9911796707
TMI Blog2023 (12) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 premises 'Aparna-2' Plot No.702/4(B), Rameshwar Patna, Bhubaneshwar, on 22.08.06. During the course of search, documents related to procurement of unaccounted raw materials, suppression of production, clandestine removal of finished goods, receipt of sale proceeds from such clandestine clearances, invoices with under valuation, parallel invoices et. were recovered from Mr. Chttaranjan Bhukta and Manoj Kumar Sahoo, who were in charge of the office. Shri. Mukesh Kumar Agarwal, Chief Accountant in his statement dated 05.09.2007 admitted that both the above said persons were working for the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 following submissions: (i) The entire demand in the Notice has been made based on Sales Register (Computer Printouts) without satisfying conditions of Section 36B(2)/36B(4) of the Central Excise Act, 1944. Shri G.D. Agarwal, Constituent Attorney has disowned the computer printouts. (ii) Under Section 36B, Computer printouts are not admissible in evidence as conditions under section 36B(2)/36B(4) are not satisfied. Under Section 36B Computer Printout is "deemed document" admissible in evidence only if condition there under are satisfied. In the present case, no Certificate under section 36B(4) from person occ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, 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 supplied 605.640 MT of raw material. Cross Examination of Director of M/s AuroIspat (P) Ltd. was demanded but not allowed. (viii) 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. (ix) No tax can be demanded on matching of some entries in private records with statutory records/Book of Accounts. The Appellant relied on following decisions, in support of this contention: (i) Sharma Chemicals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 procurement of unaccounted raw materials, suppression of production, clandestine removal of finished goods, receipt of sale proceeds from such clandestine clearances, invoices with under valuation, parallel invoices etc. were recovered from the above said premises. On the basis of these documents, a show cause notice dated 23.05.2008 was issued to the Appellants 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 penalty. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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.702/4(B), Rameshwar Patna, Bhubaneshwar, in the presence of Shri. G.D. Agarwal. The seized documents from the Rameshwar Patna office contains details such as payments made to contractors, party ledger, trial balance etc. Computer print outs of these documents were taken in the presence of Shri. Srinivas Padhi who was authorized by the Appellant to witness the retrieval of data from the seized computer. The Appellant contended that Shri. Srinivas Padhi, was a Telephone Operator attended printing of computer print out at DGCEI office. He was not holding any responsible official position in relation to the operation of relevant device or management of relevant activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 computer in which Shri Sushil Kumar Roy was working was the source of all data and the requirement of Section 36B (4) stand satisfied . A pen drive is a floating device. It cannot be assumed that the company's data was not being stored in the company's computer hard-drive but was being stored in a pen drive. In his statement dated 17.07.2014, Shri Sushil Kumar Roy categorically stated that Shri. Gautam Banerjee, the other Associate of the company also makes entry in the computer, but no statement was recorded from him. There is no statement from any Director either of JBIL-III or JBIL-IV accepting the authenticity of the said data. Even on the date of search Shri Gaurav Jajodia, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Adjudicating authority. The appellants contended that the statements are pre-drafted computer statements and it cannot be voluntary nature. After considering 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simile 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 admissible in proceedings. Sub-section (2) of Section 35B provides the condition referred to in sub-section (1) in respect of the computer printout shall be the following 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 this case. Ld. Sr. Counsel has pointed out that the computer print-outs did not satisfy the statutory conditions. He has referred to the relevant provisions of Section 36B of the 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ennai (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 rejected the printouts and the Revenue's finding of clandestine manufacture and clearance. We find a strong parallel between the instant case and the cited case. Nothing contained in the printouts generated 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 fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity. 14. Under Section 65B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied : (a) There must be a certificate which identifies the electronic record containing the statement; (b) The certificate must describe the manner in which the electronic record was produced; (c) The certificate must furnish the particulars of the device involved in the production of that record; (d) The certificate must deal with the applicable conditions mentioned under Section 65B(2) of the Evidence Act; a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial 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 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 ? 13.1. The Appellant contended that Statements recorded during the course of investigation cannot be relevant without testing the same under Section 9D. The provisions of Section 9D of the Act is mandatory and unless the prescriptions of Section 9D are complied, the testimony of witness cannot be treated as relevant piece of material as mandated under Section 9D. The Appellant contended that the statements of person/witness relied on in the impugned order are not examined in chief and not allowed Cross Examination in accordance with Section 9D. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 means of the present writ petition, to challenge Order-in-Original No. V(29)15/ce/Commr.Adj/Chd-II/44/2015, dated 4-4-2016 issued by respondent No. 2 whereby respondent No. 2 has confirmed differential Central Excise Duty (hereinafter referred to "as duty") demand of Rs. 7,08,38,008/- with interest and equivalent penalty. It is contended that the impugned order-in-original has been passed in flagrant violation of Section 9D of the Central Excise Act, 1944 (hereinafter referred to as "the Act") by relying upon the statements recorded under Section 14 of the Act without first admitting them in evidence in accordance with the procedure prescribed in this regard by Section 9D(1)(b) of the Act. 4. In view of the fact that the case of the petitioner is essentially premised on Section 9D of the Central Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contained therein. In other words, in the absence of the circumstances specified in Section 9D(1), the truth of the facts contained in any statement, recorded before a Gazetted Central Excise Officer, has to be proved by evidence other than the statement itself. The evidentiary value of the statement, insofar as proving the truth of the contents thereof is concerned, is, therefore, completely lost, unless and until the case falls within the parameters of Section 9D(1). 9. The consequence would be that, in the absence of the circumstances specified in Section 9D(1), if the adjudicating authority relies on the statement, recorded during investigation in Central Excise, as evidence of the truth of the facts contained in the said statement, it has to be held that the adjudicating authority has relied on irrelevant material. Such relia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 for admitting, into evidence, a statement recorded before the Gazetted Central Excise officer, which does not suffer from the handicaps contemplated by clause (a) of Section 9D(1) of the Act. The use of the word "shall" in Section 9D(1), makes it clear that, the provisions contemplated in the sub-section are mandatory. Indeed, as they pertain to conferment of admissibility to oral evidence they would, even otherwise, have to be recorded as mandatory. 15. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the Gazetted Central Excise officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 also usefully be placed on Para 16 of the judgment of the Allahabad High Court in C.C.E. v. Parmarth Iron Pvt Ltd., 2010 (260) E.L.T. 514 (All.), which, too, unequivocally expound the law thus : "If the Revenue choose (sic chose?) not to examine any witnesses in adjudication, their statements cannot be considered as evidence." 21. That adjudicating authorities are bound by the general principles of evidence, stands affirmed in the judgment of the Supreme Court in C.C. v. Bussa Overseas Properties Ltd., 2007 (216) E.L.T. 659 (S.C.), which upheld the decision of the Tribunal in Bussa Overseas Properties Ltd. v. C.C., 2001 (137) E.L.T. 637 (T). 22. It is clear, from a reading of the Order-in-Original dated 4-4-2016 supra, that Respondents No. 2 has, in the said Orders-in-Original, placed extensive reliance on the statements, recorded during investigation under Section 14 of the Act. He ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, should it choose to do so. In case any such request is made by the assessee, it would be incumbent on the adjudicating authority, i.e., on Respondent No. 2 to allow the said request, as it is trite and well-settled position in law that statements recorded behind the back of an assessee cannot be relied upon, in adjudication proceedings, without allowing the assessee an opportunity to test the said evidence by cross-examining the makers of the said statements. If at all authority is required for this proposition, reference may be made to the decisions of the Hon'ble Supreme Court in Arya Abhushan Bhandar v. U.O.I., 2002 (143) E.L.T. 25 (S.C.) and Swadeshi Polytex v. Collector, 2000 (122) E.L.T. 641 (S.C.). 25. The writ petition is allowed in the aforesaid terms. 13.6. Had the adjudicating authority followed the provisions of Section 9D and examined the witnesses who have given the statements, the truth in this stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive 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(229) ELT 273 (Tri-Ahmd), it has been held that demand of duty cannot be held merely on the basis of some entries available in the private registers. Positive, tangible evidences are required to confirmed demands on clandestine removal. The demands cannot be made on assumptions and presumptions. The relevant portion of the decision is as under: "6. After considering the submissions made by both sides and after going though the impugned order, we find that the demand stand confirmed against the appellant on the basis of entries made in the so-called lot register read with statement of the Director, though the appellants have denied that such lot register belong to them, in as much as they used the letter 'K' for allotting lot number and the word 'W' was never used by them, we find that said lot register, in any case, is a private document. We have seen the said lot register giving details of the clearances along with the name and address of the buyer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 proceeds by the consignor and its disposal. In the instant case, no such evidences to the above effect have been brought on record. 14.4. In the instant case we find that the investigation has not brought in any corroborative evidence to substantiate the allegation of clandestine removal. In view of the above findings, we hold that the investigation has failed to establish the alleged clandestine clearance of goods by the Appellants and hence the demands confirmed in the impugned order are not sustainable. Accordingly, answer to the Question (iv) and (v) in Para 11 supra is in the negative. 15. (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? 15.1. We find that in the impugned order personal penalty of Rs.50.00 Lakhs has been imposed on Shri Rajeev Kumar Agarwal, Managing Director, penalty of Rs.25.00 Lakhs has been imposed on Shri Ghanshyam Das Agarwal, Share Holder & ..... X X X X Extracts X X X X X X X X Extracts X X X X
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