2019 (8) TMI 527 - AT - Central Excise

Clandestine removal - bogus transaction - allegations are framed on the basis of assumption and presumption and unauthenticated private records/Loose Sheets - tangible, cogent, affirmative corroborative evidence or not - HELD THAT - The department has failed to conclusively prove that the said traders were bogus. We find considerable force in the contentions of the Ld. Advocate for the Appellants that the levy under the Central Excise Act,1944, is on manufacture of excisable goods and in the instant case there is no evidence of manufacture of the impugned goods. Rather, in the investigation by DGCEI, Chennai, Kochi the consigner/buyer have categorically stated that they have purchased impugned goods from Sri Pankaj who is Director of M/s Puja TMT Plant P.Ltd., which is engaged in manufacture of TMT Bars. Further, in the show cause, it is observed that the impugned goods were manufactured on Job Work by M/s ASTL and were of M/s Samridhi TMT make. In the instant case there is no allegation/evidence of extra consumption of electricity more particularly, when the process of manufacture of MS Ingots/Silico Manganese are power intensive. Further, there is no evidence of extra use of labour/payment of any extra wages, shortage/excess of raw materials or finished goods. The excess stock of finished goods stood explained and accepted by the department. The allegation/findings on purchase of raw materials is not specific and there is no quantification of raw materials purchased out of accounts based on Purchase Register. It is well settled that charge of clandestine removal is a serious charge and must be proved by adducing tangible, cogent and affirmative evidence which are completely lacking in the instant case. In the case of SHARMA CHEMICALS VERSUS COMMISSIONER OF C. EX., CALCUTTA-II 2000 (12) TMI 161 - CEGAT, KOLKATA this Tribunal has held that the noting in private records may raise suspicion but for confirming charge of clandestine removal, there must be corroborative evidence in the form of installed capacity, raw materials, utilization, labour employed, power consumed, goods actually manufactured and packed etc. Reliance on the data contained in laptop computer and print out taken for that has to be in conformity with the conditions laid down under Section 36 B of Central Excise Act. The investigation reveals that no such complained has ever been made by the Revenue. Accordingly, the entire investigation which is based on the computer printout is not admissible as the evidence. Therefore the data relied upon based on the print out obtained from laptop is not admissible and has to be discarded. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Allegation of clandestine removal and undervaluation of goods by M/s BFCL and M/s GFA.
2. Validity and admissibility of evidence, including computer printouts and statements.
3. Compliance with procedural requirements under Section 36B of the Central Excise Act and Section 65B of the Evidence Act.
4. Burden of proof on the department to establish clandestine manufacture and removal.

Detailed Analysis:

Allegation of Clandestine Removal and Undervaluation:
The department alleged that M/s BFCL and M/s GFA clandestinely removed and undervalued significant quantities of their final products without paying the required excise duty. The allegations were based on documents and data seized during a search operation, including computer printouts and statements from various individuals and transporters.

Validity and Admissibility of Evidence:
The investigation relied heavily on computer printouts from a laptop seized during the search. The printouts included sale and purchase registers, which formed the basis of the demand. However, the appellants contested the validity of this evidence, arguing that the printouts were not authenticated as required by law. The tribunal found that the computer printouts did not meet the stringent conditions laid down under Section 36B of the Central Excise Act and Section 65B of the Evidence Act, making them inadmissible as evidence.

Compliance with Procedural Requirements:
The tribunal noted that the investigation did not comply with the procedural requirements for admitting electronic evidence. The conditions under Section 36B(2) and (4) of the Central Excise Act, which include ensuring the proper functioning of the computer and providing a certificate identifying the electronic record, were not fulfilled. This non-compliance rendered the computer printouts inadmissible.

Burden of Proof:
The tribunal emphasized that the burden of proof lies on the department to establish the clandestine manufacture and removal of goods. The investigation failed to provide tangible, cogent, and affirmative evidence to support the allegations. Key aspects such as the purchase of raw materials, excess use of electricity, and flow of funds were not substantiated. The tribunal referenced multiple judgments to highlight that mere assumptions and presumptions are insufficient to confirm charges of clandestine removal.

Conclusion:
The tribunal concluded that the department failed to conclusively prove the allegations of clandestine removal and undervaluation. The evidence presented was found to be inadmissible and insufficient. Consequently, the tribunal set aside the impugned order and allowed the appeals filed by the appellants, granting them consequential reliefs.

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