2020 (3) TMI 15 - AT - Central Excise

Clandestine removal - suppression of production - MS Round - MS Sponge Iron - demand based on various documents recovered and various statements - Section 9D of CEA Act - HELD THAT - The search has taken place at the premises of the appellant on 20.08.2013 and during the course of search, the department has found some loose computer printouts and hand written loose sheets showing data in respect of production and clearance of MS Round (TMT Bar) and Sponge Iron for the period from December, 2012 to July, 2013. Thereafter, the department recorded the statements of Shri Basant Kumar Sahu, V.P. (Commercial) of the appellant under Section 14 of the Act. The case of the department is mainly based on the documents recovered, (the authenticity of the same has been disputed by the appellant) and the statement of Shri Basant Kumar Sahu, which has also been disputed by the appellant. The statement recorded under Section 14 of the Central Excise Act cannot be relied upon as an evidence unless the learned Adjudicating Authority follow the procedure prescribed under Section 9D of the Act - In the present case, admittedly no process has been followed. The private documents recovered at the premises remains unrebutted by the department. Also, the allegation of clandestine manufacture and removal in the present case is based on the (a) computer generated sheets and (b) loose papers which cannot be relied upon as evidence, inasmuch there is no indication in the orders passed by the authorities below that the appellant was maintaining computerised records of their production and clearance of goods and whether any other computerised sheets were traced out in the files withdrawn. There is no compliance of Section 36B of the Act. Merely deposit of money at the time of investigation would not amount to acceptance of allegations of clandestine manufacture and removal as alleged by the department - It is well settled law that, payment of money at the time of investigation would be treated as a deposit under protest. Further, the burden to prove allegation of clandestine manufacture and removal is heavily on the department and has to be discharged by producing clinching evidence on record, which has not been discharged by the department in the present case - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Reliance on Statements Recorded under Section 14 of the Central Excise Act.
2. Admissibility of Computer-Generated Sheets and Loose Papers as Evidence.
3. Lack of Corroborative Evidence for Alleged Clandestine Manufacture and Removal.
4. Burden of Proof on the Department.
5. Implications of Payment of Money During Investigation.

Issue-wise Detailed Analysis:

1. Reliance on Statements Recorded under Section 14 of the Central Excise Act:
The appellant argued that the statements recorded under Section 14 of the Act cannot be relied upon as evidence unless the provisions of Section 9D of the Act are followed. The statements of Shri Basant Kumar Sahu were recorded under threat and duress, and without compliance with Section 9D, they cannot be admitted as evidence. The Tribunal agreed, citing the Chhattisgarh High Court's ruling in Hi-Tech Abrasives Ltd. v. CCE&C, Raipur, which held that Section 9D is mandatory and statements recorded without its compliance cannot be treated as relevant evidence.

2. Admissibility of Computer-Generated Sheets and Loose Papers as Evidence:
The appellant contended that the computer-generated sheets and loose papers found during the search cannot be relied upon as evidence. There was no indication that the appellant maintained computerized records of production and clearance, and no compliance with Section 36B of the Act was shown. The Tribunal agreed, noting that private documents without corroborative evidence cannot be relied upon, as supported by the Hon'ble Supreme Court's decision in Anwar P.V. v. P.K. Baseer and the Tribunal's decision in Popular Paints.

3. Lack of Corroborative Evidence for Alleged Clandestine Manufacture and Removal:
The appellant argued that the department did not find any shortage or excess of raw materials or finished goods during the search. The huge demand was confirmed solely based on alleged private records without any corroborative evidence. The Tribunal agreed, citing the Chhattisgarh High Court's decision in Hi-Tech Abrasives Ltd., which emphasized the need for corroborative evidence such as purchase of raw materials, use of electricity, sale of final products, payment, and realization of sale proceeds.

4. Burden of Proof on the Department:
The appellant argued that the burden to prove the allegation of clandestine manufacture and removal lies heavily on the department and must be discharged by producing clinching evidence. The Tribunal agreed, citing the Allahabad High Court's decision in Continental Cement Company v. Union of India, which held that demands cannot be confirmed solely on presumptions and assumptions without substantial evidence.

5. Implications of Payment of Money During Investigation:
The appellant contended that the deposit of money during the investigation does not amount to acceptance of allegations of clandestine manufacture and removal. The Tribunal agreed, citing various judgments, including Bayshore Glass Trading Pvt. Ltd. v. CC, Kolkata, which held that payment of money during investigation is treated as a deposit under protest.

Conclusion:
The Tribunal found that the department failed to comply with Section 9D of the Act, and the statements recorded under Section 14 could not be relied upon as evidence. The private documents recovered were not corroborated by other evidence, and the burden of proof was not discharged by the department. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief as per law.

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