2016 (5) TMI 508 - HC - 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 - Tribunal held that 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, so the demand of duty solely on the basis of these materials cannot be sustained. Also, as the clearance value was within the SSI exemption, the confiscation of the goods cannot be sustained. and the imposition of penalties are not warranted reported in 2015 (3) TMI 825 - CESTAT AHMEDABAD - High Court by relying on the decision of this court in the case of The Commissioner of Central Excise And Customs, Surat- 2 Versus Ambica Organics 2016 (1) TMI 390 - GUJARAT HIGH COURT , disposed of the appeal. - Appeal disposed of

Summary

Issues:
1. Admissibility of computer printout as evidence in the absence of required certification under Section 36B of the Central Excise Act, 1944.
2. Sufficiency of evidence to prove demand of duty and imposition of penalty based on the show cause notice.

Analysis:

Issue 1: Admissibility of computer printout as evidence
The High Court addressed the question of whether the Tribunal erred in not considering computer printouts as evidence due to the absence of certification under Section 36B of the Central Excise Act, 1944. The case involved allegations of clandestine removal of goods based on printouts obtained during a raid. The Department collected a USB device and printouts of data from it, which were presented as evidence. The assessee requested cross-examination of witnesses whose statements were recorded, and selective cross-examination was allowed for four witnesses who disowned their statements. Despite this, the Commissioner (Appeals) upheld the allegations based on the printouts. The Tribunal, however, ruled that the reliance on such material was impermissible as it did not meet the conditions of Section 36B(2) of the Central Excise Rules. The High Court, while acknowledging the legal question raised by the Revenue, emphasized that the issue of establishing clandestine removal was primarily factual. Even with the contents of the printouts, the allegation could not be sustained as the witnesses disowned their statements, and there was little other evidence on record. Consequently, the High Court dismissed the appeal, maintaining that the entire issue revolved around facts, and the reliance on the printouts was insufficient to prove the allegations.

Issue 2: Sufficiency of evidence to prove demand of duty and imposition of penalty
The second issue involved the sufficiency of evidence to establish the demand of duty and imposition of penalty as per the show cause notice. The Tribunal found that there was inadequate evidence on record to prove the charges leveled in the notice. Despite the Department's argument that collateral documentary evidence supported the clandestine removal allegations, the Tribunal held that the evidence was insufficient to justify the demand of duty and penalty. The High Court concurred with the Tribunal's findings, emphasizing that the establishment of clandestine removal against the assessee was a factual matter. The Court noted that the selective cross-examination of witnesses led to their disowning of statements, and there was a lack of substantial evidence apart from the contested printouts. Consequently, the High Court disposed of the appeal in line with the Tribunal's decision, highlighting the importance of factual evidence in proving the demand of duty and imposition of penalties based on show cause notices.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the significance of factual evidence in establishing allegations of clandestine removal and the insufficiency of relying solely on printouts without meeting the legal requirements under the Central Excise Act.