Electronic evidence for clandestine removal must satisfy admissibility rules and be independently corroborated before duty, confiscation, or penalties can stand.

Electronic printouts from a pen drive could not sustain a clandestine removal demand because the seizure record was inconsistent, the Section 36B requirements for electronic evidence were not met, and cross-examination of persons whose statements were relied on was denied; without independent corroboration such as stock variation, transport evidence, or flow-back of funds, the demand failed. Confiscation of branded goods also failed because the factory was shown to be in a rural area and the SSI exemption under Notification No. 8/2003-CE applied, making the brand-name objection insufficient on the facts. Penalties on the unit and co-appellants fell with the underlying demands and confiscation.

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Issues: (i) Whether the alleged pen drive data and the statements recorded on that basis could be relied upon to sustain the duty demand for clandestine removal; (ii) Whether the confiscation of goods bearing another person's brand name was sustainable in view of the claimed rural area based SSI exemption; (iii) Whether the penalties imposed on the appellant unit and the co-appellants could survive.

Issue (i): Whether the alleged pen drive data and the statements recorded on that basis could be relied upon to sustain the duty demand for clandestine removal.

Analysis: The demand was founded on electronic printouts said to have been taken from a pen drive, but the panchnamas contained serious inconsistencies regarding seizure, sealing, opening, and timing of the proceedings. No reliable showing was made of the computer from which the data was produced, and the conditions contemplated by Section 36B(2) and the certificate requirement under Section 36B(4) were not satisfied. The statements of buyers, suppliers, and transporters were also based on that disputed material, and cross-examination was denied despite the statements being used against the assessee. In the absence of independent documentary or physical corroboration such as excess stock, shortage, transport evidence, electricity variation, or flow-back of funds, clandestine removal was not established.

Conclusion: The duty demand based on the pen drive data and connected statements was not sustainable and was set aside.

Issue (ii): Whether the confiscation of goods bearing another person's brand name was sustainable in view of the claimed rural area based SSI exemption.

Analysis: The appellant produced evidence that the factory was situated in a rural area. On that basis, the exemption under Notification No. 8/2003-CE was applicable, including the relevant rural area carve-out. Once the exemption was available, the mere use of another person's brand name did not justify confiscation on the facts found in the case.

Conclusion: The confiscation of the branded goods was not sustainable and was set aside.

Issue (iii): Whether the penalties imposed on the appellant unit and the co-appellants could survive.

Analysis: The penalties were consequential to the duty demand and confiscation. Since the foundation for both had failed, there remained no independent basis to sustain the penalty liability of the appellant unit or the co-appellants.

Conclusion: The penalties were not sustainable and were set aside.

Final Conclusion: The impugned order could not be sustained because the alleged clandestine removals were not proved by admissible and corroborated evidence, the confiscation was unjustified in the facts, and the connected penalties necessarily failed.

Ratio Decidendi: Electronic evidence used for excise demand must satisfy the statutory admissibility requirements and be supported by independent corroboration; in clandestine removal cases, unsupported electronic printouts and untested statements cannot by themselves sustain duty, confiscation, or penalty.

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