2013 (11) TMI 685 - AT - Central Excise

Tribunal overturns orders, stresses evidence & cross-examination importance for fair adjudication

The Tribunal set aside all three impugned orders, allowing the appeals with consequential relief to the appellants. The judgment emphasized the need for ... Undervaluation of goods - Differential cost collected by cash – Unaccounted purchase of raw materials - Assessee is in the manufacture of decorative plywood - Revenue was of the view that the appellant had under invoiced their final product - Revenue relied upon the data retrieved from the seized personal laptop of Shri Jitendra Kejriwal – Held that:- The evidence relied upon by the department, does not lead to the inevitable conclusion of such clandestine activities of the assessees and on the other hand the evidence produced by the appellant M/s SBL, which is in the shape of the exculpatory statements of 16 distributors, the evidence of sale price of identical goods by the other plywood manufacturers, continuation of the sale of their final product at the same price post June, 2005, establishes the case in their favour - failure of the Revenue to investigate the matter, in detail as regards the cost structure of their goods, price factor of the other manufacturers, the availability of any evidence reflecting upon cash receipt by the appellant from the distributors and further cash sales by the distributor to their dealers, the ultimate sale price of the product etc. etc. demolishes the Revenues case against the assessee – there are no justifiable reasons to uphold the demand of duty against M/s SBL or to impose any penalty upon them – thus Penalty imposed upon the Managing Director set aside. Information retrieved from laptop admissible or not - Whether the information retrieved from the personal laptop of Shri Kejriwal, which was purchased only 4 months prior to the seizure, at his back by the GEQD after a period of one and a half years can be considered to be a sufficient evidence for confirmation of demand for the entire period of March 2002 to June 2005 – Held that:- Relying upon S. Namasivayam vs. CC, Chennai [2009 (1) TMI 238 - CESTAT, CHENNAI] - Jumbled up retrieved data, without any reference to the decoding of the same etc. by itself cannot be considered to be the relevant evidence, especially when the appellant has disowned the same, attributed the allegation of fabrication and the same being not clear entries in the records - the provisions of Section 36A readwith Section 36B of the Central Excise Act, 1944 are not invokable in respect of the computer printout, generated by the GEQD from the personal computer/laptop seized - the Revenue’s reliance on the retrieved data by GEQD cannot be held to be an admissible piece of evidence so as to rely upon the same for arriving on the findings of under valuation – Decided in favour of Assessee. Issues Involved:1. Admissibility and authenticity of data retrieved from a personal laptop.2. Reliability and evidentiary value of statements from distributors.3. Allegations of under-valuation and clandestine activities.4. Confiscation of cash and goods.5. Non-inclusion of exculpatory evidence by the Revenue.Issue-wise Analysis:1. Admissibility and Authenticity of Data Retrieved from a Personal Laptop:The primary issue revolved around the data retrieved from the personal laptop of Shri Jitendra Kejriwal, which was seized and analyzed by the Government Examiner of Questioned Documents (GEQD). The appellants questioned the authenticity of this data, arguing that it was jumbled and lacked an integrity certificate, unlike data from other computers seized. The Tribunal found merit in the appellants' contention, noting the absence of an integrity certificate and the failure to offer the GEQD officer for cross-examination. The Tribunal held that the data retrieved from the laptop could not be considered admissible evidence under Section 36B of the Central Excise Act, 1944, as it did not meet the conditions specified, such as regular use and proper operation of the computer during the relevant period.2. Reliability and Evidentiary Value of Statements from Distributors:The Tribunal examined the statements of various distributors, noting that many had retracted their statements or provided exculpatory evidence. The Tribunal emphasized that the statements of third parties must be tested for their correctness through cross-examination. It was observed that the Revenue had selectively relied on inculpatory statements while ignoring exculpatory ones, which was deemed unfair. The Tribunal found that the retracted statements and the results of cross-examinations could not be the sole basis for upholding the charges of under-valuation.3. Allegations of Under-Valuation and Clandestine Activities:The Tribunal scrutinized the allegations of under-valuation, which were primarily based on the data retrieved from the laptop and statements from a few distributors. The Tribunal noted that the Revenue failed to provide concrete evidence of excess cash receipts or under-valuation practices. The Tribunal also highlighted the lack of investigation into the cost structure of the goods, the pricing of similar goods by competitors, and the absence of any significant difference in prices post-investigation. The Tribunal concluded that the allegations of under-valuation were not substantiated by sufficient and positive evidence.4. Confiscation of Cash and Goods:The Tribunal addressed the confiscation of Rs. 6,00,000/- recovered from the appellant's premises, which the appellant claimed was withdrawn from the bank for daily activities. The Tribunal found that the appellant had provided relevant bank statements to support this claim, which the Adjudicating Authority had not considered. Consequently, the Tribunal set aside the order of confiscation, finding no justifiable reason for it. Similarly, penalties imposed on various dealers and the confiscation of goods seized from their premises were also set aside, as the Tribunal allowed the appeals of M/s SBL and others.5. Non-Inclusion of Exculpatory Evidence by the Revenue:The Tribunal criticized the Revenue for not including the statements of 16 distributors that were favorable to the appellants. It emphasized that the entire evidence collected during the investigation should be placed on record to ensure a fair adjudication process. The selective inclusion of inculpatory statements and exclusion of exculpatory ones was deemed a violation of natural justice principles. The Tribunal underscored the importance of considering all evidence, both inculpatory and exculpatory, to arrive at a just conclusion.Conclusion:The Tribunal set aside all three impugned orders, allowing the appeals with consequential relief to the appellants. The judgment emphasized the need for concrete and admissible evidence to substantiate allegations of under-valuation and clandestine activities, the importance of cross-examination to test the veracity of statements, and the requirement to consider all evidence collected during investigations to ensure fair adjudication.