Electronic evidence and service tax demands require verification, cross-examination, and compliance with evidentiary rules before sustainability.

A service tax demand based entirely on electronic data recovered from laptops, CPUs and pen drives could not be sustained without proper verification of that material and compliance with the evidentiary requirements for electronic records. The text stresses that disputed electronic evidence must be supplied as relied-upon documents and tested through examination and cross-examination of the GEQD official whose report forms the basis of the case. It also notes that, in view of an earlier remand in a connected matter on the same material, the matter was remanded for de novo adjudication, with the appellant's claims on cum-tax benefit and tax computation on a receipt basis up to 31.03.2011 to be reconsidered.

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Issues: Whether the service tax demand based entirely on data retrieved from electronic devices could be sustained without proper verification of the retrieved material and compliance with the evidentiary requirements for electronic records, and whether the matter required remand for de novo adjudication.

Analysis: The demand rested wholly on data recovered from laptops, CPUs and pen drives seized from the alleged secret office, and the authenticity and evidentiary value of that material was disputed. The challenge included non-compliance with Section 36B of the Central Excise Act, 1944, reliance on material not supplied as relied upon documents, and the need for examination of the GEQD official whose report formed the basis of the case. Since an earlier connected central excise matter based on the same material had already been remanded with directions for examination and cross-examination of the concerned GEQD official, the same approach was considered appropriate here. The Tribunal also noted that the appellant's submissions on cum-tax benefit and computation of tax on receipt basis upto 31.03.2011 required reconsideration in the de novo proceedings.

Conclusion: The impugned order could not be sustained at this stage and the matter was remanded for fresh adjudication after examination and cross-examination of the relevant GEQD officials and consideration of the appellant's other submissions.

Ratio Decidendi: Where a demand is founded entirely on disputed electronic data, the adjudicating authority must ensure compliance with the evidentiary requirements for electronic records and afford proper opportunity for examination and cross-examination before sustaining the demand.

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