Computer printouts from pen drives inadmissible as evidence without following Section 36B procedure for clandestine manufacture case

CESTAT Kolkata allowed the appeal against clandestine manufacture and removal of 47658 M.T. of Pig Iron. The tribunal held that computer printouts from pen drives recovered during search cannot be relied upon as evidence since the department failed to follow Section 36B procedure, including obtaining prescribed certificates and identifying data authors. Statements recorded under Section 14 were also inadmissible as Section 9D procedure was not followed. The tribunal found no tangible evidence of clandestine removal, raw material procurement, or finished goods sale. Demands for duty, interest, and penalties on the company and its director were set aside due to lack of sustainable evidence.

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Issues Involved:
1. Admissibility of computer printouts as evidence u/s 36B of the Central Excise Act, 1944.
2. Compliance with Section 9D of the Central Excise Act, 1944 regarding the relevancy of statements.
3. Sufficiency of evidence for clandestine removal of goods.
4. Imposition of penalty on the Appellant company and its Director.

Summary:

Issue 1: Admissibility of Computer Printouts as Evidence
The Tribunal examined whether the computer printouts taken from pen drives recovered during the search could be relied upon as evidence to demand duty. The Tribunal observed that the department did not follow the mandate prescribed in Section 36B of the Central Excise Act, 1944. Specifically, the author of the entries was not identified, and no certificate as required under Section 36B(4) was obtained. Consequently, the computer sheets recovered from the pen drives could not be relied upon to establish clandestine clearance. This view was supported by precedents such as "Shivam Steel Corporation Vs Commr. of C.Ex. & Cus., BBSR-II" and "Super Smelters Ltd. Vs Commr. of Cus., C.Ex. and S.Tax, Durgapur".

Issue 2: Compliance with Section 9D of the Central Excise Act, 1944
The Tribunal evaluated whether the procedure set out in Section 9D was followed. The appellant argued that the statements recorded by a Gazetted officer are relevant only if the procedure prescribed under Section 9D is followed, which includes examining the person who made the statement as a witness. The Tribunal found that the adjudicating authority did not comply with this procedure, rendering the statements inadmissible. This position was supported by cases such as "Ambica International Vs. Union of India" and "G-Tech Industries Vs. Union of India".

Issue 3: Sufficiency of Evidence for Clandestine Removal
The Tribunal considered whether the demands confirmed in the impugned order on clandestine clearance of finished goods were sustainable in the absence of evidence of procurement of major raw materials or sale of the finished goods clandestinely. The Tribunal noted that there was no evidence of unaccounted raw materials, excess electricity consumption, or transportation of goods. The Tribunal cited "M/s. Continental Cement Company Vs. Union of India" and "M/s. Jai Balaji Industries Vs. Commissioner of Cus., C.Ex. & S.T., Durgapur", emphasizing that clandestine removal must be proved with tangible evidence, which was lacking in this case.

Issue 4: Imposition of Penalty
Regarding the penalty imposed on the Director, Shri Hemant Goyal, the Tribunal observed that the demand for clandestine clearance was not sustainable. The Director had retracted his statement, claiming it was taken under coercion. The Tribunal found no evidence of the Director's involvement in any alleged illegal activities. Therefore, the penalty imposed under Rule 26 of the Central Excise Rules, 2002 was set aside.

Conclusion:
The Tribunal concluded that:
1. The computer printouts taken from the pen drives could not be relied upon as evidence to demand duty.
2. The conditions mentioned in Section 36B were not followed, making the computer printouts inadmissible.
3. The statements recorded under Section 14 of the Central Excise Act, 1944 could not be relied upon as the procedure under Section 9D was not followed.
4. The demands confirmed on clandestine clearance were not sustainable due to the lack of evidence.
5. Penalties on the Appellant company and its Director were not justified.

The Tribunal set aside the impugned order and allowed the appeals filed by the Appellants, with consequential relief as per law.

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