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TMI Blog2025 (3) TMI 1098X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at the Appellate Stage when not raised before the Adjudicating Authority - electronic evidence collected admissible given the absence of certificate issued under Section 36B(4) or not - HELD THAT:- Both S.14 and S.9D of the CE Act are pari-materia with S.108 and S.138B of the Customs Act respectively and therefore judicial pronouncements in respect of these provisions of Customs Act, 1962 would also hold good for the pari-materia provisions of Central Excise Act, 1944. A three judge bench of the Honourable Supreme Court, in K. I. Pavunny v Asst.Collr.(H.Q).,C.Ex.Collectorate, Cochin, [1997 (2) TMI 97 - SUPREME COURT], had an occasion to consider whether the confessional statement of the appellant therein, given to the Customs officers under Section 108 of the Customs Act, 1962 (for short, the `Act'), though retracted at a later stage, is admissible in evidence and could form basis for conviction and whether retracted confessional statement requires corroboration on material particulars from independent evidence. The Supreme Court in Ram Bihari Yadav vs. State of Bihar [1998 (4) TMI 578 - SUPREME COURT] itself has observed that more often than not, the expressions 'relevanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd excise matters, where the assessee can be visited with financial penal consequences, Courts have always tried to apply a qualified preponderance of probabilities standard - The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility." Thus, while the general standards of proof for civil cases are the preponderance of probability and the standards for criminal cases are beyond reasonable doubt, these standards have also been eschewed in favour of "clear and convincing evidence" when the allegations are of more serious nature and also attract heavy financial consequences. Having detailed some of the lacunae and shortcomings in the investigation supra as well as the standard of proof required to be adduced by Revenue in clandestine removal matters as aforementioned, we shall now deal with the evidence relied upon qua each of the demands confirmed in the impugned order and examine whether the evidence relied upon meet the standard of "clear and convincing evidence", to establish the case of clandestine removal and to establish the availment of cenvat credit without actual receipt of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture and clearances of MS ingots during period February 2010 to February 2012 and the consequent demand of duty made is untenable; the demand of cenvat credit availed for the period February 2010 to May 2010 by the main appellant terming it ineligible, is incorrect; the demand made on M/s. SKSRM for clearances of TMT Rods alleged to have been cleared without payment of duty and allegedly made out of MS ingots procured from the main appellant without payment of duty, as confirmed in the impugned Order in Original, is untenable and consequently the penalties imposed on the appellants are unsustainable.
Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... conducted on 28.09.2010 at the residential premises of one Shri. P. Kumar who had previously worked as Accountant in GSPL. During the course of the search of the premises, some chits with details regarding cash expenditure incurred, two pen drives were found and seized. As there was no computer at the residential premises of Shri. Kumar, the officers along with Shri Kumar and the witnesses browsed the contents of the two pen drives in a nearby browsing center and print outs were taken from the pen drives, and put in a box file. 3. On the day of search operations, i.e. 28.09.2010, statements of various persons concerned in the respective premises were recorded under Section 14 of the Central Excise Act, 1944 from, a. Shri. Pintu, Lab Chemist of GSPL b. Shri. P. Kumar, former Accountant of GSPL c. Shri. C. Natarajan, the MD of GSPL d. Shri. A. Selvaraj, Proprietor of Shri Senthil Steels, Namakkal e. Shri. K. Murugesan Murugan, Proprietor of M/s Bakya Lakshmi Metal Mart, (BLM for short) Namakkal 4. A further statement was also recorded from Shri. P. Kumar on 08.10.2010. Thereafter, on 11.10.2010, the 2 pen drives seized from Shri. P. Kumar, were imaged in the presence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The factory premises of GSPL was again searched on 21.06.2012 and certain incriminating documents like Account of Raw Materials, Incoming Register, Bank Account Statements, Invoices issued to SKSRM and BSI were seized during the search under Mahazar dated 21.06.2012. A statement was also recorded from Shri Natarajan MD of GSPL on 21.06.2012. 9. Statements were also recorded from various transport operators and investigations were also conducted at the end of the suppliers of raw materials, as detailed below: a Statement dated 28.12.2012 from Shri. Sidesh Kumar, Managing Partner, M/s Salem Alloys (SA), Salem who were supplying materials to GSPL under Invoices. b Statement dated 10.01.2013 of Shri A. Raja. Managing Partner of M/s Vyapuri Chettiar & Co, Salem (VCC) who had supplied Scrap to GSPL. c Statement dated 15.01.2013 of Shri. V. Shivalingam, Proprietor, M/s Vasantham Steels, Erode, (VS) who had sent scrap to GSPL 10. Subsequently on 22.10.2013, the two pen drives seized from the residence of Shri P. Kumar under Mahazar dated 28.09.2010, the CPU and Hard disk seized from the Office premises of GSPL under Mahazar dated 28.09.2010 and the CPU seized from the resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of duty and that M/s. Sri Vela Smelters Pvt ltd, M/s. Dindugul Steel Rolling Mills, M/s. RAN India Steel, M/s. Attur Steels, M/s. NGA Steels have all failed to account inputs received by them from GSPL. Lower authority also took a view that M/s. Salem Alloys, M/s. Sakthi Ferro Alloys (India) Pvt Ltd, M/s. Salem Automech and M/s. Akshara Industries Ltd, have deliberately and wilfully passed on cenvat credit through dealer invoices without actual supply of goods on which such cenvat credit was being passed on. The lower authority was also of the view that GSPL, the Managing Director and two other directors of GSPL, the firms SKSRM, M/s. Vela Smelters, M/s. Dindugul Steel Rolling mills, M/s. RAN India, M/s. NGA Steels, M/s Sakthi Ferro Alloys, M/s. Akshara Industries, M/s. Salem Automach and M/s. Salem Alloys as well as the managing partner of M/s. Salem Alloys, have by their various acts of omissions and commissions rendered themselves liable for penalties under the provisions of Central Excise Act and Rules. 13. A show cause notice dated 28-10-2013 was issued to the main appellant GSPL as also to other appellants. The show cause notice directed the main appellant to show cause as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant GSPL and its directors Mr. C. Natarajan, Smt. Rani Devanai and Mr. N. Kirubakaran, submitted as under: a) Based on the computer printouts retrieved from the pen drives, seized on 28.9.2010 from the residence of Shri P. Kumar, former employee of the appellant's company. (i) Rs. 58,90,251/- was demanded on the grounds that 2193.52 metric tons of MS Ingots were cleared clandestinely during Feb, 2010 to June 2010. (ii) Further, an amount of Rs. 51,37,557/- was demanded on the grounds that it is ineligible cenvat credit on the MS Scrap, which was not received but credit was taken during Feb 2010 to June 2010. The department interrogated the drivers of the vehicles based on the lorry numbers in the invoices. The drivers have deposed that they have not transported MS Scrap. The demand based on such deposition alone without corroborative and tangible evidences is not sustainable when payments were made to the suppliers. Reliance is placed on the decision rendered in the case of Motabhai Iron and Steel Industries vs. CCE-2014 (302) ELT 69 (Tri.Ahmd) and in the case of RS Industries vs. CCE-2003 (153) ELT 114 (Tri.Del). b) On 28.9.2010, two pen drives were seized from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of purchases, suppression of production, excess consumption of electricity than what is required, production capacity, transportation of clandestine purchases and sales, cash flow back and evidences/depositions from the alleged suppliers and buyers were adduced. Reliance is placed on the decisions in CCE vs. Shree Nakoda Ispat Ltd-2014 (308) ELT 612 (Tri-Del) and Shingar Lamps. (P) Lid. V. CCE-2002 (150) ELT 290 (Tri-Del). No cogent and tangible evidences are adduced for the suppression of production and Section 9D (2) has not been followed. d) Rs. 25,58,588/- demanded on the alleged shortage of MS Ingots is not sustainable because during the course of investigation itself, it was properly explained to the investigating officers that a quantum of 959.010 MTs of RG-1 Stock was remelted due to quality problems as per Notification No.67/95-CE and the transactions were also duly reflected in the ER-1 Return. The closing balance of MS Ingots as on 28.9.2010 was re-melted. Such quantum was shifted from the RG-1 Stuck to raw material stock (defective ingots on 28.9.2010. The stock transfer was also shown in the ER-1 return for the month of Sep, 2010. Necessary entries were also made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en if found admissible, should be treated as light weight documents needing independent corroboration. Further, the statutory obligation under Section 9(D) (2) must also be discharged, i.e. examination in chief and cross examination. In the instant case, it is not satisfied. Therefore, no reliance can be placed on such depositions against the appellants. g) Reliance is placed on Manish Dixit vs. State of Rajasthan - AIR 2001 SC 93 (2001) Cr LJ 133 wherein the Court said that even otherwise an entry in the register would not have been sufficient to charge anybody with liability. h) In the case of Kashmir Vanaspathi Vs. CCE reported in 1989 (39) ELT 655, it has been held that note books maintained by labourers are not a dependable record In the case of M/s. Ashwin Vanaspathi Industries Vs. CC reported in 1992 (59) ELT 175-Tri, it is held that the liability cannot be proved on the basis of private registers. i) In the case of M/s. Gurpreet Rubber Industries vs. CCE-1996 (82) ELT 347-Tri, it is held that note books maintained by casual labourers are not a dependable record to establish the liability. j) The decisions rendered in the following case laws are relied on to contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e set aside and the appeals are to be allowed. 18. Shri. S. Durairaj, Ld. Advocate submits on behalf of M/s. SKSRM that: a) The appellant had sought relief under Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS in short) which was rejected on the ground that the main noticee has not opted for SVLDRS, but however the same relief was granted to another co-appellant Balaji Steel Industry and therefore the case may be remanded to the Respondent to consider similar relief as granted to Balaji Steel Industry. b) That without prejudice to the above, the demand is confirmed on the basis of two weighment slips recovered from the appellants' premises on 7.3.2012, which do not indicate the material weighed. A slip recovered from the appellants' premises on 7.3.2012 was also an unauthenticated slip, which is not lucid. Further, no other corroborative and tangible evidences are adduced to prove the receipt of unaccounted MS Ingots and the unaccounted clearance of TMT bars. c) That he reiterates the reliance on the decisions cited earlier to contend that private registers, mere slips, notebook maintained by workers etc. are not sufficient evidence to establish liability and that rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Industries, reported in 2004 (164) E.L.T. 339 (Tri. Kolkata) which stands affirmed by the Hon'ble Apex Court 2004 (170) Ε.Ε.Τ. A307 (S.C.), and in the case of. Aditya Steel Industries v CCE, 1996 (84) ELT 229 (T). f) That no enquiry with transporters was conducted to know whether they have delivered any MS Ingots from GSPL without any valid documents. g) the entire case is based on presumptions and assumptions as no evidence is available for the purchase of raw material in excess of the accounted quantity by the appellants, no evidence is available for the payment for the alleged purchase of raw materials, no evidence available for payment of freight charges h) The printouts recovered from the pen drive of Shri. Kumar is not admissible as an evidence in terms of Section 36B of the Central Excise Act, 1944, and relied on case laws in Jindal Nickel & Alloys v CCE,,2012 (279) ELT 134 (Tri-Del), Sakeen Alloys Pvt Ltd v CCE, 2013(296) ELT 392 (Tri-Ahmd), S.N.Agrotech v CC, 2018 (361) ELT 761 (Tri-Del), Rhino Rubber Pvt Ltd v CCE, 1996 (85) ELT 260 (T), CCE v Rajaguru Spinning Mills (P) Ltd, 2009 (243) ELT 280 (Tri-Chennai), R.M.Brothers v CCE, 2015 (328)E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.40508/2024 dated 01.05.2024 of this Bench in case of M/s. Aurofood Pvt Ltd v Commissioner of GST and Central Excise, Puducherry, wherein the Department was directed to issue discharge certificate, requests that appropriate direction may be issued to the Department to close the issue. 21. Shri. M.A. Mudimannan, Ld. Advocate on behalf of M/s. N.G.A Steels further submits that the demand is barred by limitation since the investigation commenced on 28.9.2010 and the SCN was issued on 28.10.2013 after a lapse of 3 years and one month. The inordinate delay in the issue of SCN is not explained in the SCN and the latches being unexplained in the SCN is fatal to the invocation of extended period and the notice is barred by limitation. 22. Shri. M. Kannan, Ld. Advocate who appeared for the appellants, M/s. Salem Alloys, Shri S. Sidesh Kumar, MD of Salem Alloys and Salem Automech, Salem would further submit that there was no cash transactions with M/s. Geetham Steels Pvt Ltd; that they are in no way connected with M/s. ABC India Ltd and no prudent person would pay an amount of Rs. 1,11,21,421/- by RTGS and receive back the said amount in cash for availing cenvat credit of Rs11,72,909/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d demand of Rs. 32.5 lakhs are based on statement of Shri. Pintu, loose papers seized from him and his admissions, the mismatch in seized production reports and that declared in RG1 have been detailed in tables 8.1.3 and 8.1.4 of the OIO b) The fact remains there was shortage on the day of search and the theory of captive consumption is not tenable as neither the seized RG 1 register upto 30.08.2010 nor the raw material register seized on the same day show any transfer of finished goods from RG 1 to raw material register and none of the ingots were declared as rejects when ER 1 was filed for August or Sept 2010. That the reliance placed on the decisions in CCE Raipur v Shree Nakoda Ispat, 2015 (1) TMI 267-CESTAT, New Delhi, Shingar Lamps Pvt Ltd v CCE, 2002 (2) TMI 278- CEGAT, New Delhi, CCE, Raipur v Sidhi Vinayak Sponge Iron (P) Ltd, 2015 (1) TMI 264- CESTAT, New Delhi, Bhartiya Tar Udyog v CCE, Delhi-II, 2015 (1) TMI 170- CESTAT, New Delhi, Commr of C. Ex, Kanpur v Trela Footwear Exports Pvt Ltd, 2015 (1) TMI 213- CESTAT, New Delhi were distinguishable from the facts of the instant case. c) For the clandestine removal/sale of 2193.52 MTs of MS Ingots during the period Feb 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ili Detergent Industries, M/S Superchem, Shree Jalaram Chemicals Industries, Sonal Cosmetics (Exports) Ltd. Versus C.C. E-Ahmedabad-II 2019 (7) TMI 825 - Cestat Ahmedabad, M/S Karsh Enterprises, Jaswinder Singh And Ajay Adwani Versus CCE & ST- Jalandhar 2021 (8) TMI1225 - Cestat Chandigarh, Harika Resins Pvt Ltd and Sama Rajasekhar Versus Commissioner Of Customs, Central Excise & Service Tax, Guntur 2021 (7) TMI 891 - Cestat Hyderabad, M/s. Vishnu Chemicals Ltd, M.V. Ramana Murthy, Central Excise Incharge and CH. Krishna Murthy, Managing Director Versus Commissioner of Central Excise, Customs & Service Tax, Hyderabad - I, 2019 (7) TMI 952 - CESTAT HYDERABAD h) That Shri. Natarajan was non cooperative and did not respond to six summons and all his statements have to be considered to conclude on his bonafides and he had not mentioned about stock available in the factory when specifically asked under statement and no evidence was placed by appellant on the day of search or immediately thereafter that defective ingots were duly accounted and used captively for remelting. i) That there is no correlation of purchases and sales chronologically of the computerised stock or sale ledgers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, as mandated under Section 9D. 28. We have considered the submissions made at length by both sides and carefully perused the appeal records, written submissions as well as the case laws quoted by both sides. 29. The disputes involved in these cases are whether the finding that the main appellant has indulged in clandestine manufacture and clearances of MS ingots during period February 2010 to February 2012 and the consequent demand of duty is lawful; whether the demand of cenvat credit availed for the period February 2010 to May 2010 by the main appellant terming it ineligible, is licit; whether the demand made on M/s. SKSRM for clearances of TMT Rods alleged to have been cleared without payment of duty and allegedly made out of MS ingots procured from the main appellant without payment of duty, as confirmed in the impugned Order in Original, is tenable and whether penalties imposed on the appellants are legal. 30. Having heard both sides at length and after perusing the records we find that the demand of Rs. 58,90,251/- confirmed on GSPL on finding of clandestine removal of MS Ingots from February 2010 to June 2010 and the demand of Rs. 51,31,557/- of ineligible cenvat cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the person summoned. (2) All persons so summoned shall be bound to attend, either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and to produce such documents and other things as may be required: Provided that the exemptions under Sections 132 and 133 of the Code of Civil Procedure, 1908 (5 of 1908) shall be applicable to requisitions of attendance under this section. (3) every such inquiry as aforesaid shall be deemed to be a "judicial proceeding" within the meaning of Section 193 and Section 228 of the Indian Penal Code, 1860 (45 of 1860)." "9D. Relevancy of statements under certain circumstances.- (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, - (a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the court considers unreasonable; or (b) When the person who made the statement is examined as a witness in the case before the court and the court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) the provisions of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a court, as they apply in relation to a proceeding before a court." 34. As can be seen from the aforestated provisions, both S.14 and S.9D of the CE Act are pari-materia with S.108 and S.138B of the Customs Act respectively and therefore judicial pronouncements in respect of these provisions of Customs Act, 1962 would also hold good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised to have been obtained by threat, inducement or promise. (5) The collection of evidence under Section 108 and other relevant provisions relating to search and seizure are only for the purpose of taking further steps for confiscation of contraband and imposition of penalty. (6) The selfsame evidence is admissible in evidence on the complaint laid by the Customs Officer for prosecution under Section 135 or other relevant statutes." (emphasis supplied) 36. Thereafter, the import of a retracted confession was elaborated as under: "25. It would thus be seen that there is no prohibition under the Evidence Act to rely upon the retracted confession to prove the prosecution case or to make the same basis for conviction of the accused. The practice and prudence require that the Court could examine the evidence adduced by the prosecution to find out whether there are any other facts and circumstances to corroborate the retracted confession. It is not necessary that there should be corroboration from independent evidence adduced by the prosecution to corroborate each detail contained in the confessional statement. The Court is required to examine whether the confessional statement is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x xxx Section 19 lays down that every person arrested under the Act shall be forwarded without delay to the nearest Central Excise Officer empowered to send persons so arrested to a Magistrate, or, if there is no such Central Excise Officer within a reasonable distance, to the officer-in-charge of the nearest police station. These Sections clearly show that the powers of arrest and search conferred on Central Excise Officers are really in support of their main function of levy and collection of duty on excisable goods." (at page 702) (emphasis supplied)" xxxxx "109. Having regard to the statutory scheme contained in the Central Excise Act, more particularly sections 21(1) and proviso (a) to section 21(2), the Court held that a Central Excise officer had no power to submit a charge-sheet under section 173(2) of the Cr.PC, as such officer is only empowered to send persons who are arrested to a Magistrate under these provisions. 110. The Court distinguished Raja Ram Jaiswal (supra), and held that this case being under the Central Excise Act, which is a revenue statute like the Land Customs Act, 1924 and the Sea Customs Act, 1878, would be more in accord with the case of Bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Act. The Customs Officer does not exercise, when enquiring into a suspected infringement of the Sea Customs Act, powers of investigation which a police officer may in investigating the commission of an offence. He is invested with the power to enquire into infringements of the Act primarily for the purpose of adjudicating forfeiture and penalty. He has no power to investigate an offence triable by a Magistrate, nor has he the power to submit a report under Section 173 of the Code of Criminal Procedure. He can only make a complaint in writing before a competent Magistrate. (at pages 466-467) (emphasis supplied)" 112. Barkat Ram (supra), Raja Ram Jaiswal (supra) and Badku Joti Savant (supra) were all referred to. The Court then laid down, what according to it was the true test for determining whether an officer of customs is to be deemed to be a police officer, as follows: "But the test for determining whether an officer of customs is to be deemed a police officer is whether he is invested with all the powers of a police officer qua investigation of an offence, including the power to submit a report under Section 173 of the Code of Criminal Procedure. It is not claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which any person is conscious." S. 2(e) "evidence" means and includes- (i) all statements including statements given electronically which the Court permits or requires to be made before it by witnesses in relation to matters of fact under inquiry and such statements are called oral evidence; (ii) all documents including electronic or digital records produced for the inspection of the Court and such documents are called documentary evidence" 41. Thus, Fact" encompasses any thing (in the material sense), state or relation, of things perceptible to the senses, including states of mind, whereas "evidence" can ONLY be oral or documentary. Fact refers to the thing to be proved (quid probandum) and evidence means the means of proof or manner of proof (modus probandi). Thus, conceptually Fact and Evidence are distinct and separate. 42. Fact can either be a fact-in-issue, which means and includes any fact from which, either by itself or in connection with other facts, the existence, non-existence, nature or extent of any right, liability or disability, asserted or denied in any suit or proceeding, necessarily follows. [2(g) of the BSA] or a relevant fact [2(k) of the BSA]- A fact i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t admissibility of hearsay evidence. Indeed, it is substantive evidence and like any other substantive evidence requires no corroboration for forming basis of conviction of an accused. But then the question as to how much weight can be attached to a dying declaration is a question of fact and has to be determined on the facts of each case." 45. It is pertinent to note that Section 5 to 16 of the Indian Evidence Act, 1872 (3 to 14 of BSA, 2023) pertains to relevance of facts and sections 16 to 31 of Indian Evidence Act, 1872 (14 to 25 of BSA, 2023) deals with admissions and confessions and when they are relevant or when they are irrelevant. 46. At this juncture, it will also be appropriate to notice S.141 BSA (former S.136 of Indian Evidence Act). S.141 says: "141. (1) When either party proposes to give evidence of any fact, the Judge may ask the party proposing to give the evidence in what manner the alleged fact, if proved, would be relevant; and the Judge shall admit the evidence if he thinks that the fact, if proved, would be relevant, and not otherwise. (2) If the fact proposed to be proved is one of which evidence is admissible only upon proof of some other fact, such la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In fact, one cannot even use the statement recorded by a Magistrate under Section 164 Cr.P.C. of a witness as a substantive piece of evidence. A statement given by a witness to the police under Section 161(3) Cr.P.C. cannot even be used to corroborate his testimony in the Court, but, can be used only to contradict him. The law being thus, certain Revenue statutes like the CESA, etc. provide for a special rule of evidence for treating a statement of a person as a substantive piece of evidence. The Parliament, in its wisdom, reposed faith in the investigation of Revenue offences by Revenue officers and also was aware of the difficulties that would be faced by them while prosecuting a Revenue offender in a Court of law. 9. Section 9D along with its analogous provisions, was inserted into being added to the CESA was vide clause 19 of the Customs, Gold (Control) and Central Excises and Salt (Amendment) Act, 1973 (Act 36 of 1973). This amendment was a consequence of the 47th report of the Law Commission of India on "Trial and Punishment of Social and Economic Offences" submitted to the Government of India in February, 1972. For the purpose of the discussion at hand the observations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r obvious reasons. Twenty years ago, Stone stressed the importance of excluding similar conduct evidence (even though it is relevant otherwise than via disposition), where its effect was too prejudicial, in these words-- "where the peg is so small and the linen so bulky and dirty that a jury will never see the peg, but merely yield to indignation at the dirt." Somewhat similar considerations make it desirable that the Court should have this power, since the provision which we are recommending is itself new." It is, therefore, obvious that the use of a statement made before a Central Excise officer of a gazetted rank under the CESA cannot be pressed in aid, if the conditions stated therein are not satisfied. 10 In this backdrop, if we analyse Section 9D of the CESA, extracted above, it can be inferred that a statement of a person recorded by any Central Excise officer of a gazetted rank can be treated as a substantive piece of evidence, without he being examined in the Court, provided the Department is able to establish the existence of the conditions set out in sub-section (a). The conditions set out in sub-section (a) are in pari materia with the ones set out in the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the statement made to a Gazetted Central Excise Officer is taken as relevant and admitted in evidence. This would take care of a scenario, of the deponent turning hostile, in which case, the Court can rely on the previous statement given before the Gazetted Central Excise Officer in the interests of justice. Whenever the witness who gave the statement deposes and stands by his earlier statement given before the Gazetted Officer, and if such deposition is to the detriment of the opposite side, then the witness is to be offered for cross-examination as otherwise it will be prejudicial to the interests of the other side. If the witness stands by his statement and if the cross-examination doesn't dislodge his deposition in Court, save for some minor or inconsequential inconsistencies, then the Court can disregard such variations and, in the facts and circumstances admit the statement in evidence in the interests of justice as provided in S.9D(1)(b). Thus, S.9D(1)(b) would also apply to a situation as aforementioned, where the witness is examined in chief and thereafter offered to the opposite side for cross-examination. 52. S.9D(2) states that the provisions of sub-section (1) shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case, to the extent possible. In other words, the words "so far as may be" cannot be taken as a leeway to refrain from the application of S.9D(1), to the exclusion of the consideration of the word "shall", which would be contrary to the stated intent of the section. 56. Now what would this entail for the adjudicating proceeding before the adjudicating authority? It is pertinent to note that under Section 14 of the CEA/Section 108 of the Customs Act, all persons so summoned before the Gazetted Officer of the Department shall be bound to state the truth upon any subject respecting which they are examined or make statements and produce such documents and other things as may be required. Every such inquiry as aforesaid shall be deemed to be a judicial proceeding within the meaning of section 193 and section 228 of the erstwhile Indian Penal Code, 1860 (45 of 1860). Thus, the person summoned is giving the aforesaid statement at the risk of being proceeded against for perjury. That in itself, neither automatically translates into a validation of the truthfulness of the statement, nor does it attract any such presumption that what is deposed in the statement is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it contains- that is to say, the said deposition of the Gazetted Officer stating that the deponent had indeed given the statement before him, would be the manner of admitting or mode of proof of the admissible substantive evidence. 58. Again, 9D(1)(b) provides for the deponent's statement given before the Gazetted Officer to be admitted as substantive evidence, when the person who made the statement is examined as a witness in the case before the adjudicating authority and the adjudicating authority is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. This sub section (b) of Section 9D(1) takes care of a situation where the witness who is deposing before the adjudicating authority turns hostile and on an evaluation of the circumstances of the case the adjudicating authority decides to discard the version given by the witness before it and instead place reliance on the earlier statement given before the Gazetted Officer. As elucidated supra, this also applies in a case where the witness deposing stands by his earlier statement and is thereafter offered for cross-examination to the opposite side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the decision of the Honourable Apex Court in K I Pavunny's case as stated supra, wherein the Apex Court emphasised that in the case of a retracted confession the court should examine whether the confessional statement is voluntary; in other words, whether it was not obtained by threat, duress or promise and if the Court is satisfied from the evidence that it was voluntary, then it is required to examine whether the statement is true. Such an interpretation is also in line with the decision of the jurisdictional Madras High Court cited supra and given the pari materia provisions of the Customs Act, 1962, we are of the view that the said interpretation would hold good under the pari materia provisions of Customs Act as well. 61. However, we are unable to subscribe to the view that cross-examination of the witness is a necessary pre-requisite in all circumstances. Wherever, the scenario under Section 9D(1)(a) arises, it goes without saying that there would not arise a question of the deponent being made available for cross-examination. Similarly, when the adjudicating authority, on examination of the witness under Section 9D(1)(b) forms an opinion in the facts and circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y implies that it is only in the proceedings before the Court and in the context of any prosecution for an offence under the Customs Act, the statement of a person as recorded by the Customs Officer would be held to be relevant. 18. Insofar as the second limb of Section 138B as provided for in subsection (2) of the said provision is concerned, it clearly implies that the provisions of sub-section (1) shall apply in relation to any proceedings under the Customs Act (other than a proceeding before a Court), in a manner they apply in relation to a proceeding before a Court. In other words, the relevancy of a statement which sub-section (1) of Section 138B speaks about, would be held to be admissible and relevant even in relation to any proceeding under the Customs Act, in a manner it is so applicable before a Court as provided for under subsection (1). 19. On such meaning which can be attributed to Section 138B, the contention of the petitioner is required to be tested. At the outset, we may observe that Section 138B per se does not provide for any cross examination, as the provision deals with relevancy of statements in the facts and circumstances of the case. As to whether an op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld militate against the provisions of clause (a) of sub-section (1) of Section 138B which also includes complete discretion which is made available to the adjudicating officer, to hold statements as recorded relevant even in given situation. When the provision itself manifest such discretion to the adjudicating officer, then any demand for cross examination would be required to be tested, in the facts and circumstances of the case, including by applying the test of prejudice which may be required to be discharged. For such reasons, we reject the contention of the petitioner that any absolute right was created by virtue of Section 138B on the petitioner to demand cross examination of the three witnesses in the facts of the present case." (emphasis supplied) 63. It would also be apposite to refer to the decision of the High Court of Delhi in J & K Cigarettes v. CCE, 2009 (242) ELT 189 (Del), wherein while repelling the challenge to the constitutionality of Section 9D the Honourable High Court held as under: "28. The moot question that arises at this stage is as to whether the provision in question is arbitrary. Such a provision can still be held to be offending Article 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al authority would confront the assessee as well, during the proceedings, which shall give the assessee a chance to make his submissions in this behalf. It goes without saying that the authority would record reasons, based upon the said material, for forming the opinion. Only then, it would be possible for the affected party to challenge such a decision effectively. Therefore, the elements of giving opportunity and recording of reasons are inherent in the exercise of powers. The aggrieved party is not remediless. This order/opinion formed by the quasi judicial authority is subject to judicial review by the appellate authority. The aggrieved party can always challenge that in a particular case invocation of such a provision was not warranted. 30. Therefore, it cannot be said that the provision gives uncanalised or uncontrolled power upon the quasi judicial authority. Granting of opportunity and passing reasoned order are the conditions inbuilt in exercise of power by any quasi judicial authority and, therefore, it is not necessary that these conditions should be specifically mentioned in the provision. The very fact that before power under Section 9D(2) of the Act could be exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith; otherwise, it would be arbitrary. In such cases, test of reasonableness is more strict. Following observations therefrom are worth quoting :- "15. Every wide power, the exercise of which has far reaching repercussion, has inherent limitation on it. It should be exercised to effectuate the purpose of the Act. In legislations enacted for general benefit and common good the responsibility is far graver. It demands purposeful approach. The exercise of discretion should be objective. Test of reasonableness is more strict. The public functionaries should be duty conscious rather than power charged. Its actions and decisions which touch the common man have to be tested on the touchstone of fairness and justice. That which is not fair and just is unreasonable. And what is unreasonable is arbitrary. An arbitrary action is ultra vires. It does not become bona fide and in good faith merely because no personal gain or benefit to the person exercising discretion should be established. An action is mala fide if it is contrary to the purpose for which it was authorised to be exercised. Dishonesty in discharge of duty vitiates the action without anything more. An action is bad even without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 reliance would, therefore, be vitiated in law and on facts. 13. Once the ambit of Section 9D(1) is thus recognized and understood, one has to turn to the circumstances referred to in the said sub-section, which are contained in clauses (a) and (b) thereof. 14. Clause (a) of Section 9D(1) refers to the following circumstances : (i) when the person who made the statement is dead, (ii) when the person who made the statement cannot be found, (iii) when the person who made the statement is incapable of giving evidence, (iv) when the person who made the statement is kept out of the way by the adverse party, and (v) when the presence of the person who made the statement cannot be obtained without unreasonable delay or expense. 15. Once discretion, to be judicially exercised is, thus conferred, by Section 9D, on the adjudicating authority, it is self evident inference that the decision flowing from the exercise of such discretion, i.e., the order which would be passed, by the adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract confessional statements. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudicating authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned. (emphasis supplied) 19. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise Officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise Officer, unless and until he can leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he witness is offered for cross-examination to the opposite party, the statement given by such witness, in the proceeding does not become admissible as evidence in the proceeding. Such statement cannot be treated as evidence. Section 138B of the Act of 1962 carves out few exceptions from such cardinal principle in a proceeding. Section 138B(1) of the Act of 1962 stipulates that, a statement made and signed by a person before any gazetted officer of the customs during the course of any enquiry or proceeding under the Act of 1962 shall be relevant, for the purpose proving, in any prosecution of an offence under the Act of 1962, the truth of the facts which it contains when, the person who made the statement is dead, or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable, or when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Act, 1962) in response to a summons by a gazetted customs/excise officer, is not hit by Section 25 of the Indian Evidence Act, 1872, because a customs/excise officer is not a "police officer". B. At this stage, it is merely a recorded statement-not yet admissible or relevant. It becomes relevant under the circumstances stated in S. 9D of the CE Act 1944/S.138B of the Customs Act. C. The fact that a statement is made and recorded, and is said to be relevant as per IEA/BSA, does not mean it is proved. D. For the S.14/S.108 statement to be admissible under general circumstances there must be an examination in chief and a subsequent cross examination that would bring it into the evidentiary pool for consideration. It needs to be examined whether the statement is voluntary; in other words, whether it was not obtained by threat, duress or promise. If the adjudicating authority is satisfied from the evidence that it was voluntary, then it is required to examine whether the statement is true. If the adjudicating authority on examination of the evidence finds that it is true, it can be relied upon in determination of the issue in dispute in the circumstances of the case. E. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and if the conditions of sub-sections (a) or (b) of S.9D(1)/S 138B(1) exist, then the statement becomes relevant and can be made admissible without cross examination in the circumstances more elaborately elucidated supra. H. As laid down by the Hon'ble High Court in J & K Cigarettes v. CCE, 2009 (242) ELT 189 (Del), while invoking Section 9D of the Act, the concerned adjudicating authority is to form an opinion on the basis of material on record that a particular ground, as stipulated in the said Section, exists and is established; such an opinion has to be supported with reasons; and before arriving at this opinion, the authority would give opportunity to the affected party to make submissions on the available material on the basis of which the authority intends to arrive at the said opinion as it is always open to the affected party to challenge the invocation of provisions of Section 9D of the Act in a particular case by filing statutory appeal, which provides for judicial review. 67. Given that the aforesaid summation addresses the questions as to whether compliance of Section 9D by the Adjudicating Authority is mandatory and what is the import of Section 14 statement and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord that a particular ground, as stipulated in the said Section, exists and is established; such an opinion has to be supported with reasons; and before arriving at this opinion, the authority would give opportunity to the affected party to make submissions on the available material on the basis of which the authority intends to arrive at the said opinion. 70. Thus, we hold that since the adjudicating authority has not followed the mandate of Section 9D (2) in the instant case and had not given an opportunity to the affected party to make submissions post intimation of his intent to rely on such materials duly stating the reasons why he intends to arrive at the said opinion. We are therefore of the considered view that the adjudicating authority has grossly erred in placing reliance on the statements recorded under Section 14 without following the mandate of Section 9D of the CEA. The reliance placed by the adjudicating authority on all these untested statements cannot sustain. This has rendered the case of clandestine removal made against the appellants wholly unsustainable on this ground alone. 71. The only remaining question of law that arises for our consideration is whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and (d) the information contained in the electronic record reproduces or is derived from such information fed into 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- (a) by a combination of computers operating over that period; or (b) by different computers operating in succession over that period; or (c) by different combinations of computers operating in succession over that period; or (d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly. (4) In any proceedings where it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondary evidence means and includes, among other things, "copies made from the original by mechanical processes which in themselves insure the accuracy of the copy, and copies compared with such copies". Section 65 enables secondary evidence of the contents of a document to be adduced if the original is of such a nature as not to be easily movable. It is not in dispute that the information contained in the call records is stored in huge servers which cannot be easily moved and produced in the court. That is what the High Court has also observed at para 276. Hence, printouts taken from the computers/servers by mechanical process and certified by a responsible official of the service-providing company can be led in evidence through a witness who can identify the signatures of the certifying officer or otherwise speak of the facts based on his personal knowledge. Irrespective of the compliance with the requirements of Section 65-B, which is a provision dealing with admissibility of electronic records, there is no bar to adducing secondary evidence under the other provisions of the Evidence Act, namely, Sections 63 and 65. It may be that the certificate containing the details in subsect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Court wherever interest of justice so justifies. 40. In Sonu @ Amar vs. State of Haryana (2017) 8 SCC 570, (delivered on 18.07.2017) the following paragraphs being crucial are extracted hereinbelow: "30. In R.V.E. Venkatachala Gounder [R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami & V.P. Temple, (2003) 8 SCC 752], this Court held as follows: (SCC p. 764, para 20) "20. ... Ordinarily, an objection to the admissibility of evidence should be taken when it is tendered and not subsequently. The objections as to admissibility of documents in evidence may be classified into two classes: (i) an objection that the document which is sought to be proved is *itself inadmissible* [ The matter between two asterisks has been emphasised in original] in evidence; and (ii) where the objection does not dispute the admissibility of the document in evidence but is directed towards the * mode of proof *[ The matter between two asterisks has been emphasised in original.] alleging the same to be irregular or insufficient. In the first case, merely because a document has been marked as "an exhibit", an objection as to its admissibility is not excluded and is available to be raised even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te stage by holding that: (SCC p. 15, para 19) "19. Before leaving this case it is necessary to refer to one of the contentions taken by Mr Ramamurthi, learned counsel for the respondent. He contended that the police reports referred to earlier are inadmissible in evidence as the Head Constables who covered those meetings have not been examined in the case. Those reports were marked without any objection. Hence it is not open to the respondent now to object to their admissibility." 32. It is nobody's case that CDRs which are a form of electronic record are not inherently admissible in evidence. The objection is that they were marked before the trial court without a certificate as required by Section 65-B(4). It is clear from the judgments referred to supra that an objection relating to the mode or method of proof has to be raised at the time of marking of the document as an exhibit and not later. The crucial test, as affirmed by this Court, is whether the defect could have been cured at the stage of marking the document. Applying this test to the present case, if an objection was taken to the CDRs being marked without a certificate, the Court could have given the prosecut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r this matter to a larger Bench. Needless to say that there is an element of urgency in the matter." 48. The reference came to be answered in the judgment reported in (2020) 7 SCC 1 by a three-Judge bench in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal & Ors. The relevant portions of which are as under:- "45. Thus, it is clear that the major premise of Shafhi Mohammad [Shafhi Mohammad v. State of H.P., (2018) 2 SCC 801 : (2018) 2 SCC 807 : (2018) 2 SCC (Civ) 346 : (2018) 2 SCC (Civ) 351 : (2018) 1 SCC (Cri) 860 : (2018) 1 SCC (Cri) 865] that such certificate cannot be secured by persons who are not in possession of an electronic device is wholly incorrect. An application can always be made to a Judge for production of such a certificate from the requisite person under Section 65-B(4) in cases in which such person refuses to give it. 46. Resultantly, the judgment dated 3-4-2018 of a Division Bench of this Court reported as Shafhi Mohd. v. State of H.P. [Shafhi Mohd. v. State of H.P., (2018) 5 SCC 311 : (2018) 2 SCC (Cri) 704], in following the law incorrectly laid down in Shafhi Mohammad [Shafhi Mohammad v. State of H.P., (2018) 2 SCC 801 : (2018) 2 SCC 807 : (2018) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h case. When it comes to criminal trials, it is important to keep in mind the general principle that the accused must be supplied all documents that the prosecution seeks to rely upon before commencement of the trial, under the relevant sections of the Cr.PC. 56. Therefore, in terms of general procedure, the prosecution is obligated to supply all documents upon which reliance may be placed to an accused before commencement of the trial. Thus, the exercise of power by the courts in criminal trials in permitting evidence to be filed at a later stage should not result in serious or irreversible prejudice to the accused. A balancing exercise in respect of the rights of parties has to be carried out by the court, in examining any application by the prosecution under Sections 91 or 311 Cr.PC or Section 165 of the Evidence Act. Depending on the facts of each case, and the court exercising discretion after seeing that the accused is not prejudiced by want of a fair trial, the court may in appropriate cases allow the prosecution to produce such certificate at a later point in time. If it is the accused who desires to produce the requisite certificate as part of his defence, this again wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s first stored, is owned and/or operated by him. In cases where the "computer" happens to be a part of a "computer system" or "computer network" and it becomes impossible to physically bring such system or network to the court, then the only means of providing information contained in such electronic record can be in accordance with Section 65-B(1), together with the requisite certificate under Section 65B(4). The last sentence in para 24 in Anvar P.V. [Anvar P.V. v. P.K. Basheer, (2014) 10 SCC 473 : (2015) 1 SCC (Civ) 27 : (2015) 1 SCC (Cri) 24 : (2015) 1 SCC (L&S) 108] which reads as "... if an electronic record as such is used as primary evidence under Section 62 of the Evidence Act ..." is thus clarified; it is to be read without the words "under Section 62 of the Evidence Act,...". With this clarification, the law stated in para 24 of Anvar P.V. [Anvar P.V. v. P.K. Basheer, (2014) 10 SCC 473 : (2015) 1 SCC (Civ) 27 : (2015) 1 SCC (Cri) 24 : (2015) 1 SCC (L&S) 108] does not need to be revisited." (Emphasis supplied) 49. This judgment has put the matter beyond controversy. In view of the above, there is no manner of doubt that certificate under Section 65-B(4) is a condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egularly 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 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 computers, whether - (a) by a combination of computers operating over that period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Section 3 of the Evidence Act defines "document" as follows: "Document. - "Document" means any matter expressed or described upon any substance by means of letter, figures or marks, or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matter." 17. "Evidence" in section 3 of the Evidence Act is defined as follows: "Evidence." -- "Evidence" means and includes - (1) all statements which the Court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry; Such statements are called oral evidence; (2) all documents including electronic records produced for the inspection of the Court; such documents are called documentary evidence." 18. Section 36B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub-section (2) of section 65 of the Evidence Act are satisfied, without further proof or production of the original; (iii) In view of the provisions of section 65(4) of the Evidence Act, a certificate must accompany the electronic record like computer printout, compact disc, video compact disc or pen drive, pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence; (iv) Only if the electronic record is duly produced in terms of section 65B of the Evidence Act, that the question of its genuineness would arise. The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if the requirements of section 65B of the Evidence Act is not complied with; (v) An electronic record by way of secondary evidence shall not be admitted in evidence unless the requirements of section 65B of the Evidence Act has satisfied; and (vi) This would not apply in a case where the appellant adduces primary evidence by mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the statements and such non-compliance has been agitated as a question of law for the first time at the appellate stage, and this were to be the only deficiency, we would have, remanded the matter for compliance with the said requirement of Section 9D (2), as we are of the view that the Tribunal would be justified in such a remand in the aforementioned situation. 78. However, given that the Adjudicating Authority, despite noticing the protestations of the appellants regarding noncompliance of Section 36B (4), and even after the law was laid down in P.V. Anvar's case, yet chose not to cure the same, we refrain from embarking on this course of remand as it would tantamount to affording a second opportunity that was undeserved, not to mention the prolongation of the litigation, which the appellants do not deserve. Moreso, since we are conscious that we have to balance the rights of the parties before us, and such conscious non-compliance by the adjudicating authority has to be considered adversely to the detriment of the Revenue and the benefit thereof should then enure to the appellants. 79. Over and above the aforesaid crucial deficiencies in the case of the Department, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Venkatesh having been done nor the said statement of Mr. C. Natarajan that the stock found short as per RG 1 register was available as scrap, having been verified and categorically controverted. d) The imaging of the two pen drives seized from Shri. P. Kumar was done on 11.10.2010 under a mahazar in the DGCEI Coimbatore Regional Office during which printout of documents in the said pen drives were taken and about which Shri. P. Kumar in his statement dated 11.10.2010 has deposed with regard to the printouts taken in his presence from the pen drive with inscription 'SanDisk' that they pertain to purchase of M.S. Scrap, sale of M.S. Ingots and cash transactions entered by him under the company name M/s. ABC India Limited etc. The Mahazar drawn on 11-10-2010 at the office premises of DGCEI, Coimbatore Regional Unit, contains narration such as: "The seal on the cover was found intact. Then the officers opened the seal cover and took out 2 pen drives one with the inscription "Transcend" and the other with Inscription "SanDisk" which were identified by Shri. P. Kumar as the pendrives used by him for storing data relating to Geetham Steels Private limited and was seized by the offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri. M. Maharajan, Cyber Forensic Analyst from M/s. Ascent Technologies caught our attention. In the said mahazar it is recorded as under: "Shri. Maharajan generated reports showing Hash properties for each digital material for which imaging had been done (CPUs, Hard disk and 2 pen drives) and we signed on them in today's date. As per specific query by the Officer regarding the date of entry of certain files in the pen drives, Shri. Maharajan generated reports in the name of 'KUMAR PENDRIVE SAN DISK' and ' KUMAR TRANSCEND PD'. We signed on the said reports also in today's date. Upon being requested to explain the entries in the above said reports regarding files in the pen drives, Shri. Maharajan stated that in KUMAR PEN DRIVE SAN DISK, Folder named Letters was created on 17th May 2010 at 2.56.52 PM (IS) and the file was last written on 17th May 2010 at 2.56.54 PM (IS) and the same was last accessed on 11th October 2010; that in the other report regarding KUMAR PEN DRIVE SAN DISK, File name Proforma.xls file, file was created on pen drive on 23rd May 2010 at 12.32.00 PM(IS) and the same was last written on 2nd March 2010 at 03.27.36AM and the same file last accessed on 11.10.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d then mean that the file _esko was brought into the pen drive with inscription "Transcend" on 28th September 2010 at 12.21.41 PM (IS) and the file was created at some other digital location prior to the date of last written time stamp, namely, 26th July 2010. The said file is shown last accessed on 08.10.2010. At this juncture, it becomes necessary to indicate what is recorded in the mahazar dated 28.09.2010 which commenced at 11.45 hours at the residence of Shri. P. Kumar. It is recorded that during the course of search the officers found two pen drives one with the inscription "Transcend" and the other with inscription "SanDisk". It is further recorded that the search was completed at 12.15 hours and that as there was no facility in the above residential premises of Shri. P. Kumar, the officers along with the witnesses and Shri. P. Kumar proceeded to one browsing centre named "Archanaa Software Tech" located nearby where the officers inserted the two pen drives one by one in the computer available there, took printout of certain purchase and sale data entered against the companies M/s. ABC India and M/s Geetham Steels Pvt Ltd from the above pen drives and filed them in a Box fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various dates through the private bank accounts of individuals related to Shri. C. Natarajan, MD of GSPL and such cash flow corroborates to unaccounted clandestine clearances of MS Ingots by GSPL. These individuals, related to Shri. C Natarajan are none other than Shri. Kirubakar, son of Shri. Natarajan, MD of GSPL and one of the Directors of GSPL and Ms. Rani Deivanai N, wife of Shri Natarajan, into whose accounts the money is stated to have been deposited and subsequently transferred to GSPL. However, inexplicably, neither were these persons inquired with, nor was any statement recorded from them as to the nature of the transactions in their bank accounts. When it is elementary that it is for the holders of the bank account to explain the source of the cash deposits into their account and the reasons why they transferred these amounts to the bank account of GSPL, for reasons beyond us and best known to the investigating officers, such a line of enquiry that may have provided clinching link to the consignees to whom the clandestine clearances were made, was never explored, despite there being no apparent difficulty for the investigating officers to do so !. In fact, para 8.4.7 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts from the computer of Geetham Steels and also the computer available at the residential premises of Shri. C. Nagarajan, he had provided names of parties who were suppliers of scrap to his company. Yet, for some strange and inexplicable reason, the follow up investigation was delayed by nearly one year and five months and it was only on 07.03.2012 follow up investigation was done with the customers of GSPL, those who had already been identified way back in September 2010. 80. We now address the standard of proof that is required when it comes to matters of clandestine removal. The 'standard of proof' denotes the level of conviction or the 'decisional threshold' that enables the court to decide whether the party who shoulders the burden of proof has discharged the same. In customs and excise matters, where the assessee can be visited with financial penal consequences, Courts have always tried to apply a qualified preponderance of probabilities standard. They have attempted to draw a fine line by saying that the burden on the revenue is not as high as that of a criminal trial given that it is a Fiscal statute (and the customs/excise officers being not police officers). However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Courts and Tribunals in numerous decisions. In Continental Cement Company v UOI, 2014 (309) ELT 411 (All), the Honourable High Court of Allahabad has held as under: "12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects : (i) To find out the excess production details. (ii)To find out whether the excess raw materials have been purchased. (iii)To find out the dispatch particulars from the regular transporters. (iv)To find out the realization of sale proceeds. (v)To find out finished product receipt details from regular dealers/buyers. (vi)To find out the excess power consumptions. 13. Thus, to prove the allegation of clandestine sale, further corroborative ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following: (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of: (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment 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 far 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. Needless to say, a precise enumeration of all situations in which one could hold with activity th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Kumar as available at Annexure A-13(i) of the SCN as well as per the GSPL computer data at Annexure A15(i) of the SCN and the depositions of Shri. P. Kumar stating inter-alia that he made entries in the computer of GSPL as per the particulars given to him by MD of GSPL and that the details of sale of Ingots shown by GSPL in their ER1 returns tally with the entries for the corresponding months in the RG 1 register as well as that as per the computer data in the CPU of GSPL. However, the printouts from pen drive with inscription Transcend pertaining to ABC India Ltd consisted of data contained in the GSPL CPU as well as some other sales and therefore the data contained under the name ABC India Ltd is nothing but the data related to GSPL only as admitted by Shri. Kumar. That the computer printout from pen drive with inscription 'Transcend' had entries under the heading cash book in the account maintained under ABC India which shows cash received from various parties on different dates from February 2010 to June 2010 and when compared with the value of clearances to the said parties it is seen that these cash receipts were for clandestine clearances. That as regards receipt of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... small paper slips and stored it in the two pen drives. Other than the two pen drives, no computer was seized or available at the premises of Shri. P. Kumar. Again, nothing is shown as evidenced from the records that upon examination of the CPU seized from GSPL pages 1 to 473, it contained any data other than pertaining to GSPL, and this data of GSPL was also found in the pen drives of Mr. Kumar. Mr. Kumar in his statement of 28-09-2010 also confirms that the data contained in the pen drive under the name Geetham Steels Private limited was copied from the system available in the office of GSPL. It is also pertinent that Kumar in the said statement dated 28-09-2010 states that initially one computer was purchased by GSPL and subsequently in June 10 a new Samsung computer was purchased. There is no evidence of any data being retrieved or the said Samsung Computer which is the latest computer since June 10 according to Mr. P. Kumar, having been found or examined by the investigators. When the ABC data found in the pen drive of Mr. Kumar is not shown as found in the computer or hard disk recovered from the premises of GSPL, it is not forthcoming as which computer is the source computer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deivanai detailed in Annexure C of the SCN relied on to establish that these are the sale proceeds of clandestine removals as discussed in Para 34.6 of OIO reflect amount of only Rs. 18,15,000/- whereas the alleged sale proceeds of such clandestine removals as per para 34.5 of the OIO is Rs. 6.23 crores Other alleged buyers as mentioned in para 34.5 of OIO have also not been inquired with on this aspect. No enquiry appears to have been done to identify the remitters or to conduct inquiries with them which, had it been done, would have provided clinching evidence as to the person who remitted as well as corroborated the purpose of remittance, eschewing the very necessity of making assumptions. (E) Even if one peruses the unaccounted procurement of raw materials tabulated in para 8.4.9 of the OIO, as per the quantity of scrap purchased from Feb 2010 to May 2010 as per GSPL Computer data, as per ER 6 filed by GSPL and as per data in computer printout from pen drive, which according to the adjudicating authority is sufficient unaccounted quantity of inputs during the month of February 2010 to May 2010 to enable production and clearances during the same period as found in the data in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy the quality control parameters are entered in the daily stock account register is disbelieved as their daily production report indicated that the quantity of MS ingots manufactured and failed is nearly twice the quantity of MS Ingots actually accounted for the month of September 2010 and that they have not placed any evidence to show that these inferior quality ingots were duly accounted for by them and used captively for remelting. The Adjudicating Authority also relies on the statements given by Shri. Raja of M/s. Viyapuri Chettiar &Co dated 10.01.2013, Shri. Shivalingam of M/s. Vasantham Steels dated 15.01.2013 and statement of Shri. K Murugesan@Murugan, proprietor of M/s. Bakyalakshmi Metal Mart in this regard. In para 34.7 of OIO, the Adjudicating Authority records that these persons have admitted during the personal hearing that they have supplied scrap to GSPL without any bills and considers this as corroboration of the authenticity of the entries recorded in the computer data available in the pen drive with inscription Transcend and further that the said data represents the actual purchase of scrap by GSPL. We do not concur with the aforesaid conclusions for the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, no other evidence such as statements from the drivers of the vehicles in which the raw materials were clandestinely supplied have been recorded which would have been concrete evidence of their actual receipt at the premises of GSPL. In fact, though Mr. Murugesan @ Murugan, proprietor of M/s. Bakya Lakshmi Metal Mart stated in his statement dated 28.09.2010 that scrap used to be sent in a vehicle TN 28 L 1176 that belonged to them, yet strangely no effort is seen made by the authorities to enquire with the driver of the said vehicle regarding the actual transportation of the scrap. C) While the Adjudicating Authority has stated that these scrap dealers have confirmed that they have sold scrap to M/s. GSPL without bill during personal hearing, given that they were implicating GSPL, it was incumbent upon the Authority to have offered them for cross examination by the appellants and post testing of their statement on the touchstone of cross-examination, placed reliance on them if thereafter the statements remain unshaken. D) Shri. P. Kumar in his statement dated 11-10-2010 had provided from the printouts, names and locations of 28 suppliers of scrap, an unloading contractor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that there was no stock of finished goods in the production area of the factory, from which observation it is evident that the officers had verified only the production area of the factory and they have not verified the other places of the factory to find out whether any MS ingots are available and that as pointed out earlier the MS ingots were removed to the scrap yard for re-melting purposes. The Appellant had also submitted the letter received from DGCEI dated 02.12.2010 along with their aforesaid reply to the Commissioner of Central Excise, Salem vide their letter dated 15.12.2014. There is no averment in the SCN or in the impugned OIO, either as to whether the said assertion of the appellant was verified, found untrue and the restrictions proposed imposed, or why if for any other reason, the restriction proposed in the notice was not carried into effect. Not rebutting these assertions by making necessary investigations with Mr Venkatesh and also by not stating whether the statement of Mr. C Natarajan that the stock was kept separately as scrap and thus there was no shortage, was further verified and whether it was found to be incorrect or not, weighs heavily against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2012 admitted receipt of 26.45 MT Ingots on 16.02.2012, without payment of duty from GSPL and the weighment slips recovered from the premises of M/s. SKSRM also corroborate receipt of 26.45 MT ingots in vehicle No. KA 51 4824. It is stated that Shri. Damodharan and Shri. Thirugnanasambantham of M/s. SKSRM have both in their statements on 07.03.2012 admitted that M/s. SKSRM received MS Ingots from GSPL without payment of duty and TMT bar manufactured out of that has been cleared without payment of duty and they intimated vide their letter dated 07.03.2012 of payment of Rs. 4,60,967/- towards duty involved on TMT bars manufactured and cleared by them without payment of duty. The Adjudicating Authority concludes from the above that GSPL has cleared MS Ingots in the month of February 2012 without payment of duty and the duty to the tune of Rs. 2,66,856/- is to be paid by GSPL. It is also stated by the Adjudicating Authority that in their reply SKSRM has admitted to the charges made in the SCN while M/s. BSI contested that computer printouts are not admissible as evidence as they do not satisfy the conditions stipulated under Section 36 B and that the charge is not substantiated. M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Annexure D3(b). The reason for such denial of cenvat credit of Rs. 51,31,557/- as discussed by the Adjudicating Authority in para 34.9 of the OIO is that on a comparison of the computer printout from pen drive with inscription Transcend with the computer printout taken from the CPU of GSPL, it is seen that in the account entered in the name of M/s. ABC India Ltd in the computer printout from the pen drive with inscription Transcend, receipt of scrap is shown only in respect of certain invoices on which CENVAT credit has been taken by GSPL. In respect of many invoices from various suppliers on which cenvat credit has been availed by GSPL for which entries are available in the data in the CPU seized from GSPL/raw material register of GSPL, no receipt of such scrap is found in the computer printout from pen drive with inscription transcend and since M/s. ABC Data is taken to be the actual account of transactions of M/s. GSPL as per statement of Mr. P. Kumar dated 11.10.2010, absence of entry for receipt of scrap in M/s. ABC Data is treated as absence of actual receipt of scrap. In para 34.11 to 34.13 it is shown that as per M/s. ABC Data certain amounts were paid back to GSPL by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Department. (C) It is not alleged that the invoices on which cenvat credit has been taken by GSPL have not been accounted by the respective suppliers or that they have not received payment in respect of the invoices issued. On the contrary M/s. Sakthi Ferro Alloys (p) Ltd in their reply stated that there is no evidence against them relied upon in the notice and that they have actually supplied scrap covered under the invoices and made payment to transporters as well as received payment from GSPL and there is no allegation against them that they have returned money to GSPL. During adjudication proceedings they also stated that they filed a written submission alongwith worksheet showing invoice wise details with lorry nos. Likewise M/s Akshara Industries contested the allegation and named their regular transporter stating that the Department could have ascertained the bonafide nature of their transactions if enquiry had been made with their transporter, during adjudication proceedings have denied returning any money to GSPL and have stated that they have accounted the cenvat invoices issued in their returns. These contentions of the aforementioned suppliers are not cogently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment regarding the non-receipt of inputs on the aforementioned invoices issued during Feb2010 to May 2010 is considered true, it would mean that GSPL purchased only 860.955 MTs of scrap during Feb 2010 to May 2010 from which they have manufactured and cleared 934.72 MTs, an impossible feat by any means. 86. We have discussed the questions of law and analysed the failure of the Department to adhere to the statutory mandates of Section 9D and Section 36B (4) as elucidated supra. We have detailed the lacunae and shortcomings in the investigation noticed by us supra. We have given our reasons for our disagreement with respect to the evidence relied upon qua each of the demands confirmed in the impugned order indicating how the evidence relied upon has failed to meet the standard of "clear and convincing evidence", to establish the case of clandestine removal and to establish the availment of cenvat credit without actual receipt of inputs, in accordance with the standard of proof required to be adduced by Revenue in clandestine removal matters based on decisions of the High Courts and Tribunal as aforementioned. We also now state certain crucial aspects that have not been brought o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atory proceedings under the Act and is confined only to Court proceedings. The reason is not far to seek as such rebuttable presumption also equally casts a responsibility on the person intending to disprove the same in the Court by leading clear and convincing evidence to rebut the same. In this regard, the decision of the Honourable Supreme Court in Heinz India Pvt Ltd and Ors v. State of U.P. and Ors, 2012 INSC 147: [2012] 3 SCR 898 is apposite as it also specifies the standard of proof required to rebut a statutory presumption in a Fiscal Statute. In the said Heinz Case, while considering Sections 17 and 32 of Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964, and the rebuttal presumption in Section 17 of the Adhiniyam supra, the Apex Court held as under: "39. Mr. Chandra, however, laid considerable emphasis on the words "tending to show that the real fact is not as presumed", to argue that the test applied by this Court in rebuttable presumptions had been the test of 'preponderance of probability'. We do not think so. It is wellsettled that a decision is an authority for the point it decides. It is equally well-settled that the text of the decision cannot be read as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in these matters are of no consequence. Further, crucial electronic evidence were not only recovered only from third party's premises, but also such evidence along with those recovered from the factory premises were handled in a cavalier manner rendering them inadmissible. There is no justification available, either in the show cause notice, or in the impugned order, to explain the absence of statements of most relevant persons or the reasons for delay in conducting follow up searches. The transporters, who actually transported the goods, have also not been questioned. In short, the investigation has failed to establish the allegations raised in the show cause notice and the findings of the adjudicating authority are also decidedly untenable in the light of our discussions regarding the lack of demonstrable, reliable and corroborative evidence as elaborated above. 88. Thus, we hold that the finding of the adjudicating authority that the main appellant has indulged in clandestine manufacture and clearances of MS ingots during period February 2010 to February 2012 and the consequent demand of duty made is untenable; the demand of cenvat credit availed for the period February 2010 to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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