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TMI Blog2019 (12) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... rtation of finished goods was found - Shri Snehal/ Bhavesh Shah in his statement has stated that the Pen Drive ledger pertained to trading done by him of SS Patta, SS Coils and SS Pipes in his personal capacity. The show cause notice and the impugned order has alleged that the persons whose statements have been relied upon has stated that they were doing trading or acting as broker in SS Pipes of M/s SSPL. They have also verified the Pen drive ledger as pertaining to their firm. The Appellant Unit in its reply to show cause notice had challenged the authenticity/ genuineness of such pen drive data on the ground that the same is inadmissible in evidence as the requirements of Section 65B of the Indian Evidence act and procedure required under Section 36B of the Central Excise Act was not followed - Section 36B of Central Excise Act is parimateria to Section 65 of the Indian Evidence Act. As per Section 36B(1) computer printout is considered as document for the purpose of central excise act and rules and is admissible as evidence subject to condition in Section 36 B (2). There is no computer on which the data stored in pen drive was produced. There is also no person was identif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther in case of ARYA FIBRES PVT. LTD. [2013 (11) TMI 626 - CESTAT AHMEDABAD], the tribunal while dealing with the reliability of papers found from the evidence of the buyer held that private records seized from the premises of the buyer cannot be sole basis for demand especially when corroborative evidence like purchase of extra raw material, actual removal of clandestine goods, receipt of sale proceeds, etc. not produced. In the facts of the present case there is no dispute that the documents/records recovered solely from third parties, statements of third parties whose cross examination was not allowed despite it is mandatory under section 9D of CEA, 1944, no incriminating documents recovered from the Appellant SSSPL, no excess/short stock of raw material or finished goods were found; no excess electricity consumption was proved, no evidence of any cash receipt or it s seizure, no excess raw material consumption was found - thus, the clandestine removal without any evidence as narrated above cannot be established. The demands made against the Appellant Unit are not sustainable - appeal allowed - decided in favor of appellant. - E/10939 - 10942/2015 - A/12332-12335/2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was opened in presence of Shri Mahendra M. Shah and the data revealed sale of SS Patta and Pipes to customers in cash for the period April 2007 to July 2012. The data also related to purchase of Stainless Steel Flats and coils which are raw material for manufacture of SS Patta and Pipes, sales of SS Patta and Pipes and other data related to M/s SSPL viz. bank accounts and other transactions, Cash transactions, receipts of payments in RTGS by M/s SSPL and STPL and payment of equal amount in cash, the entire ledger reflecting only receipt and payments of amounts, Day book indicating date wise transactions, P L Account and Balance Sheet for the period prepared by taking into account SS Pipes and Pattas sales reflecting in seized pen drive. Statement of Shri Snehal Shah was relied upon that he explained the contents of data in pen drive which were related to business transactions of M/s STPL. He also admitted that all the bank amount shown in records retrieved from pen drive have been shown by decreasing one digit. However in respect of cash amount he did not accept the same. It was alleged that the data retrieved from pen drive showed certain ledger accounts reflecting receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1,67,29,149/- was based upon Ledger Account Pipe retrieved from Pen Drive seized from residence of Bhavesh/Snehal R. Shah. (iii) Demand of ₹ 8,31,323/- based on documents recovered from residence of Shri Bhavesh/Snehal R. Shah. (iv) Demand of ₹ 1,49,900/- based on documents recovered from office of Shri Mahendra M. Shah. (v) Demand of ₹ 8,27,505/- based on Transport Register recovered from office of Suvidha Roadways, Vasai. 3. The demand as proposed and penalties were ordered against M/s SSPL vide impugned order. Penalty was also imposed in terms of Rule 26 against co-appellants. Aggrieved the Appellants have filed present appeals. 4. Shri J.C. Patel, Ld. Counsel appearing for the Appellant M/s SSPL submits that the Show Cause Notice has placed reliance on statements of Mahendra Manilal Shah, Director of Sunrise Stainless Steel P. Ltd, Shri Snehal R. Shah (alias Bhavesh Shah), Director of Sunrise Trade Wings P. Ltd., Nawalkishore Radheshyam Dalal, Partner of Allit Metal Tubes, Babulal Ganeshmal Bhora, Proprietor of Rashmi Steels, Pradeep Jagdish Bhagat, Proprietor of Suvidha Roadways, Jayantilal J. Sanghavi, Prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Act,1944 have not been satisfied. Section 65B of the Indian Evidence Act 1872 and Section 36B of the Central Excise Act, 1944 provide that an electronic record which is generated/produced by a computer and which is stored in any device (such as Pen Drive) would be admissible in evidence only if it is established that: (a) the data in question was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; (b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities; (c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertained to his personal trading activity and to receipt and payment in cash of loans taken by him. He submits that during visit to the SSPL, no shortage or excess of raw materials or finished goods was found and no evidence of procurement of excess raw materials, consumption of excess electricity and production capacity to manufacture such huge quantity alleged to have been clandestinely cleared was found. No seizure of any unaccounted goods or cash. The Appellant s factory does not have the capacity to produce such a huge quantity which is alleged to have been cleared clandestinely. The Commissioner has not rebutted this assertion in his findings. Therefore in absence of any such evidence, no case of clandestine manufacture and removal can be made out. He relies upon decisions in case of Vishwa Traders P.Ltd v CCE 2012 (278) ELT 362 upheld by Hon bleHigh Court in 2013 (287) ELT 243 (GUJ) and by Hon ble Supreme Court in 2014 (303) ELT A24 (SC), He also relies upon orders in case of Arya Fibres P. Ltd v CCE 2104 (311) ELT 529 and other judgments. 7. As regard confirmation of demand made under Annex A-3 based on documents recovered from residence of Snehal R. Shah, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnx-5. Hence demand is not sustainable. 8. Shri T.G. Rathod (Joint Commissioner) Learned Authorized Representative appearing for the revenue submits that the pen drive and records viz. loose papers and small diary seized from residence of Shri Bhavesh/Snehal R. Shah show that the sale transaction were of goods of M/s SSPL. Also the register seized from transporter M/s Suvidha Transport shows that the goods were transported from Chhatral where the Appellant Unit is located to Mumbai. He relies upon the statement of brokers and Shri Mahendra Shah and Bhavin Shah that the ledgers found in pen drive pertains to the goods cleared by M/s SSPL. He relies upon Orders in case of K.K. Plastics Vs. CCE, Cochin 2019 (1) TMI 909, Final Order No. A/51970-51979/18 Guruharkishan Ind. Vs. CCE, Delhi III, CCE, Salem Vs. CESTAT Chennai 2019 (336) ELT 647 (Mad), Lawn Textiles Mills P. Ltd. 2018 (362) ELT 559 (Mad.), Laxmi Enterprises 2018 TIOL 1293 CESTAT DEL, Usman Suleiman Darvesh 2017 (358) ELT 1014, NR Sponge P. Ltd. 2015 (328) ELT 453 (TRI), International Cylinders P. Ltd. 2015 (255) ELT 68 (HP), Shri UlaganayagiAmmal Steels 2008 (231) ELT 434 (TRI) and Copies Force India Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise act and rules and is admissible as evidence subject to condition in Section 36 B (2) which is as under : (a) the computer print out containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; (b) during the said period, there was regularly supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived; (c) throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and (d) the information contained in the statement reproduced or is derived from information supplied to the computer in the ordinary course of the said activities. 11. We find that in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using appropriate softwares hardwares,virtually any information can be created by arranging those digits in that particular manner, so as to create the digital information; containing therein a linguistic sentence or a sentence of conversation in audio form. Once an information is created, its mirror image can be used by a person claiming it to be the copy of the original. Still further, by passing the so created information through the appropriate filters of softwares, data or the filters of pitch and frequency, which again would be in the digital form, voice of anybody can be re-created by the experts of the computer field. Hence, since the entire computer information is in the form of precise digital form only, therefore, the same can be created as `original' also with the same precision, even without the risk of possibility of the fabrication being easily detected. Its only the question of as to what is the level of expert who is creating the digital information. Hence, the digital information has to be treated with due suspicion and more stringent test has to be applied to it than the ordinary evidence, as has been held by the Hon'ble Supreme Court in its judgment rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of `Primary' or `Secondary' evidence, unlike the other documentary evidence. 12. In view of above judgments we are thus of the view that the pen drive data cannot be relied upon without following the requirements Section 36B of the Central Excise Act, 1944. As such the demands based upon pen drive in the present case cannot be confirmed against M/s SSPL. We further find that taking the pen drive data as base, the statements of traders were recorded who stated that the data contains the ledger of transactions effected by them with M/s SSPL. The Appellant during the adjudication proceedings had sought cross examination of persons and officers whose statements were relied upon in show cause notice under Section 9 D of the Central Excise Act. However the same was denied to them. In our view when the demand against M/s SSPL was based upon pen drive and papers seized from residence of third party Shri Bhavesh Shah as well as statements of third party i.e traders/ brokers, in that case it was imperative for the adjudicating authority to allow cross examination of such persons to the Appellant. Since no opportunity to cross examine such persons whose statements has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. (2) The provisions of sub-section (1) shall, so far as may be, apply in relation to any proceedings under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court. 11 . We may straightaway say that the provisions of Section 9D of the Central Excise Act, 1944 are identical to the provisions of Section 138B of the Customs Act, 1962 which would be applicable in the present case. 12 . Section 138B of the Customs Act, 1962 reads as under :- 138B. Relevancy of statements under certain circumstances . - (1) A statement made and signed by a person before any gazetted officer of customs during the course of any inquiry or proceeding under this Act shall be relevant for the purpose of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a valuable right given to the accused/Noticee, as these proceedings may have adverse consequences to the accused, at the same time, under certain circumstances, this right of cross-examination can be taken away. The court also observed that such circumstances have to be exceptional and that those circumstances have been stipulated in Section 9D of the Central Excise Act, 1944. The circumstances referred to in Section 9D, as also in Section 138B, included circumstances where the person who had given a statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay and expense which, under the circumstances of the case, the Court considers unreasonable. It is clear that unless such circumstances exist, the Noticee would have a right to cross-examine the persons whose statements are being relied upon even in quasi judicial proceedings. The Division Bench also observed as under :- 29. Thus, when we examine the provision as to whether the provision confers unguided powers or not, the conclusion is irresistible, namely, the provision is not uncanalise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it does not declare such statement to be a conclusive evidence so as to base findings in regard to fiscal liability only on that statement. Making a document relevant for the purpose of proving truth of facts which it contains is one thing and holding such statement as conclusive evidence to prove a fact is another thing. 34 . Revenue in the case in hand has tried to use and rely aforesaid statements of third parties, without permitting cross-examination by assessee, as a conclusive evidence to prove facts stated therein. It means that Revenue want to utilize an ex parte version to pass an adverse order against a person without giving such person an opportunity to cross-examine the persons who have made such statements so as to have an opportunity to show that those statements are not true or there is some inaccuracy or otherwise irregularity etc. Such an attempt on the part of Revenue is not only illegal but also in the teeth of principles of natural justice and beyond the scope of Sections 14 and 9D of Act, 1944. 35 . In view of above discussion, we answer both questions against appellant and confirm the view taken by Tribunal in the judgment under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the seized documents whereas the same could not have been relied upon in absence of corroborative evidence from the independent source or any evidence at the Appellant Unit s end. The show cause notice does not point out any discrepancy at the time of visit of the officers in raw material or finished goods stock. No inculpatory record/ papers were found at the factory of Appellant Unit which could show that any excess raw material has been received by them or any goods has been cleared clandestinely by them. There is no production record or raw material consumption record showing excess unaccounted production. No statement of production incharge or worker is appearing. Except pointing out the transport register of Suvidha Transport and that too for few transports, there is no other independent evidence of transportation of goods. Pertinently we find that statements of few traders/ broker were recorded but none of them has provided even a single name of customer or actual buyer. No finished goods alleged to be clandestinely cleared was seized from any alleged buyer. No transport Bilty or octroi receipts/ records has been brought on record to show that the goods were consigned f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished goods. The investigation has not proceeded further to bring on record unaccounted purchases of all the raw materials required for manufacturing of Frit . 14 . In the case of Dhanavilas (Madras) Snuff Co. - 2003 (153) E.L.T. 437 (Tri-Chennai), we find that in Para 6, the Tribunal has recorded as under : 6 ..Revenue ought to have produced the evidence of purchase of raw material, manufacture and clearance of goods clandestinely by examining the workers and also those who have received the goods without payment of duty. In view of lack of evidence, the Commissioner has rightly dropped the proceedings with regard to the charge pertaining to clandestine removal. However, he has upheld the charge pertaining to certain other charges and has confirmed duty and penalties In yet another case in the case of S.T. Texturisers - 2006 (200) E.L.T. 234, this Bench, in respect of clandestine removal, very clearly held as under : 6. Considering the above arguments of the appellant in the light of the various decisions of the Tribunal, it is seen that it has been consistently held by the Tribunal that entries in rough register cannot be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal went in great detail and have clearly laid down that unless department produces evidence, which should be clinching, in the nature of purchase of inputs and sale of the final product demands cannot be confirmed based on some note books. A similar view was expressed by the Tribunal in the other judgments noted supra. The citations placed would directly apply to the facts of this case. Hence, following the ratio of the cited Judgments, the assessee s appeal is allowed. All the above reproduced ratio would lead to a conclusion that the charge of clandestine manufacture and removal has to be proved beyond doubt and in the case before us, as already discussed, there is nothing on record that instils confidence in our mind that the appellant had clandestinely manufactured and cleared the final product. Further, it is settled law that for the purpose of clandestine removal, there has to be clandestine manufacture. We find on perusal of the record, that the Revenue authority, despite having engaged themselves in massive investigation, has not brought on record a single evidence of procurement of other major raw materials required for manufacture of Frit, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the circumstances, on the basis of the material available on record, it is not possible to state that the Tribunal has committed any legal error In giving benefit of doubt to the assessee. (Emphasis supplied) The above ratio, as laid down by Hon ble High Court of Gujarat, would squarely cover the issue before us. 16. In the absence of any tangible evidence which would indicate that there was clandestine manufacture and clearance of the goods from the factory premises of M/s. VTPL, in the peculiar facts and circumstances of this case, we hold that the impugned order which confirms the demand on the appellant M/s. VTPL and imposes penalty on them is not sustainable and is liable to be set aside and we do so. 14. The above order of the tribunal stands upheld by the Hon ble High Court of Gujarat as reported in 2013 (287) E.L.T. 243 (Guj.). 15. Further in case of ARYA FIBRES PVT. LTD. 2014 (311) E.L.T. 529 (Tri. - Ahmd.), the tribunal while dealing with the reliability of papers found from the evidence of the buyer held that private records seized from the premises of the buyer cannot be sole basis for demand especially when co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce has been brought either in the SCN or in the Adjudication Order to show that raw materials have been purchased by Nova for manufacture of such a huge quantity of POY. There is no proof of any extra payment being made to Nova by GSL. In the absence of these evidences, the ld. Senior Advocate submitted that it would be impossible to conclude that Nova had cleared POY of such huge quantities to GSL, in the light of the decisions of this Tribunal, which he has earlier placed before us. He also submitted that V.N. Parab s statement, could not be given much credence for the reason that these were note books maintained by him in the office of GSL. It would be difficult for Nova to explain why such entries were made by V.N. Parab who was neither their employee nor acting under their instructions. When the Directors of Nova were shown the records of GSL, they have stated that they cannot comment on the records of GSL. It was also the submission made by the ld. Senior Advocate that no presumption of truth can be drawn against Nova from the documents A-19, A-20, A-22 or A-23 or from the statement of V.N. Parab. Under Section 36A of the Act, where any documents have been seized from the cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployees of Nova. Applying the ratio of the decision of the Hon ble Supreme Court in M.M. Mathew (supra), the documents upon which the show cause notice has placed strong reliance has no probative value. The ld. Senior Advocate further submitted that merely because the document has been produced during investigation, it does not establish its probative value. The Hon ble Supreme Court in the case of Bareilly Electricity Supply v. Workmen, 1971 (2) SCC 617 has held that mere production of document does not amount to proof. Further, in the case of Life Insurance Corporation of India Anr v. Rampal Singh Besin, (2010) 4 SCC 491, the Hon ble Supreme Court has held that mere admission of a document in evidence does not amount to its proof . Para 25 of the said decision reads thus : We are of the firm opinion that mere admission of a document in evidence does not amount to its proof. In other words, mere marking of exhibit on a documents does not dispense with its proof, which is required to be done in accordance with law . The ld. Senior advocate has, therefore, submitted that the confirmation of the demand of ₹ 56,52,945/- is arbitrary, illegal and unjusti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting under Nova s instructions. Reliance by the ld. Senior Advocate on the decisions of the Hon ble Supreme Court in State of Kerala v. M.M. Mathew (supra) and Bareilly Electricity Supply v. Workmen (supra) are appropriate and supports the submission made on behalf of Nova. In cases like the present, where the demand is based on clandestine production, clearance and sale of excisable goods, mere entries in note books or diaries cannot establish the same. Proof of actual production, whether by direct evidence or corroborative evidence is a must , and the probative value of such evidence has to be established, especially when such a finding would lead to penal consequences. In our view, therefore, the present demand of ₹ 56,52,945/-, which has been confirmed against Nova by the impugned order, is not based on evidence which, as this Tribunal has repeatedly emphasized in cases of clandestine manufacture and clearance, would justify a finding against the appellant (Nova). Inferential or conjectural conclusions cannot be arrived at in such cases as has been done in the present demand, merely based on what GSL did with the POY allegedly sold to them by Nova. Unless ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of raw materials for the manufacture of Polyester Chips. That apart, no evidence have been led by the Revenue regarding production of such a huge quantity of POY. Undoubtedly, these POY could not have been transported without proper mode of transport. The Revenue has failed to bring on record any evidence regarding transportation of POY alleged to have been manufactured clandestinely. No buyer has been identified who has clandestinely procured the POY from Nova. Merely because Ashok Chiripal has explained the entries made in the diary, it cannot be accepted as a basis for demanding duty against Nova. The adjudicating authority has sought to rely upon the statement of Ashok Chiripal without subjecting him to cross examination. The ld. Senior Advocate appearing for Nova reiterated these submissions. He emphasized that, under Section 36A of the Act, mere production of document would not have no probative value as has been held by the Hon ble Supreme Court in Bareilly Electricity Supply (supra). It was pointed out by the learned Senior Advocate that the decision of Hon ble Supreme Court in Duncan Agro Ltd. has been wrongly applied to the facts of the present case. It has further been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all manufactured, to any buyer. No payments made by Nova to suppliers of raw materials, nor by buyers of POY to Nova have been specifically alleged or any evidence adduced of the same. The ld. Senior Advocate for Nova, in his written submissions, again referred to the decisions of the Hon ble Supreme Court in Bareilly Electricity Supply case (supra), Ram Bihari Yadav (supra), LIC of India v. Ram Pal Singh Besin, (2010) 4 SCC 491 in support of the proposition that mere admission of a document in evidence does not amount to its proof, which has to be done in accordance with law. He also relies upon the fact that the entries in the diary showed that approximately 4.97 lakhs kgs were manufactured in March, 2002, 16.46 lakhs kgs in April, 2002 and 28.54 lakhs kgs in May, 2002. Such variation could not have been real, on which no explanation was sought from Ashok Chiripal when his statement came to be recorded. Nova s request for his cross examination was rejected. The Adjudicating Authority, as submitted by the ld. Senior Advocate, rejected the aforesaid submission regarding the variation by merely stating that there was no such variation in the Polyester Chips manufactured from month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of entries made in a document. It is totally a different thing to assess the probative value of the contents of the document. As repeated by this Tribunal, clandestine manufacture and clearance cannot be readily inferred from documents and statements. They have to be established on evidence, relatable to or linked with actual manufacturing operations. As far as the present demand is concerned, there is no such evidence forthcoming in the record before us. Mere reliance on note books/diaries or statements cannot justify a finding of clandestine manufacture and/or clearance. Investigation into the sources of supply of raw material (MEG PTA in the present case), especially when Nova had stated that they get their raw materials from Reliance Industries Ltd., one of the biggest producers thereof, would have revealed the actual facts. Apparently, no efforts seem to have been made in this behalf by the investigating authorities. Of equal importance would have been investigations into the transportation of the raw materials (in huge quantities, as alleged) to Nova and of POY allegedly manufactured from the factory of Nova to its buyers, and payments for such raw materials and for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Managing Director of the Appellants was not even questioned about these reports. In the case of Rama Shyama Papers Ltd, supra, wherein the records were seized from the premises of one of the customer of the assessee, the Tribunal did not uphold the charge of clandestine removal as the Revenue has not been able to adduce any corroborative evidence to show the movement of goods from the premises of the Appellant s company to the premises of M/s. Chitra Traders or the Customers when the goods were sent directly to as per the directions of Chitra Traders... The onus of proof that the goods were removed by the Appellants without payment of duty and without entering the same in their records is upon the Revenue which cannot be discharged merely on the strength of the entries made in the records of a third party without linking the removal of goods from the premises of the Appellant Company. In the present matter also the Revenue has not brought any material on record to show that the excess bag-in-boxes said to have been sold by M/s. Hyderabad Beverages were removed from the premises of the Appellants. As show cause notice alleging clandestine removal cannot be issued based o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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