2024 (1) TMI 772 - AT - Central Excise

Clandestine Removal - non-production of corroborative evidences to prove that the appellant has manufactured such huge quantity of final product - reliability and admissibility of computer print out as an evidence in terms of Section 36B of Central Excise Act - HELD THAT - Section 36B(2) provides the conditions in respect of computer printouts. In the present matter the computer was not shown to have been used regularly to store or process information for the purposes of any activities regularly carried on by the appellants. It was also not shown that information of the kind contained in the computer printout was regularly supplied by the appellant to the computer in the ordinary course of activities. Again, it was not shown that, during the relevant period, the computer was operating in the above manner properly. The above provision also casts a burden on that party, who wants to rely on the computer printout, to show that the information contained in the printout had been supplied to the computer in the ordinary course of business of the company. We find that none of these conditions was satisfied by the Revenue in this case. In the present case, the data was not stored in the computer but the officers had taken the printout from the Hard Disk drive by connecting to the computer. The officers had not obtained any certificate as required under Section 36B of the said Act. It is also noted that none of the conditions under Section 36B(2) of the Act, 1944 was observed. The provisions of Section 65B of Indian Evidence Act and Section 36B of Central Excise Act, 1944 of the Act are pari-materia. It is evident from the panchanama, and the appeals records that the investigating officer had failed to follow the safeguard as mandated under Section 36B of the Act. In the present matter there is no supportive evidence found by the revenue with regard to receipt of inputs, place from where inputs are purchased, nor there is shortage of inputs as per raw material accounts, electricity consumption have not been challenged to show that there was excess consumption. Further production capacity of the appellant not challenged by the revenue. It became apparent that the department has not led any corroborative evidence to support the allegations of clandestine clearance. There is no evidence regarding procurement of raw material, transportation of raw material, payment for unaccounted raw material and its transportation to sustain the allegation of clandestine manufacture and removal by the appellant. No evidence has been led by the Department to show that the appellant had sufficient production capacity to produce the quantity of goods alleged to have been produced clandestinely - It is now a settled position of law that mere slips/chits are not sufficient for the purpose of confirming the allegation of clandestine manufacture and removal of goods. In an identical matter the Tribunal in the case of K. RAJAGOPAL VERSUS COMMISSIONER OF CENTRAL EXCISE, MADURAI 2002 (1) TMI 151 - CEGAT, CHENNAI also held that the entries made in the private note books or chits is not a conclusive piece of evidence to prove clandestine removal unless the scribe of note book are examined and other corroborative evidence processed in the matter. In the present matter department alleged that there was shortage of 550Kgs. of Billets as per the Daily Stock account and as per the actual stock during Panchanama. However on going through the said panchnama we noticed that nowhere it has shown in the panchanama whether any stock taking has been taken place. There is no any weighment slip. Moreover, inasmuch as there is no evidence that said shortages are on account of any clandestine removal - It is a well settled position of law that serious allegation cannot be made merely on assumptions and presumptions and in the absence of detailed supporting evidence, the charge of clandestine removal cannot be upheld. The impugned order cannot be sustained and accordingly the same is set aside - Appeal allowed.

Summary

Issues Involved:
1. Admissibility and reliability of computer printouts as evidence.
2. Compliance with Section 9D of the Central Excise Act regarding the admissibility of statements.
3. Corroborative evidence supporting allegations of clandestine manufacture and removal.
4. Alleged shortage of stock and its implications.

Summary:

1. Admissibility and Reliability of Computer Printouts as Evidence:
The Tribunal examined whether the computer printouts seized from the appellant's premises could be admitted as evidence under Section 36B of the Central Excise Act. The Tribunal found that the conditions stipulated in Section 36B(2) were not met. Specifically, it was not demonstrated that the computer was regularly used to store or process information in the ordinary course of business, nor was there a certificate as required under Section 36B(4). Consequently, the computer printouts could not be admitted as evidence.

2. Compliance with Section 9D of the Central Excise Act:
The Tribunal noted that the statements recorded during the investigation were not admissible as evidence because the witnesses were not examined in chief before the adjudicating authority, and no opportunity for cross-examination was provided. The Tribunal emphasized that as per Section 9D, statements made before a gazetted officer can only be treated as relevant if the witness is examined in chief and cross-examined. The lack of adherence to these procedural requirements rendered the statements inadmissible.

3. Corroborative Evidence Supporting Allegations of Clandestine Manufacture and Removal:
The Tribunal found that the revenue failed to provide corroborative evidence to support the allegations of clandestine manufacture and removal. The investigation did not produce evidence of procurement of raw materials, excess electricity consumption, or unaccounted cash transactions. The Tribunal cited several precedents, emphasizing that mere slips or statements are insufficient to establish clandestine removal without tangible and convincing evidence.

4. Alleged Shortage of Stock and Its Implications:
The Tribunal addressed the alleged shortage of 550 Kgs of billets. It observed that the panchnama did not provide details of any physical stock-taking or weighment slips. The Tribunal referenced the Allahabad High Court's decision in CCE, Kanpur v. Minakshi Castings, which held that mere shortages without evidence of clandestine removal do not imply evasion of duty. The Tribunal concluded that the shortage alone could not substantiate the allegations of clandestine removal.

Conclusion:
The Tribunal set aside the impugned order, ruling that the demand for duty and penalties could not be sustained due to the lack of admissible evidence and corroborative proof. The appeals were allowed with consequential relief as per law.