2015 (3) TMI 825 - AT - Central Excise

Clandestine removal of goods - Clearance of goods without issuance of bills - Excess stock found lying in the factory - Confiscation of seized goods - Release of goods on issuance of bank guarantee - Held that - 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 print out. 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. - demand of duty along with interest and penalties on the appellants cannot be sustained. Accordingly the impugned orders are set aside - Decided in favour of assessee.

Issues Involved:
1. Legality of the evidence obtained from the USB drive.
2. Denial of cross-examination of witnesses.
3. Validity of the demand of duty, interest, and penalties.
4. Legitimacy of the confiscation of goods.

Detailed Analysis:

1. Legality of the evidence obtained from the USB drive:
The primary issue in this case was whether the evidence obtained from the USB drive was legally admissible. The Central Excise officers found a USB drive during their visit to the appellant's factory, which was connected to a computer, and a printout was taken by a computer expert. The printout allegedly contained details of sales exceeding the exemption limit of Rs. 1 Crore. The appellants argued that the data was not stored in the computer but retrieved from the USB drive, and the Central Excise officers did not follow the procedure under Section 36B of the Central Excise Act, 1944. This section outlines the conditions under which computer printouts can be admitted as evidence. The Tribunal noted that none of the conditions under Section 36B(2) were observed, and no certificate as required under Section 36B(4) was obtained. Consequently, the printout from the USB drive could not be accepted as valid evidence to support the clandestine removal of goods.

2. Denial of cross-examination of witnesses:
The appellants contended that the statements of 30 persons, who were claimed to be purchasers of the goods, were pre-drafted and not voluntary. The Adjudicating authority denied the cross-examination of these 30 persons, allowing only four to be cross-examined. Three of these individuals stated that they were made to sign pre-drafted statements under a promise that no action would be taken against them. The Commissioner (Appeals) observed that the evidentiary value of these statements was weak, as they were not voluntary and were recorded under a promise of no penal action. This significantly weakened the credibility of the statements used to corroborate the contents of the USB drive printout.

3. Validity of the demand of duty, interest, and penalties:
The demand of Central Excise duty of Rs. 23,78,329.00 along with interest and penalties was based on the printout from the USB drive and the statements of the 30 persons. The Tribunal found that the entire case was built on weak evidence, as the statements were not voluntary and the printout did not meet the legal requirements under Section 36B. Additionally, there was no substantial evidence of manufacture, clearance, purchase of raw materials, or transport documents to support the alleged clandestine removal of goods. Therefore, the demand of duty, interest, and penalties could not be sustained.

4. Legitimacy of the confiscation of goods:
Given that the demand of duty was not upheld, the confiscation of the goods valued at Rs. 83,248.00, which were seized during the stock verification, could not be justified. The Tribunal concluded that since the clearance value was within the SSI exemption limit of Rs. 1 Crore, the confiscation of goods and the imposition of fines were not sustainable.

Conclusion:
The Tribunal set aside the impugned orders, ruling that the demand of duty along with interest and penalties on the appellants could not be sustained due to the lack of adequate evidence. Consequently, all the appeals filed by the appellants were allowed, and the confiscation of goods was deemed unwarranted. The judgment emphasized the importance of adhering to legal procedures for evidence admissibility and the necessity of voluntary and credible witness statements in supporting claims of duty evasion.

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