2007 (11) TMI 458 - AT - Central Excise

Stay/Dispensation of pre-deposit - Admissibility of Evidence - Computer print-outs - Held that - The appellants had raised a legal issue to hold that the condition in Section 36B has not been fulfilled in respect of the retrieved computer printout and therefore the same would not be admissible in evidence. Prima-facie this contention of the appellant appears to be correct. Moreover there is force in the contention of the appellants that the demands have been multiplied. No evidence has been produced for the receipt of huge quantity of raw materials required for production and clearance of Gutka/Panmasala involving duty of 137 crores. No investigation regarding finances required for such huge turnover has been done. There is no evidence of any seizure of cash. The production capacity is also a contentious issue. All these issues have to be examined only at the time of regular hearing. Presently no definite finding regarding alleged evasion can be given - the recovery of the balance of duty and penalty is stayed till the disposal of the appeals.

Issues Involved:

1. Alleged evasion of duty by HSGPL.
2. Admissibility and authenticity of reconstructed computer data under Section 36B of the Central Excise Act, 1944.
3. Financial hardship and pre-deposit requirements.

Issue-wise Detailed Analysis:

1. Alleged Evasion of Duty by HSGPL:

The Central Excise department received information about significant duty evasion by HSGPL, leading to extensive investigations and raids on various premises. The department scrutinized records and seized computers from HSGPL and associated entities. The adjudicating authority issued show cause notices demanding duty and imposing penalties based on evidence, including reconstructed data from seized computers. The main demand of Rs. 137.63 crores was primarily based on reconstructed data from the hard disks of M/s Anju Agencies and other entities. The appellants contested the reliability and authenticity of this evidence, arguing that the reconstructed data could have been tampered with and lacked corroborative evidence from buyers, payments, and raw material procurement.

2. Admissibility and Authenticity of Reconstructed Computer Data:

The appellants raised a legal issue regarding the admissibility of the reconstructed data under Section 36B of the Central Excise Act, 1944. They argued that the reconstructed data did not meet the conditions specified in Section 36B(2), which requires that the computer printout be produced by the computer during its regular operation. The reconstructed data, being retrieved after deletion, did not satisfy this condition. The tribunal found merit in this contention, noting that the demands based on reconstructed data might not be sustainable under Section 36B.

3. Financial Hardship and Pre-deposit Requirements:

The appellants claimed severe financial hardship, arguing that the confirmed demand was disproportionately high compared to their financial capacity. They highlighted that the demand was 335 times their total paid-up share capital and reserves, and 34 times their annual duty payment. The tribunal considered these arguments and noted that the appellants had already deposited Rs. 1 crore during the investigation. Given the significant financial hardship and the legal issues raised, the tribunal ordered a waiver of the balance duty and penalties, treating the Rs. 1 crore already deposited as a pre-deposit. The tribunal also stayed the recovery of the remaining duty and penalties until the disposal of the appeals, scheduling the case for a hearing in January 2008.

Conclusion:

The tribunal acknowledged the complexity and magnitude of the case, emphasizing the need for a detailed examination during the regular hearing. The decision to waive the pre-deposit and stay recovery was based on the legal contention regarding the admissibility of reconstructed data, the appellants' financial hardship, and the lack of concrete evidence for the huge demands. The case was set for a comprehensive hearing to address all raised issues thoroughly.

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