2022 (8) TMI 830 - AT - Central Excise

Tribunal overturns orders due to procedural errors in admitting evidence under Central Excise Act

M/s. Vadivel Pyrotech Private Ltd., M/s. Vadivel Pyropark, Sri V. Arumugasamy and Sri A. Vasant Vikas Versus Commissioner of CGST & Central Excise, Madurai

M/s. Vadivel Pyrotech Private Ltd., M/s. Vadivel Pyropark, Sri V. Arumugasamy and Sri A. Vasant Vikas Versus Commissioner of CGST & Central Excise, ... Issues Involved:1. Alleged evasion of Central Excise duty by M/s. VPPL through clandestine clearances and suppression of sales turnover.2. Alleged non-passing of discounts to customers, resulting in suppressed sales turnover.3. Admissibility of computer printouts as evidence under Section 36B of the Central Excise Act, 1944.4. Clubbing of clearances of different units and treating them as a single financial entity.Issue-wise Detailed Analysis:1. Alleged Evasion of Central Excise Duty by M/s. VPPL:The primary allegation was that M/s. VPPL evaded Central Excise duty by clearing goods in the name of other firms and suppressing their actual sales turnover. The investigation was based on specific intelligence, and searches were conducted at various premises, resulting in the seizure of incriminating documents and electronic devices. The show cause notice proposed to recover duty jointly and severally from M/s. VPPL and other firms, confirming the duty demands and imposing penalties. The department's main evidence was a file containing computer printouts of sales details and the hard disc of a CPU seized from M/s. VPPL's factory. However, the Tribunal found that the department did not comply with Section 36B of the Central Excise Act, 1944, which mandates specific procedures for admitting computer printouts as evidence. The Tribunal emphasized that the provisions of Section 36B are mandatory and non-compliance renders the printouts inadmissible. The Tribunal cited several case laws supporting this view, including CCE Vs Jindal Nickel & Alloys Ltd. and S.N. Agrotech Vs CC New Delhi.2. Alleged Non-Passing of Discounts to Customers:The second allegation was that M/s. VPPL raised invoices showing discounts but did not actually pass on these discounts to customers, thereby suppressing the value of clearances. The department relied on computer printouts and sales ledgers of a few customers to support this allegation. The Tribunal found that the department failed to establish this allegation convincingly. The Tribunal noted that the comparison made with computer printouts, which were already held inadmissible, could not substantiate the claim that discounts were not passed on. The Tribunal held that the department's reliance on the sales ledgers of a few customers was insufficient to prove the suppression of sales turnover.3. Admissibility of Computer Printouts as Evidence:The Tribunal extensively discussed the admissibility of computer printouts as evidence under Section 36B of the Central Excise Act, 1944. It was observed that the department did not comply with the mandatory requirements of Section 36B, such as obtaining a certificate stating that the computer printouts were produced during the regular use of the computer and that the computer was operating properly. The Tribunal cited several judicial precedents emphasizing the mandatory nature of Section 36B, including the Delhi High Court's decision in CCE Vs Jindal Nickel & Alloys Ltd. The Tribunal concluded that the computer printouts could not be relied upon for confirming the duty demand.4. Clubbing of Clearances of Different Units:The department alleged that the clearances of M/s. VPPL and other units should be clubbed and treated as a single financial entity, thereby denying the benefit of SSI exemption. The Tribunal found inconsistencies in the department's approach. While the department proposed to club the clearances, it also raised separate duty demands on each unit, indicating that the units were considered independent entities. The Tribunal noted that the units had separate factory premises, infrastructure, and independent existence, and there was no evidence of mutuality of interest or financial flow back between the units. The Tribunal referred to several judicial decisions, including Renu Tandon Vs Union of India and Coimbatore Engineering Works Vs CCE Coimbatore, which held that in the absence of evidence of common funding and financial flow back, units could not be treated as one for the purpose of clubbing clearances. The Tribunal concluded that the department failed to establish sufficient grounds for clubbing the clearances and confirming the duty demand.Conclusion:The Tribunal set aside the impugned orders, holding that the department failed to establish the allegations of evasion of duty, non-passing of discounts, and the clubbing of clearances. The appeals were allowed with consequential relief as per law.