2024 (3) TMI 1037 - AT - Central Excise

Clandestine manufacture and removal - 47658 M.T. of Pig Iron - demand worked out based on the details available in the computer print-out recovered from the premises of the Appellants office and premises associated with them and the statements recorded from the concerned persons - evidentiary value of the computer print-outs - admissible evidences or not - procedure as set out in Section 9D of the Central Excise Act, 1944 was followed in this case or not - reliability of statements recorded under Section 14 of the Central Excise Act, 1944 - penalty on the Appellant companies and it's Director, on the basis of the evidences available on record. Whether the computer printouts taken from the pen drives recovered during the search can be relied upon as evidence to demand duty? - Whether the conditions mentioned in Section 36B has been followed in this case or not, to rely upon the computer printouts as evidence? - HELD THAT - The procedure prescribed in Section 36B must be followed to rely on the computer sheets as evidence. It is observed that the department has not followed the procedure prescribed in Section 36B. The author of the entries made in the computer has not been identified. The certificate as prescribed under Section 36B(4) has not been obtained. Hence, the computer sheets recovered from the pen drives cannot be relied upon to arrive at clandestine clearance - As the department has not followed the mandate under section 36B, the data recovered from the print outs available in the computer sheets cannot be relied upon to work out the duty liability on the allegation of clandestine removal. Accordingly, the answer to the question are in the negative. Whether the procedure as set out in Section 9D of the Central Excise Act, 1944 was followed in this case or not? - If not followed, then whether the statements recorded under Section 14 of the Central Excise Act, 1944 can be relied upon to demand duty? - HELD THAT - The adjudicating authority has not followed the procedure prescribed under Section 9D, accordingly, the statements cannot be relied upon to confirm the demands. Thus, the answer to question is in the negative. Whether the demands confirmed in the impugned order on clandestine clearance of finished goods is sustainable in the absence of any evidence of procurement of the major raw materials or sale of the finished goods clandestinely? - HELD THAT - There is no evidence of clandestine removal, purchase and consumption of unaccounted raw materials, discrepancy between recorded stock and physical stock, seizure of any goods, consumption of excess electricity, actual clandestine removal of finished goods without payment of duty, mode of removal, evidence of transporters and buyers of the clandestinely removed goods and flow back of funds pertaining to clandestine removals have been brought on record in this case. Without having any such tangible evidence, clandestine manufacture and clearance of goods cannot be sustained on the basis of mere assumptions and presumptions. Accordingly, the demand confirmed in the impugned order is not sustainable. Thus, the answer to question is in the negative. Whether penalty is imposable on the Appellant company and it's Director, on the basis of the evidences available on record? - HELD THAT - The allegation of clandestine removal against the appellant-company is not sustainable. Accordingly, the role of Director of the appellant-company in the alleged clandestine clearance is not established. It is also observed that no benefit of the alleged illegal activities have accrued to the Director. Therefore, the penalty imposed on the Director of the appellant under Rule 26 of the Central Excise Rules, 2002 is not sustainable and the same is set aside. Thus, the answer is in the negative. The demand of duty confirmed in the impugned order is not sustainable. The demand of interest and penalty imposed on the Appellants are also not sustainable - Appeal allowed.

Issues Involved:
1. Admissibility of computer printouts as evidence u/s 36B of the Central Excise Act, 1944.
2. Compliance with Section 9D of the Central Excise Act, 1944 regarding the relevancy of statements.
3. Sufficiency of evidence for clandestine removal of goods.
4. Imposition of penalty on the Appellant company and its Director.

Summary:

Issue 1: Admissibility of Computer Printouts as Evidence
The Tribunal examined whether the computer printouts taken from pen drives recovered during the search could be relied upon as evidence to demand duty. The Tribunal observed that the department did not follow the mandate prescribed in Section 36B of the Central Excise Act, 1944. Specifically, the author of the entries was not identified, and no certificate as required under Section 36B(4) was obtained. Consequently, the computer sheets recovered from the pen drives could not be relied upon to establish clandestine clearance. This view was supported by precedents such as "Shivam Steel Corporation Vs Commr. of C.Ex. & Cus., BBSR-II" and "Super Smelters Ltd. Vs Commr. of Cus., C.Ex. and S.Tax, Durgapur".

Issue 2: Compliance with Section 9D of the Central Excise Act, 1944
The Tribunal evaluated whether the procedure set out in Section 9D was followed. The appellant argued that the statements recorded by a Gazetted officer are relevant only if the procedure prescribed under Section 9D is followed, which includes examining the person who made the statement as a witness. The Tribunal found that the adjudicating authority did not comply with this procedure, rendering the statements inadmissible. This position was supported by cases such as "Ambica International Vs. Union of India" and "G-Tech Industries Vs. Union of India".

Issue 3: Sufficiency of Evidence for Clandestine Removal
The Tribunal considered whether the demands confirmed in the impugned order on clandestine clearance of finished goods were sustainable in the absence of evidence of procurement of major raw materials or sale of the finished goods clandestinely. The Tribunal noted that there was no evidence of unaccounted raw materials, excess electricity consumption, or transportation of goods. The Tribunal cited "M/s. Continental Cement Company Vs. Union of India" and "M/s. Jai Balaji Industries Vs. Commissioner of Cus., C.Ex. & S.T., Durgapur", emphasizing that clandestine removal must be proved with tangible evidence, which was lacking in this case.

Issue 4: Imposition of Penalty
Regarding the penalty imposed on the Director, Shri Hemant Goyal, the Tribunal observed that the demand for clandestine clearance was not sustainable. The Director had retracted his statement, claiming it was taken under coercion. The Tribunal found no evidence of the Director's involvement in any alleged illegal activities. Therefore, the penalty imposed under Rule 26 of the Central Excise Rules, 2002 was set aside.

Conclusion:
The Tribunal concluded that:
1. The computer printouts taken from the pen drives could not be relied upon as evidence to demand duty.
2. The conditions mentioned in Section 36B were not followed, making the computer printouts inadmissible.
3. The statements recorded under Section 14 of the Central Excise Act, 1944 could not be relied upon as the procedure under Section 9D was not followed.
4. The demands confirmed on clandestine clearance were not sustainable due to the lack of evidence.
5. Penalties on the Appellant company and its Director were not justified.

The Tribunal set aside the impugned order and allowed the appeals filed by the Appellants, with consequential relief as per law.

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