2024 (10) TMI 672 - AT - Central Excise

Clandestine manufacture and removal - excess stock - admissibility of electronic records under Section 36B of the Central Excise Act - printouts allegedly taken from the computerized records of the noticee - burden to proof - HELD THAT - The Central Excise Act contains a specific provision that describes the manner in which the admissibility of computer print outs will be accepted as evidence in proceedings initiated under the Central Excise Act. In respect of section 65B of the Evidence Act, which is pari materia to the provisions of section 36B of the Central Excise Act, it would be relevant to refer to the observations made by the Supreme Court in ANVAR P.V VERSUS P.K. BASHEER AND OTHERS 2014 (9) TMI 1007 - SUPREME COURT , the Supreme Court, held that evidence relating to electronic record shall not be admitted in evidence unless the requirement of section 65B of the Evidence Act is fulfilled. The aforesaid judgment of Supreme Court in Anvar P. V. was followed by the Supreme Court in ARJUN PANDITRAO KHOTKAR VERSUS KAILASH KUSHANRAO GORANTYAL AND ORS. 2020 (7) TMI 740 - SUPREME COURT , though with a slight modification. The Supreme Court held that if the original device is not produced, then electronic record can be produced in accordance with section 65B (1) of the Evidence Act together with the requisite certificate under section 65B (4). It is not in dispute that the hard disk from which the printouts were subsequently taken was not found installed in the CPU. The Panchnama drawn on 04.07.2013 records that the officers found that Vaibhav Goel had removed a hard disc from his kitchen and had tried to throw it away. The panchnama does not mention that any officer had seen Vaibhav Goel actually remove the hard disc from the CPU. It only records that Vaibhav Goel had removed a hard disc from the kitchen and had tried to throw it away. At a different place, the panchnama records that the officers conducted a thorough search of the entire residential premises and found one hard disc hidden in a corner lying near the dog house. What needs to be noticed is that if Vaibhav Goel had thrown the hard disk, it would not have been found hidden in a corner of a room near the dog house. The seven pen drives were also recovered from a room on the first floor of the rear side of the house. In the said room three computer monitor were also installed without a CPU - There is nothing on the record to link the hard disk to the CPU, nor is there anything to link that the hard disc and the pen drive stored information contained in the computer. The printouts, which are the sole basis for holding that the appellant had indulged in clandestine removal, were taken both on 04.07.2013 and on 15.07.2013 by placing the recovered hard disc and pen drive in the CPU. It is, therefore, clear that the CPU did not contain the hard disk. The hard disk was in fact picked up from the corner of the room. No attempt was made by the department to admit the hard disk and the pen drive in evidence. The required certificate under section 36B (4) of the Central Excise Act was also not produced. Thus, no reliance can be placed on the printouts, in view of the two judgments of the Supreme Court in Anvar P. V. and Arjun Panditrao Khotkar and the three decisions of the Tribunal in M/S AGARVANSHI ALUMINIUM LTD OTH VERSUS COMMISSIONER OF CUSTOMS (I), NHAVA SHEVA 2013 (10) TMI 856 - CESTAT MUMBAI , M/S POPULAR PAINTS AND CHEMICALS REFERRED AS, SHRI MANSOOR ZAFFAR, SHRI HUSSAIN ZAFFAR VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS RAIPUR 2018 (8) TMI 473 - CESTAT NEW DELHI and GLOBAL EXTRUSION PRIVATE LIMITED, SHRI VIJAY MADHUSUDANBHAI DAVE, SHRI DEEPAK KUMAR BABULAL NAGAR, SHRI MANOJ VIJAYKUMAR GUPTA, SHRI MANHAR AMARSHIBHAI CHAVDA, SHRI NIMESHKUMAR JAYANTIBHAI VAGHELA, SHRI JIGNESH BHIMJIBHAI PATEL, SHRI VIPUL DAMJIBHAI SANGHANI, SHRI BABULAL JETHABHAI SABHAYA, SHRI SHARAD KUMAR KALAYANJI VASANT, SHRI SHARAD KUMAR KALAYANJI VASANT, SHRI BHAGESHBHAI JAYANTIBHAI CHANDERIA, SHRI MANOJBHAI DAYABHAI AKBARI PATEL VERSUS COMMISSIONER OF CENTRAL EXCISE ST, RAJKOT 2024 (1) TMI 772 - CESTAT AHMEDABAD . It is, therefore, not possible to accept the contention advanced by the learned authorized representative appearing for the department that panchnama itself should be treated as a certificate or that the adjudicating authority was justified in itself examining whether the conditions set out in section 36B (4) of the Central Excise Act had been satisfied. The impugned order dated 30.06.2021 passed by the adjudicating authority, therefore, cannot be sustained - appeal allowed.

Summary

Issues Involved:

1. Validity of the Panchnama proceedings and the evidence obtained.
2. Admissibility of electronic records under Section 36B of the Central Excise Act.
3. Compliance with procedural requirements for admitting electronic evidence.
4. Reliance on electronic records for quantifying duty evasion.

Issue-wise Detailed Analysis:

1. Validity of the Panchnama Proceedings and the Evidence Obtained:

The appellant challenged the Panchnama proceedings, alleging they were conducted under coercion and did not adhere to legal safeguards. The adjudicating authority, however, found that the procedures for sealing and recovering electronic gadgets were clearly described in the Panchnama, and the locations of recovery were specified. The Panchnama was deemed to satisfy legal requirements, as corroborated by signatures from relevant parties and witnesses. The authority rejected the appellant's contentions, citing that the Panchnama was detailed and legally compliant, thus reliable.

2. Admissibility of Electronic Records under Section 36B of the Central Excise Act:

The appellant argued that the electronic records were inadmissible due to non-compliance with Section 36B. The adjudicating authority asserted that the conditions under Section 36B(2) were met, as the computer was regularly used for storing data related to the appellant's activities. The authority emphasized that the electronic records were obtained in the presence of witnesses and were thus credible. However, the Tribunal found that the required certificate under Section 36B(4) was not produced, rendering the electronic records inadmissible.

3. Compliance with Procedural Requirements for Admitting Electronic Evidence:

The adjudicating authority claimed compliance with Section 36B, asserting that the computer was lawfully controlled and regularly used by the appellant. The Tribunal, however, highlighted that the conditions stipulated in Section 36B(2) were not sufficiently demonstrated, particularly the absence of a certificate as mandated by Section 36B(4). The Tribunal noted that the adjudicating authority's self-examination of oral evidence was not permissible, emphasizing the necessity of a proper certificate for admissibility.

4. Reliance on Electronic Records for Quantifying Duty Evasion:

The appellant contested the use of electronic records for duty quantification, citing procedural lapses in evidence collection. The adjudicating authority relied on printouts from the hard disk and pen drive, asserting they contained both accounted and unaccounted transactions. The Tribunal, however, determined that the absence of a Section 36B(4) certificate and the lack of direct linkage between the hard disk and the CPU invalidated the reliance on these printouts. Consequently, the Tribunal set aside the adjudicating authority's order, concluding that the electronic records could not substantiate the demand.

Conclusion:

The Tribunal concluded that the adjudicating authority's order was unsustainable due to non-compliance with Section 36B requirements, particularly the absence of a necessary certificate. The appeal was allowed, and the impugned order was set aside, underscoring the criticality of adhering to procedural safeguards for admitting electronic evidence.