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TMI Blog2023 (12) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... vidence Act, which is parimateria with Section 36B(4) of the Central Excise Act are complied with, no reliance can be placed on any computer printouts . Admittedly, the procedure set out in Section 36B has not been followed in this case - in the present case the author of entry of data has not been identified. As per the impugned order the entry in computer was done by Shri Chittaranjan Bhukta or Sri Rajeev Agarwal or Sri Manoj Kumar Sahoo. However, no certificate was obtained from any of them - the material evidence available on record do not establish that the documents recovered from all the Factory, Registered office and the premises at Rameshwar Patna are all belonged to the Appellant Company and the data cannot be relied upon to demand duty - the questions answered in negative. Whether the procedure as set out in Section 9D of the Central Excise Act, !944 was followed in this case or not? If not followed, then whether the statements recorded under Section 14 of the Central Excise Act, 1944 can be relied upon to demand duty? - HELD THAT:- Had the adjudicating authority followed the provisions of Section 9D and examined the witnesses who have given the statements, the trut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent ORDER PER K. ANPAZHAKAN : The instant Appeals are filed against the Order-in-Original dated 26-02-2010 passed by Ld. Commissioner, Central Excise, Bhubaneswar I Commissionerate. By the said Order Ld. Commissioner has confirmed Central Excise duty of Rs.9,27,69,569/-on the clandestinely removed M.S.Rods without payment of duty, during the periods 2004-2005, 2005-2006 (up to 02-03-2006) and 2006-2007 (up to 18-08-2006). Further, he imposed penalty Rs.9,27,69,569/- under Section 11AC of the Central Excise Act, on the Appellant Company. He also imposed personal penalty of Rs.50.00 Lakhs upon Shri Rajeev Kumar Agarwal, Managing Director, penalty of Rs.25.00 Lakhs on Shri Ghanshyam Das Agarwal, Share Holder Constituent Attorney and penalty of Rs.10.00 Lakhs on Shri Mukesh Kumar Agarwal, Chief Accounts Officer of the Appellant Company, for abetment of the offence. Aggrieved against the impugned order, all the four Appellants filed the present appeals. 2. Brief facts of the case are that based on intelligence, the officers of DGCEI, Rourkela Regional Unit conducted simultaneous search at the factory and Registered office of the Appellant and another premis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od 2006-07(upto 18.08.2006), 2005-06(upto 02.03.2006) and 2004-05, having sale value of Rs.11,31,98,571/-, Rs,25,46,98,780/=, and Rs. 29,15,47,637/- respectively. The duty involved for such clandestine clearance for the above said period was worked out as Rs.9,27,69,569/- along with Education Cess. 5. On the basis of the data recovered during investigation, a show cause notice dated 23.05.2008 was issued to the Appellant demanding central excise duty of Rs. 9,27,69,569/- including Education Cess, along with interest and penalty. The Notice was adjudicated by the Commissioner vide Order-in-Original dated 26.02.2010, wherein the duty demanded in the Notice was confirmed along with interest and equal amount of duty was also imposed as penalty under Section 11AC of the Central Excise Act. Penalties were also imposed on Shri Rajiv Kumar Agarwal, Managing Director, Shri Ghanshyam Das Agarwal, Share Holder Constituent Attorney and Shri Mukesh Kumar Agarwal, Chief Accounts Officer of the Appellant Company,for abetment of the offence. Aggrieved against the impugned order, all the four Appellants filed the present appeals. 6. In their grounds of appeal the Appellants made the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 (50) STR 93 SC) [Para 6]; (vi) Entire Demand is based on Private Records. There is no corroborative evidence available to substantiate the allegations of clandestine clearances. (i) No evidence of manufacture of finished goods. Quantity of finished goods manufactured not known; (ii) There is no evidence of clandestine removal of finished goods. Quantity of finished goods removed not known; (iii) Documents prepared by seven production contractors relied in support of production but none of them were examined; (iv) Maker of Weighment Slips, Delivery Order etc. not examined; (v) Raw Material suppliers, Transporters, Production Staffs, Dispatch Staffs not examined; (vi) No excess/shortage of Raw material finished goods; (vii) No excess consumption of Electricity; (viii) No excess use of Labours or payment of wages; (ix) No evidence of flow back of funds Rs.65,94,44,987.50; (x) Some Invoice cancelled as no goods removed. No contra material brought on record to prove clandestine removal. Buyer mentioned on those invoices not verified. (vii) Out of 25 suppliers of Raw material, one supplier M/s Auro Ispat (P) Ltd. was examined who purportedly supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... data belonged to the Appellant. The Appellant has never disowned the data. Regarding cross examination of persons whose statements are relied upon in the impugned order, he stated that summons to these four persons were issued to all of them. But, they have not appeared for cross examination. Later, during the time of Personal Hearing, the Appellants have foregone the cross examination of four persons. On 11.11.09, Shri Krishna Chandra Padhi was cross examined. Efforts were made to serve the summons on the remaining two witnesses, but could not be done as their whereabouts are not known. This indicates that the department has made all efforts to allow cross examination of all witnesses as sought by the appellants. Thus, they contended that their statements can be relied upon to substantiate the allegations in the Notice. Accordingly, they prayed for upholding the impugned order. 9. Heard both sides and perused the appeal records. 10. We observe that searches were conducted at the Factory and Registered office of the Appellant and another premises 'Aparna-2' Plot No.702/4(B), Rameshwar Patna, Bhubaneshwar, on 22.08.06. During the course of search, documents related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to demand duty ? (iv) Whether the allegations of clandestine clearance of finished goods by the Appellants are substantiated with corroborative evidence? (v) Whether the demands confirmed in the impugned order on clandestine clearance of finished goods is sustainable in the absence of any evidence of procurement of the major raw materials for manufacture of the finished goods M.S.Rods, without invoices? (vi) Whether penalty is imposable on the Appellant company and it's Director and Chief Accountant on the basis of the evidences available on record? 12.(i) Whether the data retrieved from various premises belonged to the Appellant's company and the data can be relied upon as evidence to demand duty? (ii) Whether the conditions mentioned in Section 36B has been followed in this case or not, to rely upon the computer printouts as evidence? 12.1.We observe that various documents were seized from the Factory and Registered office under a Panchanama on 22.08.06. The Panchanama/Seizure Memo has been signed by the witnesses and the authorized signatory of the Appellants company. The documents were also recovered from the premises 'Aparna-2' Plot No.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2023-VIL- 771-CESTAT-KOL-CE to drive home the point that the data recovered from computer print outs/pen drive is not a reliable evidence to raise demand of duty, when the person who entered the data is not identified. The relevant part of the said decision is reproduced below : 12.4. Section 36B (4) mandates that any computer printout has to be signed by a person occupying a responsible official position in relation to the operation of the relevant device and a certificate is to be given to that effect. This is required to establish the ownership of the data recovered from the computer device. In the present case, we observe that neither the mandatory conditions of Section 36B(2) have been complied with nor there is any certificate on record as mandated under Section 36B(4). During the course of panchnama dated 17-07-2014 drawn at the premises of JBIL-III, Shri Sushil Kumar Roy was found working on the computer located in the dispatch section and the device on which the data was being stored was the 8 GB pen drive. The other pen drive was also recovered from the pocket of Shri Sushil Kumar Roy. We observe that the adjudicating authority has wrongly presumed that the compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter hearing both the sides and on perusal of the records, I find that the Central Excise officers while visiting the factory of the appellant, recovered a USB drive in the appellant s premises. The USB drive was connected with computer and a printout was taken by the computer expert accompanied with the Central Excise officers. The printout gives the details of the certain sales (date-wise) commencing from 1-4-2005. The delivery challans for various chemicals for the month of December, 2005 and January, 2006 were found and seized during the search. The appellants disowned the contents of the printout and stated that it has manipulated the data base with motive, to take revenge from the partner and the firm for the refusal of the loan of Rs. 1 lakh sought by the Computer Operator. The appellant filed an affidavit disclosing this fact on 13-2-2006 i.e. immediately after the raid and a copy of the affidavit was also given to the investigating officer. The Central Excise officers attempted to corroborate the contents of the printout with the statements of 30 persons viz. buyers, transporters etc. The appellants requested for cross-examination of 30 persons which was rejected by the Adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he suppliers and the purchasers of the finished goods. It is seen that the statements were recorded to corroborate the contents of the printout and the Commissioner (Appeals) had held that the said statements has no strong evidentiary value. Shri Anil Gupta, Partner of the appellant firm had stated that he was not aware of the details contained in the USB drive. 10. Learned Advocate submitted that the clandestine manufacture and removal of the goods cannot be upheld based on the printout of the data contained in the USB drive without following the requirement of condition of Section 36B of the Central Excise Act, 1944. Section 36B of the said Act provides admissibility of microfilms, facsimile copies of documents and computer printouts as documents and as evidence. Clause (c) of Section 36B(1) states that the statement contained in a document and included in a computer printout would be an evidence if the condition mentioned in the sub-section (2) and other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be the document for the purpose of this Act and the rules made thereunder and can be admissib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Instrument Controls Ltd. (supra), the Tribunal has held that the printout of the personal computer of the company s officer, had not fulfilled the statutory condition laid down under Section 36B(2) of the Act and the demand is not sustainable. The relevant portion of the said decision is reproduced below : - 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 printout 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 printouts. The statements of others, recorded in this case, did not disclose any additional fact. Therefore, apparently, what is contained in the computer printout is the only basis of the demand of duty on waste and scrap. The question now arises as to whether these printouts are admissible as evidence, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also not shown that information of the kind contained in the computer printout was regularly supplied by the Company to the personal computer of Shri Sampath Kumar 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 printout, to show that the information contained in the printout 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 printouts were relied on by the adjudicating authority for recording a finding of clandestine manufacture and clearance of excisable goods. It was found by the Tribunal that the printouts were neither authenticated nor recovered under Mahazar. It was also found that the assessee in that case had disowned the printouts and was not even confronted with what was contained therein. The Tribunal reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the conditions mentioned under sub-section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under Section 65B(2). Following are the specified conditions under Section 65B(2) of the Evidence Act : (i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer; (ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity; (iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and (iv) The information contained in the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Evidence Act, which is parimateria with Section 36B(4) of the Central Excise Act are complied with, no reliance can be placed on any computer printouts . Admittedly, the procedure set out in Section 36B has not been followed in this case. Thus, following the judgement of the Hon ble Apex Court and the other decisions cited above,we hold that the data resumed from the computer print out alone cannot be relied upon to demand duty, without any corroborating evidence. 12.6. We observe that in the present case the author of entry of data has not been identified. As per the impugned order the entry in computer was done by Shri Chittaranjan Bhukta or Sri Rajeev Agarwal or Sri Manoj Kumar Sahoo. However, no certificate was obtained from any of them. Thus, we hold that the material evidence available on record do not establish that the documents recovered from all the Factory, Registered office and the premises at Rameshwar Patna are all belonged to the Appellant Company and the data cannot be relied upon to demand duty. Accordingly, by relying on the decisions cited above, we answer to the questions (i) and (ii) raised at Para 11 supra in the negative. 13. (iii) Whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement of Shri. Sahoo was not confirmed from Shri. Chittaranjan Bhukta who was the author of the entry of the data. In his statement Shri. Chittaranjan Bhukta has stated that the documents were received in the Rameshwar patna office for storage purposes. Shri. Bhukta was confronted with only two pages of the said documents recovered from Rameshwar Patna office. 13.4. We observe that when such glaring discrepancies were pointed out by the Appellant, it is all the more required to follow the provisions of Section 9D and bring out the truth, which has not been done in this case. 13.5. The Appellant relied on the decision of this Tribunal in the case of M/s Jai Balaji Industries Ltd. Vs. CGST reported in 2023-VIL-771- CESTAT-KOL-CE in support of their contention that the statements recorded in this case cannot be relied upon as the provisions of section 9D are not followed. In the case of G-Tech Industries Vs Union Of India reported in 2016(339) ELT 209 (P H), the Hon ble Punjab and Haryana High Court has given an elaborate findings regarding the procedure to be followed under Section 9D. The relevant Part of the judgement is reproduced below: 3. The petitioner seeks, by mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant, for the purpose of proving the truth of the facts contained therein. 6. Section 9D of the Act came in from detailed consideration and examination, by the Delhi High Court, in J. K. Cigarettes Ltd. v. CCE, 2009 (242) E.L.T. 189 (Del.) = 2011 (22) S.T.R. 225 (Del.). Para 12 of the said decision clearly holds that by virtue of sub-section (2) of Section 9D, the provisions of sub-section (1) thereof would extend to adjudication proceedings as well. 7. There can, therefore, be no doubt about the legal position that the procedure prescribed in sub-section (1) of Section 9D is required to be scrupulously followed, as much in adjudication proceedings as in criminal proceedings relating to prosecution. 8. As already noticed herein above, sub-section (1) of Section 9D sets out the circumstances in which a statement, made and signed before a Gazetted Central Excise Officer, shall be relevant for the purpose of proving the truth of the facts contained therein. If these circumstances are absent, the statement, which has been made during inquiry/investigation, before a Gazetted Central Excise Officer, cannot be treated as relevant for the purpose of proving the facts c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the adjudicating authority under Section 9D of the Act could be challenged in writ proceedings as well. Therefore, it is clear that the adjudicating authority cannot invoke Section 9D(1)(a) of the Act without passing a reasoned and speaking order in that regard, which is amenable to challenge by the assessee, if aggrieved thereby. 13. If none of the circumstances contemplated by clause (a) of Section 9D(1) exists, clause (b) of Section 9D(1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D(1), viz. (i) the person who made the statement has to first be examined as a witness in the case before the adjudicating authority, and (ii) the adjudicating authority has, thereafter, to form the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. 14. There is no justification for jettisoning this procedure, statutorily prescribed by plenary parliamentary legislation f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the statement should be admitted in the interests of justice. 17. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede crossexamination, and cross-examination has to precede re-examination. 18. It is only, therefore,- (i) after the person whose statement has already been recorded before a Gazetted Central Excise officer is examined as a witness before the adjudicating authority, and (ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for crossexamination, can arise. 19. Clearly, if this procedure, which is statutorily prescribed by plenary parliamentary legislation, is not followed, it has to be regarded, that the Revenue has given up the said witnesses, so that the reliance by the CCE, on the said statements, has to be regarded as misguided, and the said statements have to be eschewed from consideration, as they would not be relevant for proving the truth of the contents thereof. 20. Reliance may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said statements, so that the Revenue would examine them in chief before the adjudicating authority, i.e., before Respondent No. 2. (ii) A copy of the said record of examination-in-chief, by the Revenue, of the makers of any of the statements on which the Revenue chooses to rely, would have to be made available to the assessee, i.e., to Ambika and Jay Ambey in this case. (iii) Statements recorded during investigation, under Section 14 of the Act, whose makers are not examination-in-chief before the adjudicating authority, i.e., before Respondent No. 2, would have to be eschewed from evidence, and it would not be permissible for Respondent No. 2 to rely on the said evidence while adjudicating the matter. Neither, needless to say, would be open to the Revenue to rely on the said statements to support the case sought to be made out in the show cause notice. (iv) Once examination-in-chief, of the makers of the statements, on whom the Revenue seeks to rely in adjudication proceedings, takes place, and a copy thereof is made available to the assessee, it would be open to the assessee to seek permission to cross-examine the persons who have made the said statements, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vi) No excess/shortage of Raw material finished goods; (vi) No excess consumption of Electricity; (vii) No excess use of Labours or payment of wages; (viii) No evidence of flow back of funds Rs.65,94,44,987.50; (ix) Some Invoice cancelled as no goods removed. No contra material brought on record to prove clandestine removal. Buyer mentioned on those invoices not verified. (x) Out of 25 suppliers of Raw material, one supplier M/s Auro Ispat (P) Ltd. was examined who purportedly supplied 605.640 MT of raw material. Cross Examination of Director of M/s Auro Ispat (P) Ltd. was demanded but not allowed. (xi) Only one buyer M/s Anand Enterprises was examined for sale of 9.500 MT. Shri Krishna Chandra Pati of M/s Anand Enterprises was examined allowed to be Cross Examined. Computerized Sales Register of M/s Anand Enterprises has been relied upon without satisfying condition of Section 36B. 14.2. In the absence of any corroborative evidence to substantiate the allegation of clandestine removal, the demand is not sustainable. 14.3 This view has been held in the case of Kumar Cotton Mills (P) Ltd. Vs Commissioner of Central Excise, Ahmedabad, reported in 2008(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant. (i) the appellant has relied upon the decision CCE Vs. R.A. Casting P. Ltd. reported in 2012 (26) STR 262 (All.) 22. The clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to : (i) Receipt of raw material inside the factory premises, and nonaccountal thereof in the statutory records; (ii) Utilization of such raw material for clandestine manufacture of finished goods; (iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products; (iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees; (v) Amount received from the consignees, statement of the consignees, receipts of sale procee ..... 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