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TMI Blog2008 (4) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... ., Amman Enterprises (AE), Sri Ulaganayagi Amman Steels (SUAS), Ramalingam Steel Agencies (RSA), Amman Steel Corporation (ASC), the residences of employees of the group concerns namely, Ms. Usha and Ms. Ponnalagu [both of (ASC)] and Amman lodge SASAI manufactures iron rods and bars. SUAS manufactures ingots and billets. AE deals in iron rods and bars. ASC RSA deal in scrap. At SASAI the officers conducted stock taking and found excess stock of finished goods of above 89 MTs of bars/rods and shortage of 70.5 MTs of raw materials, namely, ingots/billets. Searches were followed by elaborate investigation that involved interrogation of Shri S.P.M. Anandan, Managing Partner, SASAI, (who witnessed search at SASAI), Shri Somasundaram, Managing Partner of SUAS, Ms. Usha, Ms. Ponnalagu; a painter who painted the ends of bars/rods manufactured at SASAI, labour contractors, dealers of SASAI, operators of weighbridges, personnel of Vasavi Finance, a financing firm, and transporters. Officers also visited dealers' premises, lorry transport offices, weigh-bridges and certain other premises. Several records/documents were recovered. SASAI maintained computerized accounts 'somsacc' of production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... landestine clearances. Sumangali Steel JBA Steels supplied ingots to SASAI without invoice which were not accounted by SASAI. As there was no substantial corroboration, in his opinion, for clandestine clearances recorded in the floppies for the year 2001-02, in the registers/documents recovered, the Commissioner dropped the proposal to demand duty due on clandestine clearances by SASAI in 2001-02. Concluding separate proceedings where the proposals were strongly contested by the parties which included cross-examination of several witnesses, the Commissioner passed two orders-in-original No. 6/2007 dated 4-5-07 and No. 7/2007 dated 10-5-07. 2. In Order-in-Original No. 6/07, dated 4-5-07, Commissioner demanded Rs. 83,04,988/- being the duty due on unaccounted clearances of ingots and by-products during 4/03 to 6/04 from SUAS under Section 11A(2) of the Central Excise Act '44 (the Act), interest due thereon under Section 11AB and imposed equal penalty under Section 11AC of the Act read with Rule 25 of Central Excise Rules, 2002 (CER). A penalty of Rs. 5,00,000/- was imposed on SASAI under Rule 26 of CER. 2.1 In Order-in-Original No. 7/07 dated 10-5-07, the Commissioner confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the search and seizure in the presence of independent witnesses had not been observed in this case as well, thereby rendering such floppies and printouts inadmissible evidence. These floppies could not be used in the proceedings. In support of this claim, noticees relied on the judgment of the Hon'ble Supreme Court in the case of Khet Singh v. UOI, reported in 2002 (142) E.L.T. 13 (S.C.), wherein it was held that if the search and seizure were in complete defiance of the law and procedure and there was any possibility of the evidences collected to have been tampered with or interpolated during the course of such search or seizure, it could be held that the evidence gathered was not admissible. Reliance is also placed on the judgment of the Hon'ble Supreme Court in the case of Nabakumar v. State of West Bengal, reported in 1974 CRLJ 512 which held that if there was no proper sealing, evidentiary value would be lost. 5. It was submitted that the retrieval of data was done on various dates, in the presence of independent witnesses. One of the investigating officers, Shri V. Kalyanapasupathy, Inspector of Central Excise, was the sole person in charge of such retrieval. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be opened for the reason best known to the Department as all these peripherals remained in their custody after the date of seizure i.e. 30-7-1999." 7. Apart from the objection relating to the use of floppies and printouts in the proceedings common to both the appeals, in the appeal against Order-in-Original No. 7/2007 the following grounds are taken by SASAI. It is alleged that the order is not sufficiently speaking in that it did not deal with all the arguments advanced by the appellants. The Commissioner had traversed beyond the scope of the Show Cause Notice. The Show Cause Notice itself was vague. Eleven floppies seized were not furnished to the noticees. Only printouts of the data contained in six floppies were furnished. The appellants relied on the Jamadas Singh v. CC reported in 1992 (61) E.L.T. 639 (Tri.), wherein the adjudicating authority had not mentioned in the Show Cause Notice the seizure list, confessional statement, reports of the seizing officer, summary of the confessional statement etc. The Tribunal observed in that case that the very purpose of the Show Cause Notice was to make the appellants aware as to what were the evidence which were relied on by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards the stock taking at SASAI it is contended that the method of calculation was on average weight basis instead of actual weight. Department took into account bars and rods awaiting quality control clearance. They relied on M/s. Southern Steel (P) Ltd. v. UOI [1979 (4) E.L.T. (J 402) (A.P.)]. In the reply dated 23-4-2007 the contention that suppression of production during 12-6-2004 to 22-6-2004 was not sustainable remained unchallenged. The department had relied on unauthenticated chits without the name of the company. For example, records of Cauvery Lorry Service which did not establish from whom the goods were lifted. Proprietor of M/s. Bright Public Weighbridge deposed during the course of cross-examination that parties could not be identified from their records. Records of Kalki Transport for movement of ingots from Sumangala Steel and JBA Steels to SASAI were relied upon without examining Sumangala Steel and JBA Steels. 10. The Commissioner used an order of the Settlement Commission No. 45/2006 dated 31-8-2006 without putting the parties on notice. Department could not prove clandestine clearances of ingots from SUSAS to SASAI during 2003-04 and 2004-05 (up to 15-6-2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, computers and floppies seized on 24-6-2004 were relied upon for demand for the period 2003-04 (up to 2/2004). It was submitted that the documents could not be relied upon as Ms. Usha had deposed during cross-examination that the P L Account had been prepared by escalating sale value by 60% and escalating also purchase figures on the advice of Shri Somasundram for obtaining term loan from a bank. The closing stock of scrap mentioned in P L Account was 941.94 tonnes whereas Form-IV showed 1794.61 tonnes as on 31st March, 2004. The purchase for the fiscal 2003-04 was 7352.821 tonnes as per Form IV. P L Account showed 9281 tonnes. Therefore unaccounted scrap consumed was only 1928 tonnes and possible unaccounted production 1561 tonnes. But P L Account showed 2821 tonnes. Therefore, the sales figures were obviously escalated. P L Account was not a statutory one. P L Account contained many uncorroborated entries. Such documents prepared to obtain bank loan etc. could not be relied on. The daily transaction sheets were relied on by the Commissioner to quantify the demand for 3/2004 and 4/2004 to 6/2004. On comparing documents available for 12/03, 1/04, 3/04, 4/04, 5/04 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legally admissible. In 2006 (201) E.L.T. 437 (Tri.-Del), it was held to the effect that mahazar formed part of show cause notice. Mahazar could be relied upon. In 2000 (115) E.L.T. 38 (S.C.), it was held that retraction after four years of statement recorded under Section 108 of the Customs Act on the ground of use of force by officials was not acceptable. It was held in 2002 (147) E.L.T. 1156 (Tri.) and 2003 (155) E.L.T. A244 (S.C.) that retraction of statement after two years detracted from its value. In 2001 (128) E.L.T. 405 (Tri.-Del.), Tal Balbir Singh v. CC it was held that retraction of statement of witnesses during cross-examination was of no help to appellants as the persons who retracted the statements were his employees and working under him. In 2006 (194) E.L.T. 290 (Tri.-Del.), it was held that cross-examination of witnesses on aspects which were confessed by the accused could be denied. 13. Appellants argued that as regards transport records of Cauvery Lorry Service, they did not disclose from whom goods were lifted. Weighbridge slips of M/s. Bright Public Weighbridge did not show the parties concerned. Records of Kalki Transport were relied on for movement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the computer in question, shall be deemed to be also a document for the purposes of this Act and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible. (2) The conditions referred to in sub-section (1) in (2) respect of a computer printout shall be the following, namely (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r without human intervention) by means of any appropriate equipment; (b) whether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities; (c) a document shall be taken to have been produced by a computer whether it was produced 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." 16. We find that the printouts relied upon are not from the CPU belonging to the assessee. The precautions sought to be ensured through Section 36B(2) of the Act would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computer/floppies has to be followed in adjudication by authorities. We are not informed by either side that these principles are part of any manual or act that govern quasi-judicial proceedings. There is no such protocol or procedure laid down in this regard in the concerned Acts such as Central Excise Act '44, Cr. PC, Evidence Act or the Information Technology Act. As long as the integrity of the data is not suspect and the adjudicator can show the concerned parties that the same are not tampered with there could be no hazard in using the same. We have found from the circumstances in which printouts were taken, as to which of the printouts could be relied on in the proceedings. 19. It is submitted that vide para 24.4 of the SCN unaccounted transactions were stored in zip floppy through zip drive. However, printouts taken were only from 3.5 inch floppies. All retrievals took place under mahazars. We find that there is no claim that representatives of the assessee questioned the reliability of the printouts on this ground. This aspect have been taken up before the Commissioner. In reply to SCN it was pointed out that only six and not twelve floppies were seized from SASAI. Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tured and sold bars and rods by not showing the actual production and sales in our books of accounts. But that will not be very high. "I admit that we have indulged in raw material purchase without accounting in our books, not declaring the actual production in our stock account and sale of manufactured goods without payment of duty. However, I would like to state that the market for steel is highly competitive. Many unbranded untested bar and rods manufacturers are dumping their product in the market at very low prices. This resulted in the poor price realization for this product. In order to avoid losses and to run the mill to sustain job opportunities for more than 500 people, we were forced to indulge in such acts. Moreover, we have not enjoyed the full amount of the duty not paid for the manufactured products sold without accounting. We have passed on the benefit till the end customer." 22. SASAI claimed that computer printouts were not corroborated and the factors such as raw material purchase, purchase of fuel, payments made for unaccounted purchases, suppression of production, clandestine clearances and receipt of unaccounted sale proceeds were not proved in a cogent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /registers/records. The Commissioner did not confirm a demand for Rs. 1,84,57,861/- relying on SASAI/Fly2/File3 for want of other evidence. We find from the order that computer printouts are acceptable evidence if the files were authentic and its retrieval transparent. 25. Departmental adjudication is governed by the preponderance of probability and not proof beyond reasonable doubt. Commissioner had a plethora of evidentiary material including computer printouts to establish evasion. Stock taking was not done by actual weighment of all products is not an acceptable objection. Stock taking in no major factory is possible by actual weighment of each piece which is not practical. We find that ascertaining average actual weight per piece from a sample set and counting the total pieces to determine entire weight of stock is a scientific method which cannot admit of a grievance as being unacceptable estimation. When the shortage and excess were endorsed by the Managing partner of SASAI, he did not state that excess was owing to stock register not made up-to-date. Records of a transporter need not be authenticated by further evidence of the user of the lorry service. The omissions po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appeals seek to establish that the Commissioner had relied upon computer printouts of floppies recovered from SASAI and Ms. Ponnalagu of ASC contrary to the prescriptions in Section 36(2) of the Act and that the floppies had been seized without following statutory procedure. We find that Commissioner relied on such printouts which were found to be corroborated by documents or records recovered from the assessees or their associates as well as statements from customers, executive and staff of SASAI. The findings of evasion by both SASAI and SUAS in the orders impugned are well reasoned with the aid of printouts. However, we find that the printouts of files which were taken after the same were first opened after seizure with the password supplied by Shri S.P.M. Anandan and in his presence alone are reliable evidence without such corroboration. So is the case with files which were found on opening in presence of Ms. Ponnalagu to have been modified last on a date before the date of seizure. In the view we have taken of the provisions of Section 36B of the Central Excise Act we do not find it necessary that there should be any other independent corroboration to accept the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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