2020 (1) TMI 532 - AT - Central Excise

Tribunal overturns Central Excise duty order due to insufficient evidence, penalties dismissed

M/s. Shiv Shakti Sponge Iron Limited, M/s. Bharat Bhushan Sachdeva (Former Director) (Noticee No. 2) Versus Commissioner of Central Excise, Bhubaneshwar Bhubaneshwar-I Commissionerate

M/s. Shiv Shakti Sponge Iron Limited, M/s. Bharat Bhushan Sachdeva (Former Director) (Noticee No. 2) Versus Commissioner of Central Excise, Bhubaneshwar ... Issues Involved:1. Demand of Central Excise duty.2. Recovery of interest under Section 11AB.3. Imposition of penalty under Section 11AC.4. Penalty on the Director under Rule 26 of the Central Excise Rules.5. Admissibility and reliability of evidence obtained from a pen drive.6. Compliance with Section 36B of the Central Excise Act.7. Validity of the investigation and evidence presented.Issue-wise Detailed Analysis:1. Demand of Central Excise Duty:The Commissioner of Central Excise Customs and Service Tax Bhubaneswar confirmed a demand of Rs. 1,02,75,737/- under Section 11A of the Central Excise Act, 1994, against M/s Shiv Shakti Sponge Iron Limited (SSIL) for clandestine production and removal of excisable goods without payment of duty. The demand was based on data retrieved from a pen drive seized during a search at the premises of SEWPL, another company where the Director of SSIL, Shri Bharat Bhushan Sachdeva, was also a director.2. Recovery of Interest under Section 11AB:The order included recovery of interest on the confirmed duty amount under Section 11AB of the Act. The amount of Rs. 20 lakhs already deposited by SSIL was adjusted against this demand.3. Imposition of Penalty under Section 11AC:A penalty equal to the duty amount of Rs. 1,02,75,737/- was imposed under Section 11AC of the Act. However, a benefit was provided for a reduced penalty if the confirmed amount was deposited within thirty days from the communication of the order.4. Penalty on the Director under Rule 26 of the Central Excise Rules:A penalty of Rs. 20 lakhs was imposed on Shri Bharat Bhushan Sachdeva under Rule 26 of the Central Excise Rules, 2002, for his involvement in the alleged clandestine activities.5. Admissibility and Reliability of Evidence Obtained from a Pen Drive:The primary evidence relied upon by the Department was data from a pen drive seized from SEWPL. The data, stored in Tally-9 software, indicated alleged clandestine removal of goods by SSIL. However, the appellant argued that the demand was based solely on this data without any corroborative evidence such as excess raw material, stock discrepancies, or statements from transporters.6. Compliance with Section 36B of the Central Excise Act:The appellant contended that the evidence from the pen drive did not meet the requirements of Section 36B of the Act, which governs the admissibility of computer printouts as evidence. The Tribunal agreed, citing precedents such as Premier Instruments and Ambica Organics, which held that computer printouts are not admissible unless the stringent conditions of Section 36B are fulfilled.7. Validity of the Investigation and Evidence Presented:The Tribunal found that the investigation lacked corroborative evidence. The data from the pen drive was not supported by any independent investigation or physical evidence from SSIL’s premises. The Tribunal also noted that the statement of Shri Bharat Bhushan Sachdeva, which was retracted, could not be relied upon as it was not examined or cross-examined as required under Section 9D of the Act. Furthermore, the third-party documents recovered from other companies could not be used to substantiate the charge of clandestine removal against SSIL without direct evidence linking them to SSIL's activities.Conclusion:The Tribunal concluded that the demand and penalties were based on assumptions and presumptions without positive and cogent evidence. The reliance on data from the pen drive without fulfilling the conditions of Section 36B rendered the evidence inadmissible. Consequently, the Tribunal set aside the impugned order, allowing the appeals of SSIL and its Director, with consequential benefits as per law.