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2023 (10) TMI 804 - AT - Central ExciseClandestine removal - Ferro Silico Manganese - reliability on Pen drive printouts - can be admitted into evidence or not - period from 2005 to November, 2007 - high consumption of electricity during the years 2005-06 and 2006-07 can be relied upon to allege clandestine manufacture or not - absence of any evidence of procurement of the major raw materials for manufacture of Silico Manganese - penalty on the Appellant company and it's Directors. Demand confirmed on the basis of computerized data maintained by the Computer Operator of the Applicant Shri Ajay Behera which has been retrieved from a Pen drive recovered from one of the office table drawer of Shri Behera. Whether evidences available on record substantiate that the data retrieved from the pen drive and other computers belonged to the Appellant's company and the data 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 entire case has been buit up on the basis of the data retrieved from the pen drive and the subsequent statements recorded from the responsible persons. Thus, authenticity of the data is very essential to substantiate the allegations. The pen drive has been recovered from Shri. Ajat Kr. Behera and hence his statement is very crucial regarding the data available in the pen drive. It is a fact on record that Shri Ajay Kr. Behara has been employed only 4-5 months earlier to the date of recovery of the said data. Hence, the evidentiary value of his statement with respect to the data for the earlier period does not carry any weight. Pen drive is a floating device and unless the computer from which the electronic record was produced is identified, the data recovered from the pen drive cannot be admitted as evidence. In the instant case the data recovered from the pen drive pertains to the period 2005-06, 2006-07 and 2007-08. Shri Ajay Kumar Behera, Computer Operator has joined in the company only on 12.04.2007. His statemnt has been relied on to validate the data available in the pen drive for the period 2005-06 and 2006- 07 also. No effort has been made to identify the person who has entered the data for the period prior to 12.04.2007. In the present case the author of entry of data has not been identified only for the period prior to 12.04.2007. For the period after 12.04.2007 also, the data available in the pen drive has not been accepted by the Accountant Shri. Sujit Pruseth who is responsible for the data or the Directors - the questions are answered in the negative. Whether the procedure as set out in Section 9D of the Central Excise Act, 944 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 - It is observed that the statement of Shri. Behera cannot be taken as voluntary. Further, the adjudicating authority has not permitted the cross examination of Shri. Behera to bring out the truth. In his statement dated 23.11.2007, the Director Shri. Sitaram Agarwal has denied his involvement in the activity of clandestine clearance. But, in the Notice it has been alleged that he has accepted clandestine removal of finished goods - Had the adjudicating authority followed the provisions of Section 9D and examined the witnesses who have given the statements, the truth in this statement could have come out - the statements recorded in this case has lost its evidentiary value by not following the provisions of Section 9D - Procedure set out in Section 9D has not been followed in this case. Question is answered in negative. Whether the allegations of clandestine clearance of finished goods by the Appellants are substantiated with corroborative evidence? - HELD THAT - No inquiries were conducted with regard to the alleged clandestine removal on the basis of the aforementioned records recovered. The sales records shows cash receipts of Rs. 7 crores, which the Revenue alleges that sales proceeds of clandestinely cleared silico manganese in cash. However, no verification was done to ascertain this - The Appellants cited many judgments wherein it has been categorically laid down that when the names of the buyers were available in the seized records it would be incumbent on the investigation to make inquiries from the buyers for establishing clandestine removal. In the instant case, the investigation has not brought in any corroborative evidence to substantiate the allegation of clandestine removal - the investigation has failed to establish the alleged clandestine clearance of goods by the Appellants and hence the demands confirmed in the impugned order are not sustainable. Accordingly, question answered in the negative. Whether high consumption of electricity during the years 2005-06 and 2006-07 can be relied upon to allege clandestine manufacture and clearance to demand duty during the relevant period? - HELD THAT - It is observed from the Project Report of the Appellant that electricity required for production of 1 MT of Silico Manganese is 3800 units. As against this, the Appellant has consumed 7900 and 5564 units per MT during the years 2005-06 and 2006-07 respectively. It is observed that there was widespread variation in consumption of electricity between months. For Example in the month of April 2006, the electricity consumption per month comes to 28000 to 31000 units per MT - the excess electricity consumption alone cannot be an evidence to substantiate the allegation of clandestine clearance - question answered in negative. Whether the demands confirmed in the impugned order on clandestine clearance of finished goods is sustainable, without verification at the buyer's end? - Also, in the absence of any evidence of procurement of the major raw materials for manufacture of silico Manganese, without invoices, whether demand is sustainable? - HELD THAT - The revenue has failed to corroborate unaccounted clearance available in the data retrieved from the pen drive by verification at the customer's end. Since it is already held that the data recovered from the pen drive does not have any evidentiary value, the conclusion arrived at by the investigation with one verification cannot be considered as corroborative evidence for the clandestine clearance of entire 3474.950 MT of Silico Manganese alleged to have been cleared through cash transaction. Hence, question answered in negative. Whether penalty is imposable on the Appellant company and it's Director, on the basis of the evidences available on record? - HELD THAT - It is found that no evidence has been brought on record to establish that the Directors are involved in clandestine manufacture and clearance of the goods. As the evidence available on record does not establish the clandestine manufacture and clearance, the penalty imposed on the Directors is not sustainable. Accordingly, the same is set aside - question answered in the negative. The impugned order set aside - appeal allowed.
Issues Involved:
1. Whether the data retrieved from the pen drive and other computers belonged to the Appellant's company and can be relied upon as evidence to demand duty. 2. Whether the conditions mentioned in Section 36B have been followed to rely upon the computer printouts as evidence. 3. Whether the procedure set out in Section 9D of the Central Excise Act, 1944 was followed, and if not, whether the statements recorded under Section 14 can be relied upon to demand duty. 4. Whether the allegations of clandestine clearance of finished goods by the Appellants are substantiated with corroborative evidence. 5. Whether high consumption of electricity during the years 2005-06 and 2006-07 can be relied upon to allege clandestine manufacture and clearance to demand duty. 6. Whether the demands confirmed in the impugned order on clandestine clearance of finished goods are sustainable in the absence of any evidence of procurement of the major raw materials without invoices. 7. Whether penalty is imposable on the Appellant company and its Directors based on the evidences available on record. Summary: Issue 1 and 2: The Tribunal observed that the data retrieved from the pen drive and other computers revealed unaccounted production and clearance of 3474.950 MT of Silico Manganese. However, the pen drive, a floating device, was not accompanied by the necessary certificate under Section 36B(4), and the computer from which the data was produced was not identified. The Tribunal held that the data from the pen drive could not be admitted as evidence without corroboration, citing the decision in M/s Jai Balaji Industries Ltd. Vs. CGST. Issue 3: The Tribunal noted that the statements recorded from the Directors and other officials were not tested in accordance with Section 9D of the Central Excise Act, 1944. The Tribunal relied on the decision in G-Tech Industries Vs Union Of India, which mandates that statements recorded during investigation must be tested under Section 9D to be admissible as evidence. The Tribunal concluded that the statements in this case lost their evidentiary value due to non-compliance with Section 9D. Issue 4: The Tribunal found that the investigation did not bring any corroborative evidence to substantiate the allegations of clandestine removal. The Tribunal emphasized that positive, tangible evidence is required to confirm demands on clandestine removal, and mere entries in private records are insufficient. The Tribunal cited the decision in Kumar Cotton Mills (P) Ltd. Vs Commissioner of Central Excise, Ahmedabad, which held that demands cannot be made on assumptions and presumptions. Issue 5: The Tribunal held that excess electricity consumption alone cannot be used to substantiate allegations of clandestine clearance. The Tribunal relied on the decision in CCE Vs. R.A. Casting P. Ltd., affirmed by the Hon'ble Supreme Court, which stated that electricity consumption varies and cannot be the sole basis for determining duty liability. Issue 6: The Tribunal observed that the revenue failed to corroborate unaccounted clearance by verification at the customer's end. The Tribunal noted that verification of only one cash transaction out of many was insufficient to generalize the result for all entries. The Tribunal concluded that the demands confirmed in the impugned order were not sustainable without verification at the buyer's end and evidence of procurement of raw materials without invoices. Issue 7: The Tribunal found no evidence to establish that the Directors were involved in clandestine manufacture and clearance of goods. The Tribunal held that the penalty imposed on the Directors was not sustainable and set aside the same. Conclusion: The Tribunal answered all the issues in the negative, set aside the impugned order, and allowed the appeal filed by the Appellants. The demands of duty, interest, and penalties were not sustained.
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