2019 (7) TMI 99 - AT - Central Excise

Clandestine removal - clandestine procurement of large quantities of raw materials/inputs which had been subsequently been used in the clandestine manufacture and sale of finished goods without payment of duty - appellants sought soft copy of the printouts of computer/laptop but the same were not supplied to the appellants - cross examination of panch-witnesses as well as Central Excise officers also sought but not provided - admissible evidences - section 36B of Evidences Act. HELD THAT - The procedure prescribed under section 36B of Central Excise Act 1944 has not been followed. Therefore the printouts taken from CPU are not admissible evidence to allege clandestine manufacture and clearance. Moreover in earlier round of litigation this Tribunal has directed to supply soft copies of the documents but the direction of this Tribunal has not been complied with - thus as the adjudication authority has not followed the direction of this Tribunal on this ground alone the impugned order is liable to be set aside. Also in the show cause notice it has been alleged that printouts have been taken from the laptop whereas in the adjudication order the adjudicating authority held that the printouts taken from the CPU which creates doubt. In that circumstance on the basis of electronic printouts the demands against the appellants are not sustainable. The allegation against M/s. Waryam manufacturer of ingots is not sustainable as no other corroborative evidence has been produced by the Revenue on record. Therefore the demand confirmed against M/s. Waryam is set aside. In the case of M/s. Vee Kay we find that the production capacity has been worked out to 10781 MT by the department itself - HELD THAT - If we take alleged clandestine production into consideration the total production worked out to 186 41.01 MT which is beyond annual production capacity of M/s.Vee Kay - No contrary evidences has been brought on record by the Revenue. Furthermore In the remand proceedings the adjudicating authority was directed to allow cross examine of the panchas and central excise officers whose statements relied upon by the adjudicating authority but no cross examination has been granted to the appellant. Therefore the impugned order has been passed in gross violation of principles of natural justice and not following the direction of this Tribunal. As the Revenue has failed to come with positive evidence except printouts taken from the laptop/CPU the charge of clandestine manufacture is not sustainable against M/s. Vee Kay. Therefore the demand against M/s. Vee Kay is not sustainable - As no demand of duty is sustainable against M/s. Vee Kay and M/s. Waryam therefore no penalty is imposable on all the appellants. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Admissibility of computer printouts as evidence.
2. Compliance with remand directions.
3. Validity of panchnama and seizure process.
4. Alleged clandestine manufacture and clearance of goods.
5. Penalty imposition on appellants.

Issue-wise Detailed Analysis:

1. Admissibility of Computer Printouts as Evidence:
The Tribunal examined whether the computer printouts seized during the investigation were admissible as evidence under Section 36B of the Central Excise Act, 1944. The appellants argued that the printouts were inadmissible due to non-compliance with statutory conditions, including the lack of authentication and failure to provide soft copies. The Tribunal noted that the procedures outlined in Section 36B were not followed, rendering the printouts inadmissible. This decision was supported by precedent cases, such as Agarvanshi Aluminum Limited vs. CC, Nahvasheva, where similar issues were addressed.

2. Compliance with Remand Directions:
The Tribunal had previously remanded the case with specific directions to supply soft copies of the printouts and allow cross-examination of panch-witnesses and Central Excise officers. The appellants contended that these directions were not followed. The Tribunal found that the adjudicating authority did not comply with the remand directions, which alone warranted setting aside the impugned order.

3. Validity of Panchnama and Seizure Process:
The appellants challenged the validity of the panchnama, arguing that it contained factual inaccuracies and lacked evidentiary value. They highlighted discrepancies in the seizure process, such as the unclear source of the printouts (CPU vs. laptop) and the password protection on the laptop. The Tribunal found these inconsistencies significant, further undermining the reliability of the printouts as evidence.

4. Alleged Clandestine Manufacture and Clearance of Goods:
The Tribunal assessed the allegations of clandestine manufacture and clearance of goods. The appellants argued that no substantial evidence supported these allegations, such as identification of buyers, transporters, or seizure of unaccounted raw materials and finished goods. The Tribunal noted the lack of corroborative evidence, including statements from transporters or employees and discrepancies in stock records. Additionally, the Tribunal referenced similar cases (A.K. Alloys Ltd. and Malerkotla Steel & Alloys Pvt. Ltd.) where allegations of clandestine removal were not substantiated, leading to the dismissal of charges.

5. Penalty Imposition on Appellants:
Given the Tribunal's findings on the inadmissibility of evidence and lack of compliance with remand directions, the penalties imposed on the appellants were deemed unsustainable. The Tribunal emphasized that without a valid demand for duty, penalties could not be justified.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeals with consequential relief. The decision was based on the inadmissibility of computer printouts, non-compliance with remand directions, and lack of substantial evidence to support allegations of clandestine manufacture and clearance of goods. The penalties imposed on the appellants were also deemed unsustainable.

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