Electronic evidence and statement admissibility in clandestine-removal disputes require strict compliance and corroboration before duty demand can stand.

Computer printouts and statements used to allege suppression of production and clandestine removal were found unreliable where electronic evidence was not properly retrieved or sealed, the required certificate was absent, statutory conditions for admissibility were not met, and cross-examination was denied. In the absence of independent corroboration such as raw material purchases, electricity use, buyer transactions, sale proceeds, or fund flow-back, the clandestine-removal demand was set aside. The smaller duty demand relating to shortages of finished goods and raw materials was sustained, while penalties on the company and director were quashed because the principal clandestine-removal allegation failed and no separate penal basis was established.

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Issues: (i) Whether the computer printouts and statements relied upon by the department were admissible and sufficient to sustain the demand for alleged suppression of production and clandestine removal of sponge iron; (ii) whether the duty demand raised on the alleged shortages of finished goods and raw materials, and the related penalty on the director, were sustainable.

Issue (i): Whether the computer printouts and statements relied upon by the department were admissible and sufficient to sustain the demand for alleged suppression of production and clandestine removal of sponge iron.

Analysis: The demand for the major portion of duty rested on electronic data recovered from hard disks and computer printouts, but the record showed irregularities in retrieval and sealing, absence of the requisite certificate, and non-compliance with the statutory conditions governing admissibility of computer-generated evidence. The statements recorded during investigation were also relied upon without following the mandatory procedure for treating such statements as evidence, and cross-examination was denied. In the absence of admissible electronic evidence and reliable statements, and without independent corroboration such as evidence of raw material purchases, electricity consumption, buyer-side transactions, sale proceeds, or flow back of funds, the allegation of clandestine removal was not established.

Conclusion: The demand based on alleged suppression of production and clandestine removal was not sustainable and was set aside.

Issue (ii): Whether the duty demand raised on the alleged shortages of finished goods and raw materials, and the related penalty on the director, were sustainable.

Analysis: The short-duty demand relating to shortages of finished goods and raw materials was not contested before the adjudicating authority, and the finding on that component was left undisturbed to that extent. However, the penalty imposed on the company and the separate penalty imposed on the director could not survive once the principal clandestine-removal allegation failed and no independent basis was made out for the penal consequences beyond the confirmed shortage demand.

Conclusion: The duty demand of Rs. 2,81,953/- was upheld, but the penalties were set aside.

Final Conclusion: The appeals succeeded to the extent that the principal demand founded on clandestine removal and the penalties were quashed, while the smaller demand relating to shortages was sustained.

Ratio Decidendi: Computer printouts and statements recorded during investigation cannot be used to sustain a clandestine-removal demand unless the statutory conditions for electronic evidence and statement admissibility are strictly complied with and the allegation is independently corroborated by tangible evidence.

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