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TMI Blog2020 (1) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... on Limited, towards the amount of duty confirmed and recovery of interest under the provisions of Section 11AB of the Act and the imposition of Rs. 1,02,75,737/- (Rs. One crore two lakhs seventy five thousand seven hundred and thirty seven only) under the provisions of Section 11AC of the Act. However, the benefit was given penalty as per law if the amount so confirmed is deposited within thirty days from the communication of the order. 2. The Adjudicating Authority imposed penalty of Rs. 20 lakhs on Shri Bharat Bhushan Sachdeva, Director of M/s Shiv Shakti Iron (for short SSIL) Sponge Limited under Rule 26 of the Central Excise Rules 2002 (for short 'the Rules'). Being aggrieved by the above order the Appellant Company along with Director of the Company are in appeal by the two separate appeals. 3. Brief facts of the case are that M/s Shiv Shakti Sponge and Iron Limited, Mayurbhanj, Orissa (hereinafter for short 'SSIL) is registered with the Department and is engaged in the manufacture of Sponge Iron (in short 'the impugned goods') falling under Chapter heading 72 of the Central Excise Tariff Act, 1985 ( in short 'CETA') and have contravened various provisions of Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also submitted as under; (i) The documents contained in the pen drive for which print outs were taken, the document 61 was purchase ledger of Union, document 62 ledger again of Union, document 64 of ATL and document 65 was purchase ledger of ATL. The Entire demand appeared to have been calculation based on the comparison of the data contained in the pen drive/ printouts with the statutory recorded maintained by the Appellant under the provisions of Central Excise Act and Rules. (ii) No search or investigation were conducted in the premises of the Appellant and; no cash was found; no excess raw material found; no stock discrepancies; no evidence/ statement of transporters; electricity consumption, capacity to manufacture. (iii) The entire demand has been raised on the basis of a pen drive/print outs record obtained from the premises of the third party and also the private records of the third party which were compared with the Appellant's statutory records. (iv) The confession statement of Shri Bharat Bhushan Sachdeva who were the common Director of all the four companies were obtained under duress which in any case under the capacity as the Director/ proprietor of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity by the Appellant. Although the statement of Shri Sachdeva dated 26.09.2009 was retracted and the existence of data in the pen drive from where the various files were extracted is not disputed. But any data contained in the pen drive/printouts has to be as per the provisions of Section 36B of the Act which has definitely not been followed by the Adjudicating Authority. We find that the issue stand settled by the various decisions which has been quoted by the Appellant to this effect, however, we reproduce only a few of them in case of Premium Instrument (supra) which is held as under; "9. On the demand of duty on waste and scrap, again the appellants have made out a strong case on merits. The demand covering the period November 1993 to September 1998 is based on certain computer print-out relating to the period February, 1996 to September, 1998. These printouts were generated from a personal computer of Shri G. Sampath Kumar, a junior officer of the Company, whose statements were also recorded by the department. Admittedly, whatever facts were stated by Shri Sampath Kumar, in his statements, were based on the entries contained in the computer print-outs. The statements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that Shri Sampath Kumar was the person having lawful control over the use of the computer. The computer was not shown to have been used regularly to store or process information for the purposes of any activities regularly carried on by the company. It was also not shown that information of the kind contained in the computer print-out was regularly supplied by the Company to the personal computer of Shri Sampathkumar in the ordinary course of activities. Again, it was not shown that, during the relevant period, the computer was operating in the above manner properly. The above provision also casts a burden on that party who wants to rely on the computer print-out, to show that the information contained in the print-out had been supplied to the computer in the ordinary course of business of the company. We find that none of these conditions was satisfied by the Revenue in this case. We have considered the Tribunal's decision in International Computer Ribbon Corporation v. CCE, Chennai (supra). In that case, as in the instant case, computer print-outs were relied on by the adjudicating authority for recording a finding of clandestine manufacture and clearance of excisable go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the submissions of the appellant, the Commissioner (Appeals) allowed the cross-examination of 4 persons randomly selected. Three of them stated that they were made to sign the pre-drafted statements on a promise that no action shall be taken against them. 8. For the purpose of proper appreciation of the case, the relevant portion of the findings of the Commissioner (Appeals) is reproduced below : - "4.5 Another contention of the appellant is that department has brought artificial evidence in the form of 30 statements from the buyer parties. The appellant stand is that the statements of the 30 parties are pre-drafted computer statements and involuntary. Four of the buyers (randomly selected) deposed before me. Three of them stated before me that they were made to sign a pre-drafted statement on a promise that no action shall be taken against them. One of them stated that his statement was voluntary. In the statements it has been recorded that these person stated that they received the textile auxiliary chemicals without invoice and against cash payments. Statement of these 30 persons (most of them Processors) are against their own interest as it makes them liable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing viz. "(a) the computer printout 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 of the kind from which the information so contained is derived; (c) throughout the material part of the said period, the computer was operational 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." Sub-section (4) of Section 36B requires issue a certificate in this behalf by a person occupying the responsible official position in relation to the operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Excise Act which deals with admissibility of computer printouts etc. as evidence and says that the statement contained in a computer printout shall be deemed to be a document for the purposes of the Act and the rules made thereunder and shall be admissible as evidence of the contents of its original, if the conditions mentioned in sub-section (2) and other provisions of the Section are satisfied in relation to the statement and the computer in question. Sub-section (2) reads as under : - "2. The conditions referred to in sub-section (1) in respect of the computer printout shall be the following, namely : - (a) the computer printout 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 of the kind from which the information so contained is derived; (c) throughout t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erated by Sampath Kumar's PC can be admitted into evidence for non-fulfilment of the statutory conditions. It is also noteworthy that the computer printouts pertained to the period February, 1996 to September, 1998 only but the information contained therein was used for a finding of clandestine removal of waste and scrap for earlier period also, which, in any case, was not permissible in law. In the result, we hold that the entire demand of duty on waste and scrap is liable to be set aside." 11. Taking into consideration the overall facts and circumstances of the case, I find that the entire case was made out on the basis of statements of the buyers and the computer printout. Commissioner (Appeals) already held that the evidentiary value of the statements is weak. It is also noted that the statements of the 30 persons were mostly similarly predrafted. The investigating officers failed to comply with the conditions of Section 36B of the Act in respect of relying upon this computer printout. There is no adequate material available on record to establish the clandestine removal of goods. Therefore, the demand of duty solely on the basis of these materials cannot be sustained. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 regular 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 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 reproduces or is derived from information supplied to the computer in the ordinary course of the said activities. (3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced by it directly or (with or without human intervention) by means of any appropriate equipment. Explanation. -For the purposes of this section, - (a) "computer" means any device that receives, stores and processes data, applying stipulated processes to the information and supplying results of these processes; and (b) any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process." 14.1 In our considered view the computer printouts in the facts at hand do not fulfill the mandatory provisions of Section 36B-(2) & (4) of the Central Excise Act, in so far as there are serious irregularities about the manner of sealing of the computers as pointed out hereinabove and one computer not sealed at all. The provisions of Section 36B(4) have also not been fully complied with. The Ld. Counsel has strongly relied upon the law laid down on the admissibility of electronics records by the Supreme Court in the case of Anwar P.V. Vs. P.K. Basheer reported in MANU/S/0834/2014 wherein in paragraphs 13 to 17 it has been held as under:- "13. Any documentary evidence by way of an electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the circumstances even the statement which has not been retracted cannot be taken as an admissible piece of evidence. 16. We also find that the demand has been passed on the third party documents recovered from the premises of the Union and SEWPL which cannot be relied upon in view of decision of this Tribunal in case of Rhino Rubber, Rama Shayama Papers, Bhandari Industries, Jai Mata Industries and Shri Sidhbali Ispat and Shri Sidhbali Ispat(Supra) is reproduced as under; "7.We have considered the submissions made at length by both sides and perused the records and also considered the case laws quoted by both sides. 8.The issue involved in these cases is whether the main appellant has indulged in clandestine manufacture and clearances of finished goods or otherwise; whether Revenue is able to make out a case of clandestine removal and whether penalties are to be imposed on the appellants. 9.Having heard both sides at length and after perusing the record, we are of the view that the investigations in this matter raise more questions than answer them. To say that the investigations have been slipshod in our view will only be an understatement. It appears that the vital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny letter or document on record evidencing the same having been supplied/furnished by the Octroi Authorities. 9.6Demands are based on documents which were recovered/seized not from the assessee's premises but from premises of third parties such as transporter's premises, premises of an employee who was residing with his brother-in-law of a key transporter in this case etc. Since these documents were not seized from the premises of the appellant, the burden of proving that the same pertain to the appellant lies upon the Revenue. The notice has however, without establishing how the said documents could be correlated with the appellant assumed the same to be correct and pertaining to the appellant. 9.7Having summarised the lacunae and shortcomings in the investigation, we shall now deal with the broad evidence relied upon qua each of the demands confirmed in the impugned order and examine whether the evidence relied upon is sufficient to establish the case of clandestine removal. 9.8The largest demand of Rs. 83.09 lakhs is based on LRs/Daily Account Book Register seized from the premises of Mr. K.K. Pandey, brother-in-law of Mr. Monu Pant - the proprietor of M/s. Aishwarya Ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity for in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without payment of duty; (i) links between the documents recovered during the search and activities being carried on in the factory of production; etc." 9.9The aforesaid ratio also finds support in the following judgments : (a) Vishwa Traders Pvt. Ltd. v. CCE, 2012 (278) E.L.T. 362 (T), as affirmed by the Hon'ble Gujarat High Court in CCE v. Vishwa Traders, 2013 (287) E.L.T. 243 (Guj.), (b) Sakeen Alloys Pvt. Ltd. v. CCE, 2013 (296) E.L.T. 392 (T), which has been affirmed by the Hon'ble Gujarat High Court in CCE v. Sakeen Alloys, 2014 (308) E.L.T. 655 (Guj.), (c) Mahesh Silk Mills v. CCE, 2014 (304) E.L.T. 703 (T), as affirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to establish that these photocopies are obtained from the Octroi department. These photocopies are therefore rendered unreliable. Whatever little case that the Revenue could have, if at all made out, based on such unauthenticated photocopies, does not survive in the instant case in the absence of any investigation with the consignees/purchasers shown in these invoices/LRs. 9.12Further it is relevant to note here that with respect to the said 276 parallel invoices, statements of Mr. Pandey, Vice-President and Mr. D.D. Rathi, Manager (Commercial & Accounts) of the Appellant Company were recorded and both of them have, in their statements dated 18-9-2009 and 17-9-2009 respectively, denied the existence of such parallel invoices by the appellant. Insofar as the 123 LRs supposed to have been received from the Octroi department have been received, the investigating authority did not even deem it necessary to record statement of the appellant's personnel all the same. 9.13The statement of the transporters which have been relied upon to corroborate the said records supposed to have been furnished by the Octroi authorities, also do not support the case of the Revenue inasmuch as a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Akola Transport Co. was only acting as a commission agent and were merely arranging for transportation rather than actually transporting the goods themselves in their own trucks. No investigations have been conducted with the actual transporters engaged by M/s. Akola Transport Co. The Books of Account of M/s. Akola Transport Co. have also not been examined to find out the names of the actual transporters. In any case it is settled law laid down by the Hon'ble High Court of Patna in CCE v. Brims Products, 2011 (271) E.L.T. 184 (Pat.), that allegation of clandestine removal cannot be sustained based merely on transporters' records which are not corroborated by any other evidence." 17. We also find that the charge of clandestine removal thrusted upon the Appellant based on the documents contained in the pen drive without any other corroboration and this is mere presumption and assumption. The demand cannot be sustained which is based on the presumption and assumption as held in case of Sakeen Alloys(supra), wherein it is held as under; "7.It is also observed from Para 14.4 of the show cause notice that names and address of M/s. Siddhi Industries Pvt. Limited and M/s. Mahavir Allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al courts including the Hon'ble Supreme Court relied upon by the appellants. In the case of CCE v. Omkar Textiles - 2010 (259) E.L.T. 687 (Guj.), it was held by the Jurisdictional Gujarat High Court that onus is on the Revenue to furnish the evidence to prove the charges of clandestine removal and it is not sufficient if some confessional statements have been given by the Director of the Company. Similarly, in the case of CCE v. Arsh Casting Pvt. Limited [2010 (252) E.L.T. 191 (H.P.)], the Hon'ble High Court of Himachal Pradesh held that the private records maintained by the staff of the company cannot be made as the sole evidence to hold that clandestine removal of the goods is established and accordingly, the following point of law was decided in favour of the assessee:- "Whether on the basis of private records, the Central Excise duty can be demanded or not when these private records show higher production than that reflected in the statutory records resulting into removal of the excess stock clandestinely i.e. without issue of invoice and without making entries of production and clearance in the statutory records?" 10.Similarly, in the case of CCE, Chandigarh-1 v. Shingar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation, has deposed that they generally work as commission agent and provide transport to Appellant No. 1; the payment is used to be received directly by the drivers after delivery of the goods at the consignee's end and in case the driver did not report back for the next 3-4 days, it was presumed that the goods had reached the consignees end. Further, the name of the Applicant No. 1 on one GR No. 34 had been written not by Shri Sanjay Garg, but by his brother, whose statement has not been recorded and on GR 187, there is no mention of the name of the Appellant No. 1 at all. No statement of the drivers concerned has been recorded by the Revenue to establish that the finished goods manufactured by the Appellants were removed without payment of duty. The other transporters have not been produced for the purpose of cross-examination nor the statements of drivers who might have actually carried the goods, had been recorded. Moreover no statement of any of the recipients of the goods had been brought on record. Thus the statements of the transporters have remained uncorroborated and also suffers from the shortcoming of being not being crossexamined by the Appellants. It has been the set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age to come forward for crossexamination in order to test the veracity and correctness of the private record maintained by him." It has also been held by the Tribunal in the case of Kothari Synthetics Industries v. CCE, Jaipur - 2002 (141) E.L.T. 558 (T) that entries made in the transport Register of the transport company could not be accepted as a conclusive proof of clandestine receipt of goods from that transport company for want of corroboration from any tangible evidence. Following the ratio of these decision, the duty demand cannot be upheld solely on the basis of uncorroborated statements and records of transporter. The statements tendered by the labourers can also not be relied upon by the Revenue as these persons were not produced for being cross-examined. Moreover, there is no corroboration of their statements with regard to the Trucks by which the goods were allegedly removed or the persons who received the goods. The Truck driver Shri Shiv Bahadur Yadav has also not been cross-examined and cleaner Shri Rakesh Kumar had deposed that the Bills/Invoices are supposed to be with the Driver and he being cleaner had no knowledge. The confirmation of duty in respect of 149 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigation when huge transactions are made in cash. In the present case also, it is observed, from the annexures to the show cause notice dated 1-5-2009 issued to the appellants, that there were huge cash transactions to the tune of Rs. 11.23 Crores. When such large number of transactions involving huge amounts are being undertaken in clandestine removal activities, it is very likely that some cash would have been seized. There is not a single instance where either seizure of cash is made or any clandestinely removed goods are seized or raw materials/finished goods were found either short or in excess in the factory premises of the appellant or at any other place. As per the Panchnama drawn at the factory premises it is shown that there was no excess/shortage of the raw materials or finished goods found. The documentary evidences collected from the business premises of M/s. Sunrise Enterprise and the statements recorded by investigation, can at the most raise a reasonable doubt that some clandestine removal activities are undertaken by the appellant. However, such a suspicion or doubt has to be strengthened by positive evidences which seem to be lacking in this case. Any suspici ..... 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