2018 (3) TMI 260 - AT - Central Excise

Clandestine removal - excess of finished goods - shortage of goods - evidence obtained from computer floppies opened using unauthenticated software - Held that - the Tribunal had clarified that Revenue has no right to use any files opened with unauthenticated software in the remand proceedings. In the denovo proceedings, the Commissioner has therefore excluded the evidence obtained from the filed opened with unauthenticated software. As seen above, in the impugned order it is discussed in detail the reason for dropping duty demand of ₹ 7,60,79,469/-. Therefore, we do not find any merit in the appeal filed by the department in E/401/2009 requesting to interfere with the dropping of the said demand of duty. Penalty - Held that - there is no evidence that the co-noticees have directly indulged in clandestine production of clearance of excisable goods. Further that when separate penalties have been imposed on SUAS for the very same offence, there is no need to impose penalty for the same offence under Rule 26 of Central Excise Rules, 2002. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Use of unauthenticated software for retrieving data.
2. Confirmation and dropping of duty demands.
3. Imposition and non-imposition of penalties.

Issue-wise Detailed Analysis:

1. Use of Unauthenticated Software for Retrieving Data:
The primary contention revolved around the use of unauthenticated software by the investigation officers to retrieve data from computer floppies. The software tools, PC Inspector and Bad Copy Pro, were deemed unauthentic and lacking guarantees or warranties. The Tribunal had previously ruled that any evidence obtained using such software must be excluded. The Commissioner adhered to this ruling, excluding the evidence retrieved from unauthenticated software during the denovo adjudication. The Tribunal upheld this approach, noting that the Commissioner rightly excluded the evidence obtained from computer floppies opened using unauthenticated software.

2. Confirmation and Dropping of Duty Demands:
The initial investigation led to a significant duty demand of ?1,30,83,232/- on clandestinely cleared goods, which was confirmed by the Commissioner. However, a larger demand of ?7,60,79,469/- was dropped due to the exclusion of evidence obtained from unauthenticated software. The Tribunal noted the Commissioner’s detailed discussion on the unreliability of the electronic data and the reasons for dropping the duty demand. The Tribunal found no merit in the department’s appeal against the dropping of the ?7,60,79,469/- demand, as the electronic data was deemed unreliable and not beyond suspicion.

3. Imposition and Non-imposition of Penalties:
Penalties were imposed on SASAI under various sections and rules, including a penalty equal to the duty demand of ?1,30,83,232/-. However, no penalties were imposed on the co-noticees (SUAS, ASC, and AE) under Rule 26 of the Central Excise Rules, 2002. The Commissioner observed that there was no evidence of direct involvement of the co-noticees in the clandestine production or clearance of excisable goods. The Tribunal upheld this finding, noting that the department failed to provide any grounds to challenge the Commissioner’s decision. Consequently, the department’s appeals concerning the non-imposition of penalties on the co-noticees were dismissed.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee as withdrawn and all the appeals filed by the department as devoid of merits. The operative portion of the order was pronounced in open court, confirming the Commissioner’s decisions on duty demands and penalties.