and received any cash from them. Similarly, no investigation was conducted from any of the transporters to the same effect. 15.6. The Appellants stated that the extraction and sale of Iron Ore are governed by various legislations both at the levels of Centre and State Governments. JBIL III and JBIL IV process the entire quantity of Iron Ore procured from the State of Orissa. The licensing and sale of Iron Ore in the State of Orissa is governed by the OMPTS Rules, 2007. They procure minerals by filing Form-L which allows them to remove Iron Ore from a particular mine. Thereafter, they have to file Form-I which is a permit for the license other than mine owners. It also mentions quantity and quality of minerals/ore which are to be transported. They also filed monthly returns which contained consolidated quantity of various mineral products procured and consumed in a particular month. This return also contained opening and closing stocks. The Iron Ore or mineral products could be 104 Excise Appeal No. 75790-75792 of 2022 procured only under the signature of Deputy Director of Mines. An Inspector was always posted in each mine to oversee lifting of the Iron Ore and other mineral products, so that the sale was carried out strictly as per the form-L and Form-I. Thus, there is no possibility of procuring unaccounted raw materials which could enable JBIL III and IV to indulge in clandestine manufacture and clearance of finished goods. It is submitted that even procurement of coal, which is required to manufacture Sponge Iron is largely controlled by the Central Government. Both Pig Iron and Sponge Iron are used captively in JBIL III plant for the manufacture of MS Billets. The coal is largely procured from different sources like Eastern Coalfields Ltd. (ECL), Mahanadi Coalfields Ltd (MCL) and also through E-auction. Both ECL and MCL are Central Government controlled and the coal linkage facility also allotted to JBIL under Fuel Supply Agreement (FSA) like Iron Ore, Coal. Coal is mostly transported through Railway. Therefore, there is no scope for procurement of coal as a raw material in clandestine manner. We observe that unless JBIL III and JBIL IV have received the quantities of raw materials mentioned in the two charts above, they could not have manufactured finished goods and removed the same clandestinely. We observe that there is absolutely no evidence on record that either JBIL III or JBIL IV received proportionate quantities of raw materials in clandestine manner or without accounting and used the same to manufacture unaccounted finished goods and clandestinely removed the same. No investigation was done to ascertain the procurement of raw materials 105 Excise Appeal No. 75790-75792 of 2022 required for manufacture of such huge quantities of finished goods and its subsequent clandestine clearance.
15.7. We observe that the Adjudicating Authority has negated this very vital submission on an untenable ground that some messages were found in the in-box of the mobile phone of Shri Diptendu Samui, Accounts officer, which indicated purchase of a small quantity of 25 MT of scrap on payment of cash. The adjudicating authority considered these were enough evidences for the clandestine purchase and receipt of raw materials in cash, required for manufacture of such huge quantity of finished goods alleged to have been manufactured and clandestinely cleared. We observe that this finding has absolutely no credibility as Shri. Diptendu Samui was working as an Accounts Officer in the head office of Jai Balaji Group which owns five different units manufacturing various types of iron and steel products. It is submitted that since scrap/ melting scrap is purchased from very small suppliers, hence the payments to them are sometimes made in cash but the same are duly accounted for in their books of accounts. The investigation has brought in only two messages showing purchase of scrap of only 15 MT and 10 MT, totally 25 M.T of scrap purchased in cash. Shri Diptendu Samui in his cross examination had categorically stated that both the above entries of purchase of 25 M.T. of scrap was accounted for in their books of records. It is very unusual and peculiar to see that the Adjudicating Authority has confirmed the duty demand of more than 41 Crores on the basis of the alleged purchase of 25 MT of scrap in cash. Even those two consignments of scrap were duly accounted for in their books of 106 Excise Appeal No. 75790-75792 of 2022 accounts. No other evidence was brought on record by the investigation regarding purchase of raw materials required for manufacturing such huge quantity of finished goods foe clandestine clearance.
15.8.. In support of this proportion, the Appellants placed their reliance on the judgment of Hon'ble Gujarat High Court in the case of CCE Vs. Vishwa Traders (P) Ltd. Reported in 2013 (287) ELT 243 (Guj), which has been upheld by the Apex Court as reported in 2014 (303) ELT A24(SC). The relevant part of the judgement is furnished below:
7. The Tribunal in Paragraph Nos. 12, 13 and 16 has recorded clear finding that when the premises of the respondent were visited, the stock of raw-material and finished goods were tallying with the recorded goods. Further, nothing on record was found by the authority, which showed that unrecorded raw-materials were purchased or consumed by the respondent or that the respondent had clandestinely manufactured or removed the goods. It is necessary to extract Paragraph Nos. 12, 13 and 16 of order of the Tribunal, which reads as under :-
"12. Be that as it may be, it is to be noted that there is no dispute that to manufacture of said final product 'Frit' requires the use of Quartz, Feldspar, Zinc, Borax Power, Calcium and Dolomite as inputs/raw material. On the date of visit of the officers to the factory premises of the appellant, it is undisputed that the stock of raw materials as well as finished goods was tallying with recorded balances. This conclusion can be reached from perusal of records, as there is nothing on record to indicate otherwise.
13. On careful perusal of the entire records of the case, we find that there is nothing on record as to unrecorded purchases or consumption of various other 107 Excise Appeal No. 75790-75792 of 2022 raw material in the manufacture of Frit, there is also nothing on record to indicate that the appellant had purchased the Quartz, Feldspar, Zinc, Borax Powder, Calcium and Dolomite and without accounting them used for the manufacture of Frit for clandestine removal. There is also nothing on record nor there is any statement of the suppliers of other raw materials, which would indicate that the appellant had received unaccounted raw material from the suppliers of these raw materials. There is a solitary evidence in the form of statement of supplier of one of the raw material i.e. Borax Powder, who indicated that the appellant had procured Borax Powder and not accounted the same in his record; and the said entries and information were deduced from the documents of the premises of Shri Anil Jadav and whose evidence has been discarded for having not been produced for cross examination; in the absence of any other tangible evidence to show that the appellant had been procuring the other major raw materials required for manufacture of Frit without recording in books of accounts, we are unable to accept the contentions of the ld. AR appearing for the Revenue and the findings of the adjudicating authority, that there was clandestine manufacture and clearance of the finished goods. The investigation has not proceeded further to bring on record unaccounted purchases of all the raw materials required for manufacturing of 'Frit'.
16. In the absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises of M/s. VTPL, in the peculiar facts and circumstances of this case, we hold that the impugned order which confirms the demand on the appellant M/s. VTPL and imposes penalty on them is not sustainable and is liable to be set aside and we do so."
8. From the aforesaid findings of the Tribunal, it is clear that the appellant has not made any clandestine manufacture, 108 Excise Appeal No. 75790-75792 of 2022 which he has removed clandestinely and on which the duty was payable.
9. It is well settled that the findings of the Tribunal can be interfered only if it is perverse or some material evidence is ignored. In such circumstances, only the Court may exercise jurisdiction on issue which may give rise to any substantial question of law. In this appeal, no substantial question of law arises for consideration of this Court.
15.9..In the case of Mohan Steels Ltd. Vs. Commissioner of Central Excise, Kanpur 2004 reported at (177) ELT 668 (Tri.- Del.) it has been held that unless department produces evidence, which should be clinching, in the nature of purchase of inputs and sale of the final product demands cannot be confirmed based on some note books. The relevant part of the decision is reproduced below:
9.1 We have considered the submissions of both the sides. The impugned Order has been passed by the Commissioner on remand by the Appellate Tribunal vide Final Order No. A/899-901/2000, dated 9-
10-2000. The Tribunal had remanded the matter as the evidence produced by the Appellants from independent manufacturers and others "was not examined properly" and when the assessee had stated that power consumption may be taken as a factor for determining the quantum of final product the Commissioner had observed use of electricity which was not recorded in the bills without making such an allegation in the show cause notice. The defence of the Appellants before us is that the power used by them is only sufficient to manufacture the quantity of ingots/billets recorded by them in their records and the Commissioner has come to the conclusion that the Appellants had managed the manipulations of meter reading. The Commissioner has confirmed the demand on the basis that 9 kgs of ferro alloy is sufficient to manufacture one M.T. of ingots/billets. The Appellants have contended that the entire case of the Department is only on the basis of assumptions and presumptions whereas the contention of the Revenue is that the duty has been confirmed on the basis of statements of melters and other officials of the Appellants company and records. After considering the various submissions made by the learned Consultant for the Appellants and learned SDR for the Revenue we observe that there 109 Excise Appeal No. 75790-75792 of 2022 are three vital raw materials for manufacturing the ingots/billets. These are M.S. Scrap/Sponge iron, ferro alloys and power. It is settled law that whenever the charge of clandestine removal is made the Revenue has to prove that the assessee has procured all the raw materials required for the manufacture of final product. In the present matter there is no mention as to whether the Appellants had procured any extra quantity of M.S. Scrap/Sponge iron in addition to what has been recorded in their records. It is also not an allegation that when the Central Excise Officers visited the factory premises of the Appellants on 18-1-93, there was any excess stock of MS scrap/sponge iron. We also note that no excess stock of final product manufactured by the Appellant seems to have been found by the visiting officers. Regarding second most important input "power", the Appellants have produced a Report "Technology Evaluation in Mini Steel Industry", prepared under Technology Absorption & Adaptation Scheme by Ministry of Science & Technology. This study was initiated by the Department of Scientific & Industrial Research to assess and evaluate the existing technological norms in important sector of priority and corresponding international norms and to ascertain the gaps in technological levels. As per the Report the minimum and maximum consumption of Power in India was 600 to 1000 kwh per ton of billet/ingot. The Report has also mentioned that the consumption of power can be reduced by recent developments such as oxygen assisted melting, oxy-fuel burner, scrap pre-heating, water cooled roof and panels for wall lining, etc. The Report envisaged two model plants and the norms for the important parameters were worked out in order to establish the benefits of the phase of modernization. The norms for power was 670 kwh/per ton of billet for 10/12 t furnace and 630 kwh for 25/30t furnace. These norms regarding consumption of power have not been disputed by the Revenue. The Adjudicating Authority has come to the conclusion, merely on the basis of three furnaces found to be working by the visiting officers, that the Appellants had indulged in a systematic manipulation of records of "power consumption. This finding is without any material brought on record. On the other hand the Appellants have brought on record a certificate dated 26-12-96 issued by the Divisional Engineer. Electricity Distribution Division, Unnao which mentions as under :-
"On the basis of the reports/raids conducted from 1988 till date of metering arrangement checks on USEB 33/11KV Sub-station at 110 Excise Appeal No. 75790-75792 of 2022 Mohan Steels Ltd., Unnao; manned by the employees of the Board for 24 hours, it is very clear and apparent that the metering arrangements were always found in order and there were no possibilities of electricity theft or pilferage of power."
9.2 The Divisional Engineer of Electricity Board, thus, rules out any manipulation of electric meter as "the metering arrangements were always found in order". The Commissioner has disregarded this certificate by merely observing that the certificate had been issued on the request of the Appellants only; it also gives an indication that no irregularity was noticed during the time of raids; this certificate cannot be interpreted to mean that there could be no possibility of irregular use or manipulation. On the basis of such findings it cannot be claimed by the Revenue that the Appellants have indulged in a systematic manipulations of record of power consumption. It is well settled that strong suspicion and grave doubts cannot take the place of legal proof. It has been held by the Tribunal in the case of Rajasthan Petro Synthetics v. CCE, supra, that "the charge of clandestine removal of the goods has to be established by the Department by adducing tangible, acceptable, cogent and convincing evidence. Such a charge cannot be based only on assumption and presumption". The learned Consultant has relied upon the decision in the case of Gian Castings Ltd., 2001 (131) E.L.T. 380 wherein the Department had relied upon the theft case booked by Electricity Board. Even then the Tribunal did not uphold the demand holding that "there is nothing on record to show what ultimately happened to that case". The Punjab & Haryana High Court rejected the Reference Application filed by the Revenue and the Supreme Court dismissed the Special Leave Petition filed by the Revenue. [2004 (163) E.L.T. A203 (S.C.)]. It has also been contended by the Appellants that the supply of electricity to their Sub-station is made from 132/33, KVA Sonic Sub-station on direct feeder. There is nothing on record to show that the power required by the Appellants to manufacture the quantity of ingots and billets alleged to have been manufactured by them had been supplied by Sonik Sub-station to the Sub-station at the Appellants' end. Thus the Revenue has not succeeded in proving its allegation that the Appellants have manipulated their records of power consumption.
10.1 Regarding the quantity of ferro alloys required to manufacture 1 ton of ingot/billet, the Commissioner has confirmed the demand on the basis that 9 kgs. ferro alloys is required for 111 Excise Appeal No. 75790-75792 of 2022 manufacturing 1 kg. of ingot/billet. This is not supported by any technical data/literature on the subject. On the other hand, the Report on "Technology Evolution in Mini Steel Industry" clearly mentions that "Analysis of the ferro-alloy consumption in mini steel plants reveal that consumption of ferro-manganese varies from about 5 to 12 kg/t and that of ferro silicon from about 3 to 7 kg/t of billets. In general, it can be assumed that mini steel plants would consume about 10 kg/t of ferro manganese and 5 kg/t of ferro- silicon". The Report also fixes the same quantum of consumption of ferro-manganese and ferro-silicon as norms while dealing with "Norms for Important Parameters". The learned Consultant has also brought on record the Input-Output ratio fixed by the Ministry of Commerce for Import-Export purposes. As per these norms also Silico Manganese required is 15 kgs. and Ferro Manganese 10 kgs. In view of this the Revenue cannot proceed on the assumption that only 9 kgs. of ferro alloys is required for manufacture of one ton of billet merely on the statement of melters. The Revenue has not verified the contention of the Appellants that ferro-alloy is also added at the stage of ladle and concast. As observed earlier, the Revenue has also not made any investigation in respect of another most vital raw material that is M.S. Scrap/Sponge iron. It has been held by the Tribunal in the case of Amba Cement & Chemicals, supra, when the Revenue alleged the clandestine manufacture of cement on the basis of formula for use of lime stone per ton of cement; that "No investigation is conducted in respect of other raw-materials such as coal, gypsum and clay which are also required for manufacture of cement... As no investigation is conducted in respect of other raw materials which are essential for the production of cement, therefore, the demand on the basis of that appellants suppressed the receipt of one raw material is not sustainable." Similar views have been expressed by the Tribunal in Manbhai U. Patel v. CCE, Rajkot (T-Mum) and T.G.L. Poshak Corporation v. CCE, Hyderabad, 2002 (140) E.L.T. 187 (T-Chennai) wherein it has been held that "unless there is clinching evidence on the nature of purchase of raw materials, use of electricity, sale, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of note books maintained by some workers......" The Tribunal went in great detail and have clearly laid down that unless department produces evidence, which should be clinching, in the nature of purchase of inputs and sale of 112 Excise Appeal No. 75790-75792 of 2022 the final product demands cannot be confirmed based on some note books."
15.10. In the case of Ruby chlorates (P) Ltd. Vs. Commissioner of Central Excise, Trichy reported at 2006(204) ELT 607 (Tri.- Chennai), it has been laid down that unless there is an evidence that the manufacturer has received all the raw materials required to manufacture finished goods in proportionate quantities without account, allegation of manufacture of finished goods and its clandestine removal cannot be sustained. The relevant part of the decision is reproduced below:
"21. It is seen that, apart from potassium chloride, Hydrochloric Acid was the other major chemical used in the manufacture potassium chlorate by the assessee. Several other chemicals also were used. The case of clandestine production and clearance had been attempted to be made out with the figures of use of Potassium Chloride and no effort was made to investigate such use of Hydrochloric Acid or any other raw material. The settled legal position is that when several raw materials are involved, when a case of clandestine production and clearance is built on clandestine use of raw materials, the same should be proven with reference to unaccounted use of all such major raw materials.
22. In a case of clandestine removal the department should produce positive evidence to establish the same. In the absence of corroborative evidence, a finding cannot be based on the contents of loose chits of uncertain authorship. Department has not produced evidence of use of inputs to prove that there was manufacture of unaccounted finished product. No statements have been obtained to show as to from whom raw materials were purchased. No evidence has been obtained for the use of electricity or receipt of sale consideration by the assessee to prove clandestine manufacture and sale. The department had obtained a statement from M/s. Dhanalakshami Traders, dealer in Potassium Chloride to the effect that the assessee herein had obtained from them on payment of commission, bills for having purchased raw material without purchasing any raw material. These bills covered a significant portion 113 Excise Appeal No. 75790-75792 of 2022 of the raw material involved in the unaccounted production determined. This statement on record does not support a conclusion of clandestine production based on the allegation of clandestine procurement and use of raw material. (This initial statement was retracted by the dealer, later).
23. A unit under physical control is visited by the officers of the department regularly and clearance of the goods is effected in their presence. In such a situation, it is not understandable as to how it can be said that that there was clandestine removal of the goods. Clandestine removal in such situation can only be effected with the connivance of the department's officers. It is not the case of the department that their officers connived with the assessee for removal of the goods clandestinely and any officer was proceeded against. In Kalekhan Mohd Haniff v. CCE, Nagpur, reported in 2001 (132) E.L.T. 374, (Tri.-Mumbai) the Tribunal made the following observation :
" 4. The Tribunal, in LML Limited v. CCE. - 1991 (51) E.L.T. 434 (Tribunal) = 1991 (32) ECR 63 has held that in a case where the factory is under the physical control of the officers of the Department, extended period cannot be invoked on the ground of suppression of facts relating to manufacture and clearance. This is so for the reason that virtually every step of the manufacture and clearance is subject to the control by the officers of the department, who are required to carry out checks of such clearance to the prescribed extent. In that situation, therefore, unless collusion between the officers and the appellant were alleged the extended period will not be available. No such collusion is alleged. The notice issued to the appellant is therefore barred by limitation."
24. Demand of duty cannot be made simply on assumptions and presumptions. In the case of Hilton Tobaccos Pvt. Ltd. v. CCE, reported in 2005 (183) E.L.T. 378 (Tri.-Bang) the Tribunal while dealing with an order of the Revenue in a case of similar set of facts held as under in para 8 of their order :
"We have gone through the records of the case carefully. The Revenue has come to the conclusion that 41,777 kgs. of raw tobacco was unaccounted and the appellant had manufactured cut tobaccos out of it and removed it clandestinely. The inference is based on certain private documents only. There is no corroborative evidence recorded. If such huge quantity of cut tobacco was manufactured 114 Excise Appeal No. 75790-75792 of 2022 during the period from April 1998 to September 1998 when the factory is under physical control and removed, either the officer in charge has connived with the appellants or he closed his eyes to whatever was happening. In either case, the department should have proceeded against the officers. There is absolutely no indication in the investigation regarding any complicity of the officers posted in the appellants' unit. Moreover, the investigation has not found out at least a few buyers who have received the goods cleared clandestinely. There is no evidence of excessive consumption of electricity. When the officers visited the unit, they had not found out any unaccounted stock of cut tobacco. In the present case, the charges are based purely on a theoretical working out based on the private documents, which are not statutory. The Hon'ble CEGAT, in the case VST Industries Ltd. (cited supra), has held that the charges of clandestine removal cannot be based on assumptions and presumptions. In the Godfrey Philips case, the Tribunal has held that duty is not demandable on assumed productions. In the Sangamitra Cotton Mills case, it was held that in the absence of evidence of use of electricity, receipt of sale consideration to prove the event of manufacture and clearance of goods, clandestine removal cannot be sustained. In the Harinath Gupta case, it was held that the clandestine removal charge is not sustainable as the source of procurement of raw material has not been established, buyers of finished goods had not been contacted and the receipt of sale proceeds has not been proved. This is a case where investigation has miserably failed to get any corroborative evidence to strengthen the Revenue's case. The adjudicating authority, in his zeal to decide the issue in favour of Revenue, has not displayed a judicious approach and concluded that there has been clandestine removal in the absence of corroborative evidences."
15.11. In the case of RA Castings Pvt Ltd Vs Commissioner of Central Excise, Meerut-I, reported in 2009(237) ELT 674 (Tri-Del), it has been categorically held that clandestine removal is to be proved by tangible, direct, affirmative and incontrovertible evidences, which is reproduced as under:
115
Excise Appeal No. 75790-75792 of 2022
22. The clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to :
(i) Receipt of raw material inside the factory premises, and non-
accountal thereof in the statutory records;
(ii) Utilization of such raw material for clandestine manufacture of finished goods;
(iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products;
(iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters' documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees;
(v) Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal.
In the instant case, no such evidences to the above effect have been brought on record.
15.12. In the case of Gupta Synthetics Ltd. Vs CCE, Ahmedabad-II, reported in 2014 (312) ELT 225 (Tri-Ahmd), it has been held that there should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions:
"14. 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;116
Excise Appeal No. 75790-75792 of 2022
(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;
(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. 117 Excise Appeal No. 75790-75792 of 2022 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. 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.
15. We may now proceed to deal with the two demands of duty in the present case :
It is the contention of GSL that the demand of Rs. 32,07,422/- was wholly illegal and without any justification because no evidence has been produced to the effect that GSL had actually manufactured the quantity of 91929.140 Kgs of DT Yarn, which is alleged to be cleared clandestinely without payment of duty. It was further submitted that as per Annexure A(1) of the show cause notice it is clear that the figures of the alleged clandestine manufacture and removal has been arrived at on the presumption that GSL had achieved during the period 1-7-2002 to 15-8-2002 an optimum production of 1867 Kgs of DT Yarn. However, there was no evidence showing that GSL had achieved optimum production of 1867 Kgs of DT Yarn during the period of 45 days. There was also no evidence or justification for showing how and why the optimum production was achieved by GSL only for a period of 45 days and not at any other point of time. It was further submitted on behalf of GSL that the figure of optimum production of 1867 Kgs of DT Yarn per day was taken from Register A-21 but in reality no such details were found in the said Register. No clarification has been sought by the investigating officer regarding 118 Excise Appeal No. 75790-75792 of 2022 the expressions appearing in the Register titled as 'A-21'. There was no corroborative material to suggest that GSL had manufactured and cleared such a huge quantity of DT Yarn without payment of duty. It is the further submission of GSL that the case made out by the Revenue that GSL had achieved optimum production fails even on the basis of seized document titled as A-21. This document itself indicates that the machine stopped on each day for several hours. It was further submitted that the details compiled in Annexure A(1) to the show cause notice clarifies that the demand of Rs. 32,07,422/- was based only on Register titled as A-21 and not based on any documents namely A-19 and A-20. The expression used in the document titled as A-21, like "A.P total", "A.P Production total", "A.P", etc. was never clarified by V.N. Parab as no such question has been put forth to him for clarification of the expression mentioned in the entries during the course of recording of the statement. The entries made on each page of the document titled as A-21 i.e. details of machine stop time on a particular day and machine stop time total was also written which indicated that the machine was not operated and was stopped on a particular day for how many hours and what was the total and which machine was not operative. Despite this evidence being available on record, the demand has been worked out in the show cause notice on the basis of optimum production of 1876 Kgs of DT Yarn. It was further submitted that even the statement of Mohan Lal Gupta does not substantiate the case of the Revenue that A-21 was a register maintained for recording the actual production. Neither Mohan Lal Gupta's statement nor any evidence indicated that the details appearing in A-21 were in conformity with the details recorded in the Register titled as A-19. It is the contention of GSL that they had established during the adjudication proceedings that A- 21 and A-19 did not correlate to another and thus, the details shown in A-19 being corroboration to the case made out by the Revenue on the basis of A-21 was totally illegal and incorrect. Even the document titled as A-20 did not support the case of the Revenue as the loose papers found in this file were never examined by the Revenue.
In reply to the submission made on behalf of GSL it was submitted by the learned Special Counsel, Mr P.R.V. Ramanan that the Adjudicating Authority has confirmed that the duty demand of Rs. 32,07,422/- on the basis of records recovered from the premises of the GSL. Mohan Lal Gupta, Director of GSL on 3-9-2003 has deposed that there are 156 positions on each Crill and on an average 10 Kgs 119 Excise Appeal No. 75790-75792 of 2022 of POY was loaded for processing each day. Thus, total average weight for each Crill were worked out to 1560 Kgs per day. Further, Mohan Lal Gupta had stated that there was Crill change every day and the factory was running in two shifts. From the statement of Gupta the only inference that could be drawn was that on an average 1560 Kgs of DT yarn was being manufactured by GSL each day. It was also submitted that the Adjudicating Authority has also relied upon the seized records titled as A-19, A-20, A-21, A-22 and A-23, the statement of V.N. Parab and comparing the same with the entries made in the A-19, it becomes clear that the figure of 1867 Kgs appearing in all the pages of A-19 register has been mentioned as optimum production for the day and is arrived after considering the aforesaid figure and the time taken for the machine idle. We have considered the submissions of both parties. We find that no evidence has been produced by the Revenue to show that GSL has effected sale of such huge quantities of 91929.140 Kgs of DT Polyester Yarn. There is no tangible evidence of GSL having actually produced all the DTY or Twisted Yarn from out of non-duty paid POY supplied by Nova. No transporters' documents have been seized or produced by the Department to show transport and sale of such huge quantities of POY from Nova to GSL or, even for that matter, from GSL to the buyers of DTY produced by GSL. No evidence has been forthcoming of purchase of raw materials by Nova for production of POY in such huge quantities, or of payments effected by GSL to Nova for the excess quantities of POY, clandestinely manufactured and cleared by Nova and sold to GSL, or even of payments made by the buyers of DTY from GSL made out of quantities alleged to have been purchased by GSL from Nova. The only basis of the demand is the figures contained in A/19 and A/21, seized from GSL premises, of which V.N. Parab is the author. Even if the figures in the seized documents tally (which is disputed by GSL, since V.N. Parab has not, when he was being examined during the investigation, stated that they tally), that by itself/cannot prove clandestine manufacture and clearance, the tests for which have been adequately explained by this Tribunal in the decisions cited earlier, amongst several others. Submission made by ld. Senior Advocate, who had addressed arguments, on behalf of Nova also supports the case of GSL that where the demand is based on clandestine production, clearance and sale of excisable goods, mere entries in note books or diaries cannot establish the same. Proof of actual production, whether by direct 120 Excise Appeal No. 75790-75792 of 2022 evidence or corroborative evidence is a 'must', and the probative value of such evidence has to be established, especially when such a finding would lead to penal consequences.
In our view, therefore, the present demand of Rs. 32,07,422/-, which has been confirmed against Nova by the impugned order, is not based on evidence which, as this Tribunal has repeatedly emphasized in cases of clandestine manufacture and clearance, would justify a finding against the appellant (GSL). Unless there is conclusive evidence that Nova did actually manufacture DTY and clandestinely clear them without payment of duty, liability cannot be placed on GSL on the basis of conjectures and surmises, as the Hon'ble Supreme Court emphatically declared in the Oudh Sugar Mills case (supra). We are of the view that there is no tangible evidence produced by the department to establish that GSL has clandestinely manufactured and cleared DTY on which the present demand has been made. We, therefore, set aside the demand of Rs. 32,07,422/- as being illegal and unjustified.
16. As regards the demand of Rs. 73,00,168/-, it is the contention of GSL that the said demand has been made on the basis of seized records i.e. document titled as A-23. It was further submitted that the said demand was purely based on assumptions and presumptions as it has not been established by the Revenue as to who had written the details in A-23. The purpose for making such an entry in the register was also not clear. The Revenue has placed their own interpretation of various words and nomenclature found in the entries in the said register. It was further submitted that the entire basis of demand of Rs. 73,00,168/- was the Note Book containing 83 pages which was seized from the factory and the said Note Book contained details of samples drawn from various position of spindles on DT Machine. On the basis that the average production of DT Yarn was 1560 Kgs, per day, huge quantity has been worked out for the period from 1-4-2001 to 30-6-2002, alleging that POY of 115.68 deniers was processed on the DT machines during the aforesaid period because reports of drawal of samples were shown in documents titled as A-23. It is the submission of GSL that the author of the said report has not been identified by the Revenue. The purpose for making such entries is also not clear. The entries made in the said register have not been established by the officers during interrogation of any person. It is the further contention of GSL that no admission has 121 Excise Appeal No. 75790-75792 of 2022 been made by Mohan Lal Gupta or by V.N. Parab as regards the optimum production having been achieved on all days in the factory or average production having been achieved for all days. It was further submitted that the drawing of samples would not necessarily mean that the machine was operating on that very particular day and average production of 1560 Kgs was achieved on the said day when the sample was drawn.
In reply to the submission made on behalf of GSL, it was submitted by the learned Special Counsel Mr P.R.V. Ramanan that the Adjudicating Authority has carefully considered the relevancy of the documents titled as A-23 and the statement of Mohan Lal Gupta, Director of GSL. In paras 90 to 92 of the impugned order, the Commissioner has discussed as to how the seized records marked as A-23 containing 83 pages substantiates the case of the Revenue. Further, in the said paras, the Adjudicating Authority has carefully considered the statement of Mohan Lal Gupta. It is further submitted that the Adjudicating Authority has rightly concluded that on a combined reading of the statement of Mohan Lal Gupta and the Note Book marked as A-23, it can be concluded that the details of drawing of samples reflected in the Note Book marked as A-23 is an unimpeccable evidence to support the contention that the yarn was produced on DT machine on which random samples were shown to have been drawn. The Adjudicating Authority has rightly concluded that the private records maintained by the assessee are sufficient for arriving at the figures of production and clearance of GSL as the records A-19, A-20 were either maintained or duly signed by the Supervisor In-charge of the DT machine which means that the said records reflected the true and correct working on the DT machine. We have considered the submissions of both parties. We find that no evidence has been produced by the Revenue to show that GSL has effected sale of such huge quantities of DTY weighing 214.685 mtrs. There is no tangible evidence of GSL having actually produced all the DTY or Twisted Yarn from out of non-duty paid POY supplied by Nova or by another company. No transporters' documents have been seized or produced by the Department to show transport and sale of such huge quantities of POY from Nova or any other company to GSL or, even for that matter, from GSL to the buyers of DTY produced by GSL. No evidence has been forthcoming of purchase of raw materials by Nova or any other company for production of POY in such huge 122 Excise Appeal No. 75790-75792 of 2022 quantities, or of payments effected by GSL to Nova or any other company for the excess quantities of POY, clandestinely manufactured and cleared by Nova or any other company and sold to GSL, or even of payments made by the buyers of DTY from GSL made out of quantities alleged to have been purchased by GSL from Nova or any other company. We also find force in the submission made on behalf of GSL that no efforts have been made by the Revenue to establish the words or expressions used in the document titled as A-23. The meaning of the words and expressions used in the document could have been easily ascertained by asking a question to this effect to any of the responsible person working with GSL. Actual production achieved by GSL ought to have been established by the Revenue by concrete evidence. Statements by itself cannot be made the basis of concluding the production achieved by GSL. We are constrained to reiterate that it is one thing to make out the content of entries made in a document, it is totally a different thing to assess the probative value of the contents of the document. As repeated by this Tribunal, clandestine manufacture and clearance cannot be readily inferred from documents and statements. They have to be established on evidence, relatable to or linked with actual manufacturing operations. As far as the present demand is concerned, there is no such evidence forthcoming in the record before us. Mere reliance on note books or statements cannot justify a finding of clandestine manufacture and/or clearance. Investigation into the sources of supply of raw material would have revealed the actual facts. Apparently, no efforts seem to have been made in this behalf by the investigating authorities. Of equal importance would have been investigations into the transportation of the raw materials (in huge quantities, as alleged) to GSL and of DTY allegedly manufactured from the factory of GSL to its buyers, and payments for such raw materials and for the clandestinely cleared DTY. In the absence of all such evidence, a finding that excisable goods have been clandestinely manufactured and cleared by GSL cannot justifiably be arrived at. The probative value of the entries needs to be established by independent corroboration, which is lacking in the present case. The long line of decisions referred to and relied upon by the ld. Senior advocate, appearing for Nova have laid down the parameters for a charge of clandestine manufacture and clearance to be established, which have not been satisfied in the present case. The present demand of Rs. 73,00,168/- is, therefore, unjustified and deserves to be set aside. Accordingly, we do so." 123
Excise Appeal No. 75790-75792 of 2022 15.13. In the case of Nebha Steels Ltd. Vs Commissioner of Central Excise, Chandigarh, reported in 2016(344)ELT 561(Tri-Chan), it has been held that when the colluding parties have not been made parties to the Show Cause Notice, the same may be treated as defectice. The relevant para of the order is reproduced below:
22. We also observe that there are 28 buyers of the finished goods and the adjudicating authority has relied upon the statements of 16 parties and these statements are typed one and identically worded and cross-
examination of these buyers have not been granted to the appellants which was denied on filmy ground, i.e., their life and liberty will be in danger. Therefore, the statements of these persons cannot be relied upon. Moreover, 12 buyers who also made the statements during the course of adjudication have not been relied. Therefore, veracity of the statements recorded during the course of investigation of buyers is in doubt. We further find that in the adjudication order, the statements of broker and raw material suppliers were relied upon. In fact there are 10-15 raw materials suppliers only two statements of raw material suppliers and one broker were recorded. If their statement taken to be correct than the raw materials supplied by these persons worked out to Rs. 34 lakhs whereas to manufacture clandestine finished goods worth of Rs. 19 crores required raw materials worth of Rs. 15 crores. Therefore, the statement of these 3 people have no evidentiary value in the absence of denial of cross-examination and not made party to the show cause notice to impose penalty under Rule 26 of Central Excise Rules, 2002 for allegedly dealing in excisable goods which were used in the manufacture of clandestine manufacture of final products. None of these buyers who has admitted that they have received the goods without payment of duty were made to the show cause notice for imposing penalty under Rule 26 of Central Excise Rules, 2002 to allege that they have dealt with the goods which are liable for confiscation. Therefore, the statements of these buyers are not admissible evidence.
15.14. In view of the above discussion and the decisions cited above, we hold that in the absence of any evidence of procurement of raw materials required for the manufacture of the finished goods, the 124 Excise Appeal No. 75790-75792 of 2022 allegation of clandestine clearance in the impugned order is not sustainable. Accordingly, the answer to question No. (vii) is negative.
16. JBIL III & IV in their further submissions dated 27.05.2022 before the adjudicating authority cited the Final Order No. 75583- 75585/2020 dated 12-11-2020 passed by this Tribunal in JBIL III's own case. In this case also, duty was demanded on the basis of some data relating to unaccounted transactions recorded in external Hard Drives recovered from the secret office of one of their buyers namely M/s.Shree Parasnath Re-Rolling Mills Ltd, Durgapur (M/s.SPMRL). Printouts of the contents of the hard discs were taken in the presence of authorized signatory of M/s. SPRML and independent witnesses. Certain statements were recorded. Duty was demanded from JBIL III alleging that during the period 01-02-2012 to 25-12-2012 they have cleared 13683.05 MT of M.S. Billets to M/s. SPRML without payment of duty. This case was made out on the basis of printouts taken from hard disc seized from the secret office of M/s. SPRML. The duty demanded was confirmed by the Commissioner of Central Tax and GST, Bolpur, but on appeal the Tribunal, Kolkata set aside the demands on the basis of the following findings:-
"16.1. That though the employees of the purchaser had accepted having received goods from JBIL III without payment of duty but when it was not accepted by the supplier it could not be concluded that there was any clandestine removal on the part of the supplier (JBIL III). Further, cross examination of those employees were not allowed, therefore, no reliance could be placed on their statements.( Cross examination was allowed in this case 125 Excise Appeal No. 75790-75792 of 2022 is the only difference. Otherwise, on facts, both cases are similar).
16.2That JBIL would have required huge quantity of raw materials like iron ore, lam coke, steam coal, manganese and scrap. No evidence has been gathered to show the illegal and clandestine procurement of the said raw materials. The department did not produce any evidence of consumption of electricity, deployment of labour and production of such M.S. Billets. Without any investigation conducted in that direction, thereto without taking stock of raw materials and finished goods immediately after evidence was found at the end of M/s. SPRML, allegation of clandestine removal could not be sustained. The statement of Shri Aditya Jajodia, Managing Director, was not even recorded and it is surprising to see that while alleging clandestine removal of that magnitude responsible senior person like the Managing Director was not even questioned.
16.3. That one of the Annexure relied upon by the department contained Truck Nos. No investigation regarding the transportation at least, of which some evidence, in the form of Truck numbers, was available with the department, was conducted.
16.4. That allegation of removal of huge quantity of 13,683.05 MT valued at Rs. 52.00 Crores, the department should have established the purchase of raw material, consumption of electricity, deployment of labour, arrangement of transportation, receipt at the customers' end and financial transactions, receipt of money in respect of not even a single transaction in the hand of JBIL-III has been proved with evidence.
16.5. There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;126
Excise Appeal No. 75790-75792 of 2022 16.6. Evidence in support thereof should be of:
j. Raw materials, in excess of that contained as per the statutory records;
k. Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty.
l. Discovery of such finished goods outside the factory.
m. Instances of sales of such goods to identified parties.
n. Receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him;
o. Use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validity cleared on payment of duty.
p. Statements of buyers with some details of illicit manufacture and clearance;
q. Proof of actual transportation of goods, cleared without payment of duty r. Links between the documents recovered during the search and activities being carried on in the factory of production; etc." 16.7. It is submitted that the facts and circumstances of the present appeal are similar to that of the case wherein the Final Order No.75583-75585/2020 was passed by this Tribunal. No appeal has been preferred by the department against this order meaning thereby that the department has accepted the findings of the Tribunal which has attained finality.127
Excise Appeal No. 75790-75792 of 2022 16.8. Accordingly, relying on the above said decision by this tribunal in their own case and the various other decisions cited by them in their written submissions, they prayed for setting aside the demand of duty and penalties imposed against all the three the Appellants in the impugned order.
(viii) Whether penalty is imposable on the Appellant companies and it's Director, on the basis of the evidences available on record?
17. We observe that penalty equivalent to the duty confirmed has been imposed on both the Appellant companies JBIL III and JBIL IV, in terms of provisions of Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. Penaty of Rs.5,00,00,000/- was imposed on Shri. Aditya Jajodia ( wrongly mentioned as Ajit jajodia in the impugned order), Director of the Appellant Companies, under Rule 26 of the Central Excise Rues, 2002.
17.1 The allegation against the Appellant companies was that they indulged in clandestine manufacture and clearance of finished goods without payment of Central Excise duty. The discussions in the above paras, clearly establish that the duty demanded on the Appellant companies are not sustainable. Even the duty itself is not sustainable; the demand of interest and penalty on the Appellant companies is also not sustainable. Accordingly, we hold that the above said penalties imposed on the Appellant companies JBIL III and JBIL IV are liable to be set aside.
17.2 Regarding the Penalty imposed on the Director. Shri. Aditya Jajodia, we find that the Adjudicating Authority has discussed his role 128 Excise Appeal No. 75790-75792 of 2022 in Para 37 of Order-in-Original and held that Shri Aditya Jajodia has failed to participate in the investigation and also failed to come up with proper explanation regarding the documentary evidences recovered during the search and adduce proper evidence to establish that he was not involved in the act of clandestine removal of excisable goods. We observe that Shri. Aditya Jajodia is the Director and the key person of the Appellant companies and it is impossible that such large scale clearance of excisable goods without issue of Central Excise Invoices escaped his attention. In absence of any convincing arguments and evidences from his side, the Adjudicating Authority found that Shri Aditya Jajodia was concerned with transporting, removing, depositing, keeping, concealing, selling and purchasing of excisable goods, which he had knowledge, or reason to believe were liable to confiscation. Therefore, the adjudicating authority found that he has rendered himself liable for penal action under Rule 26 of the Central Excise Rules, 2002.
17.3. From the Show Cause Notice, we observe that summons were issued to various key persons relating to the alleged clandestine clearance including Shri Aditya Jajodia, Director of JBIL. Shri. Aditya Jajodia did not appear for the summons, but In this regard Shri Aditya Jajodia in his submissions dated 27-05-2022 , had categorically stated that no details have been given as to what were the dates of these summons and whether these summons were served upon the said persons. We observe that if the investigating officers were of the view that repeated summons were issued to the Director and employees of M/s. JBIL III and IV, it was incumbent 129 Excise Appeal No. 75790-75792 of 2022 upon them to have given the details of the said summons. Therefore, such type of vague allegations did not advance the case of the DGCEI. Shri Aditya Jajodia , in the reply to the Notice, informed the Adjudicating Authority that all the summons and replies were given thereto. He categorically stated that these summons were not pertaining to the present proceedings. The Appellant stated that unfortunately the Adjudicating Authority has not taken the further submissions dated 27-05-22 made by them into consideration while passing the impugned order. Therefore findings of the Adjudicating Authority in para 37 of the impugned order are factually incorrect. Shri Aditya Jajodia was never summoned with regard to the present proceedings.
17.4 The Appellant further stated that there is no evidence on record to show that Shri Aditya Jajodia was concerned with transporting, removing, depositing, keeping, concealing, selling and purchasing of excisable goods, which he had knowledge, or reason to believe were liable to confiscation. The JBIL III and IV have already made detailed submissions that the duty demand on both the units is not sustainable on various grounds. The said grounds are reiterated and contended that since no duty demand is sustainable against JBIL III and IV hence question of penal action against Shri Aditya Jajodia does not arise at all.
17.5. We observe that the investigation has not brought out any evidence against Shri. Aditya Jajodia. There is no evidence on record to show that he was concerned with the clandestine procurement of raw materials or instrumental in clearance of the finished goods in a 130 Excise Appeal No. 75790-75792 of 2022 clandestine manner. Since, the allegation of clandestine clearance itself is not sustained, we hold that the allegation of aiding and abetting the clandestine clearance against the Director also not sustainable. Accordingly, we hold that the penalty imposed on the Director Shri. Aditya Jajodiya is not sustainable, and answer to question No.(viii) is in the negative.
18. In view of the above discussion, we answer to the questions raised in Para 10 as under:
(i) The evidences available on record do not substantiate that the Appellants are the owners of the two pen drives and the data contained therein.
(ii) The computer printouts taken from the pen drives recovered during the search cannot be relied upon as evidence to demand duty.
(iii)As the conditions mentioned in Section 36B have not been followed in this case, the computer printouts cannot be relied upon as evidence, to demand duty.
(iv)The statements recorded under Section 14 of the Central Excise Act, 1944 cannot be relied upon to demand duty, since the procedure as set out in Section 9D of the said Act has not been followed.
(v) The allegations of clandestine clearance of finished goods JBIL III are not sustainable without any corresponding investigation to corroborate the claim, at the receiver's end?
(vi) The statements retracted at the time of cross examination, has no evidentiary value and the same cannot be relied upon to demand duty.131
Excise Appeal No. 75790-75792 of 2022
(vii) The demands confirmed in the impugned order on clandestine clearance of finished goods are not sustainable in the absence of any evidence of procurement of the major raw materials such as Iron Ore and Coal, without invoices.
(viii) Penalty not imposable on the Appellant companies and it's Director, on the basis of the evidences available on record.
18. In view of the above discussion, we hold that the demand of duty confirmed in the impugned order against JBIL III and JBIL IV are not sustainable. Since the demand of duty is not sustainable, the demand of interest and imposition of penalty against the Appellants JBIL III and JBIL IV are also not sustainable. As there is no evidence againt the Director, the penalty imposed on him is not sustainable. Accordingly, we set aside the demands of duty and penalties related to the aforementioned three Appellants in the impugned order.
19. In view of the discussions above, we allow the appeals filed by all the three Appellants.
(Pronounced in the open court on..27.07.2023....) Sd/-
(Ashok Jindal) Member (Judicial) Sd/-
(K. Anpazhakan) Member (Technical) Tushar Kumar