9911796707
TMI Blog2008 (4) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... nished 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 and raw materials. The same was integrated with a program to generate invoices. Shri N. Palani maintained the accounts. Shri Palani also handled payments and receipts on a day to day basis. A CPU and a few floppy discs were seized from SASAI. Floppy disc. were seized also from the residence of Ms. ponnalagu. Floppies were found to contain detailed accounts of transactions, both recorded in the statutory records and a major portion, only in private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls 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 confiscated excess stock of 89.025 MTs of bars and rods of value Rs. 24,93,000/- seized from SASAI under Rule 25 of CER with an option to redeem them on payment of Rs. 2,50,000/-. He demanded an amount of Rs. 7,11,08,209/- towards duty due on bars and rods clandestinely cleared during 2002-03 to 2004-05 under Section 11A(2), interest due thereon under Section 11AB and imposed equal penalty under Section 11AC of the Act read with Rule 25 of CER. A penalty of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance 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. He had introduced two software tools, viz., "PC inspector" and "bad copy pro", to retrieve the data from the password protected files stored in the floppies. The retrieval of the files in the instant case was not by means of any authenticated software tool, it is argued. Appellants introduced the concept of what they describe as computer forensics. It was submitted that the original floppy should have been imaged and copy alone used in the proceedings. Hash value of the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants. 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 the department against him. In CC v. Ali Mohamed P.P. [2004 (177) E.L.T. 436 (Tri.-Bang.)], the Tribunal held that if the department wanted to rely on a statement, the same had to be mentioned in the relied upon documents. The Commissioner obviously relied on "paper seal" not mentioned in the list of relied upon documents in the SCN. None of the floppies was also mentioned in the list of relied upon documents. He had relied upon the reports of the Superintendent of Central Excise and Inspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) which were found to have been converted into CTD bars and rods and clandestinely cleared by SASAI. There was no evidence for this finding. SASAI investing profits of clandestine clearances in SUAS and SASAI receiving DDs through Vasavi Finance in fictitious names as found in the order No. 7/07 was not backed by evidence. Clandestine clearances in various years by SASAI were found without adequate corroborative evidence. Slips and chits were not to be relied on to find clandestine clearances. 11. SU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 6/04, entries such as I and II were seen under the column "sales". Invoices were not available for entries with remarks 'II' relating to SASAI. No incriminating evidence was obtained from the SASAI end regarding these transactions. Moreover, such removals were not corroborated by power consumption or suppression of production. If the daily transaction sheets were admitted, the demand would be Rs. 34,16,973/- only. Demand was based on unauthentic and inadequate evidence. The charges in the notice were va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8) 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 ingots from Sumangala Steels and JBA Steels to SASAI. But no investigation was conducted with Kalki Transport. Order relied on records of Kalki for purchase of 17 tonnes of ingots from Sumangala Steels on 26-9-2006 and 69.4 tonnes of ingots from JBA Steels during 24-6-03 to 18-8-2003. These were not good evidences. Based on kutcha slips, SASAI was found to have purchased 62.34 tonnes of ingots in June 2002 and 98.22 tonnes of ingots in August 2002 from Sumangala unaccountedly. In slips recovered from Sumangala year was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (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 computers, whether - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout 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 appear to apply to printouts of data taken from a CPU. It cannot apply to a printout of a file in the presence of the person who had maintained the same and with the key (password) supplied by him. Such data is beyond suspicion of having been tampered by the investigating agency. These printouts are also corroborated by other evidence. In the consolidated submissions of SASAI dated 3-1-08, SASAI submitted that in the instant case the provisions of Section 36B would come into operation only when the computer printouts were sought to be relied upon without any corro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Department relied on twelve floppies. This submission cannot be verified or vouched for want of details in the seizure mahazar. 20. There is admission of clandestine clearances of iron rods and bars and unaccounted purchases of ingots by SASAI in the statement of Shri M. Somasundaram, Managing Partner of SASAI. He restricts the confession of clearances without payment of duty to a few clearances. This qualified confession a pears not acceptable in view of the systematic accounts of transactions maintained in the floppies correlated with diverse back to back transactions with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 and tangible manner to sustain the-demand. This submission is not true. In this case the assessee's comprehensive private accounts embracing all its multifarious transactions and the computer printouts, we find, are sufficient evidence to establish clandestine removals. SASAI admitted in their final submissions dated 3-1-08 that computer printouts with corroboration are acceptable evidence. 23. We find that the assessees are fully aware of the method and the software deployed to retrieve the printouts. Ideally Commissioner could have met the charge that he was relying on the computer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 pointed out are factually not correct or are not of significance. 26. We find that none of the above arguments of SUAS regarding power consumption by SUAS per tonne are valid. The technical study group found that power consumption varied from 555 units upwards per tonne whereas SUAS had actually consumed 724 units as per their records. The argument that ingots recorded as dispatched to SASAI might have gone elsewhere cannot be countenanced. So also the explanation that entries found not covered by accounted clearances of ingots marked as 'II' was a grade of ingots. The P&L Accounts seized from Ms. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 printouts we have referred to above as evidence. As the seizure proceedings were not in accordance with the statutory provisions, printouts of other files retrieved from floppies are not admissible in evidence without adequate corroboration. If a computer printout can be accepted as evidence only if all the data in the printout has corroboration, printout itself does not serve any particular evidentiary purpose. All the data in a printout found to be reliable evidence are acceptable without further corroboration. 29. The noticee had raised the objection that the Commissioner had re/lied on an order of the Sett ..... X X X X Extracts X X X X X X X X Extracts X X X X
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