2020 (1) TMI 321 - AT - Central Excise

Clandestine Removal - suppression of production - shortage of finished goods and raw materials (coal) - period April, 2011 to Nov, 2013 - admissibility of evidences and statements - corroborative evidences of not - Section 36B of the Central Excise Act, 1944 - Section 9D of the Central Excise Act, 1944 - HELD THAT - The entire case of the department is based upon the computer printouts taken from the computer hard disk, from the premises of the appellant, at the time of search. That, on careful perusal of the Panchnama dated 04.07.2014 (RUD-15) drawn at the Room No. 113, Computer Cell of Central Excise, Hqrs, Raipur, it is found that that the officers have taken the printout (on the basis of which, Central Excise Duty of ₹ 3,03,41,494/- for the period April, 2011 to Nov, 2013 has been demanded)from the one time writable DVD (after copying), however, the said DVD has been written from Hard Disk No. 2 on 03.07.2014. We further find that the Panchnama dated 03.07.2014 has not been relied upon in the show cause notice, and neither the appellant nor his authorised representative was present on 03.07.2014, when the data from the Hard Disk No. 2 was retrieved on DVD. It is clear that the said Hard Disk could have been tempered, therefore, cannot be relied upon as evidence inasmuch the said data has been retrieved without ensuring the presence of the appellants - further, no certificate has been produced by the department as envisaged under Section 36B of the Central Excise Act, 1944, which provides the conditions to be fulfilled in order to admit the said documents in evidence. The computer printouts relied upon by the revenue are not admissible in evidence - As far as statements recorded under Section 14 of the Central Excise Act, which have been relied upon by the revenue, it is found that the learned Commissioner had denied the cross-examination of witnesses, therefore, in view of the decision of Andaman Timber Industries Vs CCE, Kolkata, 2015 (10) TMI 442 - SUPREME COURT and CCE Vs Kurele Pan Products Pvt. Ltd., 2014 (4) TMI 463 - ALLAHABAD HIGH COURT , the said statements cannot be relied upon as evidence. Thus, the statements relied upon by the revenue are not admissible and cannot be relied upon as evidence and has to be eschewed from evidence - further, there is no corroborative evidence adduced by the department in order to allege huge production and removal of goods. There is no reliable evidence adduced by the department in order to prove clandestine production and removal of goods - the demand of ₹ 3,03,41,494/- along with interest and penalty for the period April, 2011 to Nov. 2013, on allegation of suppression of production and clandestine removal of Sponge Iron, is hereby set aside - further, the appellant has not contested the demand of Central Excise Duty ₹ 2,81,953/- on allegation of shortages of finished goods and raw materials, before the learned Commissioner. Hence, the duty demand of ₹ 2,81,953/- is confirmed, however penalty is set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Demand of Central Excise Duty ?3,03,41,494/- for the period April 2011 to November 2013 on allegations of suppression of production and clandestine removal of Sponge Iron.
2. Demand of Central Excise Duty ?2,81,953/- on allegations of shortages of finished goods and raw materials.
3. Penalty on the Director, Sh. Vishal Singh, and others.

Detailed Analysis:

1. Demand of Central Excise Duty ?3,03,41,494/- for the period April 2011 to November 2013:
The department's case was based on computer printouts taken from hard disks seized during a search at the appellant's premises. The appellant argued that these printouts were inadmissible under Section 36B of the Central Excise Act, 1944, and that no corroborative evidence was provided. The Tribunal agreed, noting that the printouts were taken without the appellant's presence and without a certificate as required by Section 36B. The Tribunal cited several judgments, including Anwar P.V. vs. P.K. Basheer, which clarified the stringent conditions for admitting electronic records as evidence. The Tribunal found that the department failed to comply with these conditions, rendering the computer printouts inadmissible. Additionally, the Tribunal noted that the statements recorded under Section 14 of the Central Excise Act were not admissible as evidence since the appellant was denied the opportunity to cross-examine the witnesses, violating Section 9D of the Act. Consequently, the demand of ?3,03,41,494/- was set aside.

2. Demand of Central Excise Duty ?2,81,953/- on allegations of shortages of finished goods and raw materials:
The appellant contended that the stock verification was conducted based on eye estimation, which is insufficient to substantiate the demand without evidence of clandestine removal. The Tribunal noted that the appellant did not contest this demand before the Commissioner. Hence, the duty demand of ?2,81,953/- was confirmed. However, the Tribunal set aside the penalty associated with this demand.

3. Penalty on the Director, Sh. Vishal Singh, and others:
The Tribunal found no evidence of clandestine removal of goods or any goods being confiscated or held liable for confiscation. The penalty of ?5,00,000/- imposed on Sh. Vishal Singh, Director of the appellant, was set aside. The Tribunal emphasized that the extended period for issuing the show cause notice could not be invoked, and no interest or penalty could be imposed against the appellant.

Conclusion:
The Tribunal set aside the impugned order dated 27.02.2018, except for the confirmation of the duty demand of ?2,81,953/-. The appeals were allowed with consequential relief as per law.