2025 (2) TMI 1407 - AT - Central Excise

Admissibility of electronic records and recorded statements in central excise investigations fails, leading to dismissal of clandestine manufacture charge and duty demand.

Admissibility of computer printouts and electronic records was challenged for noncompliance with the statutory certification requirement governing ... Admissibility of computer printouts u/s 36B of the Central Excise Act - statements and the documents recovered and printouts taken from the Pen Drives - clandestine manufacture and clearance of goods without payment of duty - Admissibility of electronic records u/s 65B of the Evidence Act - Relevancy of statements recorded by gazetted officers u/s 9D of the Central Excise Act - Clandestine manufacture and clearance evidentiary requirements - HELD THAT:- Section 36B of the Central Excise Act deals with cases where any document is required to be produced as an evidence in proceeding sunder the Central Excise Act and the Rules framed thereunder. Such certificate should be signed by a person occupying a responsible position in relation to the operation of the device in question or the management of the relevant activities. In such a case it shall be evidence of any matter which is stated therein. As in this case, no procedure has been followed in terms of Section 36B of the Act, therefore, following the decision of this Tribunal in the case of Trikoot Iron & Steel Casting Limited. [2024 (10) TMI 672 - CESTAT NEW DELHI] the printouts taken from the computer, are not admissible evidence. The fact that the statements recorded during the course of adjudication, are not examined in Chief and allowed cross objection to the appellant, therefore, the same are not admissible evidence as held by this Tribunal in the case of Narsingh Ispat Limited & Other Vs. Commissioner of CGST & Central Excise [2024 (3) TMI 1037 - CESTAT KOLKATA] We, therefore, hold that the statements recorded during the course of investigation, were not tested in terms of Section 9D of the Central Excise Act, 1944, therefore, the same are not admissible evidence to establish the clandestine manufacture and clearance of goods. Thus, we hold that the charge of clandestine manufacture and clearance of goods is not sustainable on the basis of faulty investigation. Therefore, the charge of clandestine manufacture and removal of goods is set aside. Consequently, the demand of duty is also not sustainable. Accordingly, the demand of duty is also set aside. No demand is sustainable against the appellant, therefore, no penalty can be imposed on the appellant. Issues: (i) Whether computer printouts/pen-drive data seized without compliance with the procedure in Section 36B of the Central Excise Act (and Section 65B of the Evidence Act) are admissible evidence; (ii) Whether statements recorded during investigation are admissible without examination in chief and cross-examination under Section 9D of the Central Excise Act; (iii) Whether clandestine manufacture and removal of goods and consequent demand and penalty are established on the available evidence.Issue (i): Admissibility of computer printouts and electronic records recovered from seized devices where the statutory procedure under Section 36B of the Central Excise Act (and Section 65B of the Evidence Act) was not followed.Analysis: The statutory scheme prescribes conditions for treating computer output as evidence and requires an accompanying certificate from a responsible official describing production and relevant operational details. Authorities and precedents equate Section 36B with Section 65B principles, distinguishing primary electronic evidence from secondary computer-generated printouts and mandating compliance or production of the original device. Where the procedure and certificate requirements are not satisfied, the evidentiary safeguards for source, authenticity and integrity are absent and the secondary electronic material cannot be admitted as proof of contents.Conclusion: Computer printouts and data accessed from seized devices without compliance with Section 36B/Section 65B are inadmissible.Issue (ii): Admissibility of statements recorded by gazetted officers during investigation without being tested by examination in chief and cross-examination as required by Section 9D of the Central Excise Act.Analysis: Section 9D permits reliance on such statements only in specified circumstances and otherwise requires that the maker be examined as a witness and the adjudicating authority form a view that admission is in the interests of justice. The statutory procedure is mandatory; failure to examine the maker and to permit testing of the statement means the statutory preconditions for relevancy are not met.Conclusion: Statements recorded during investigation that were not examined in chief and not subjected to cross-examination under Section 9D are not admissible evidence.Issue (iii): Validity of the allegation of clandestine manufacture, demand of duty and imposition of penalty based on the impugned evidence.Analysis: Establishing clandestine manufacture requires tangible, admissible evidence such as excess raw material consumption, discovery of unaccounted finished goods, sales to identified parties with receipt of proceeds, excess electricity consumption or reliable transportation proof, and links between recovered documents and factory activities. Where the principal material consists of inadmissible computer printouts and untested statements, the fundamental evidentiary criteria remain unmet and the factual foundation for demand and penalty is deficient.Conclusion: The charge of clandestine manufacture and removal of goods is not sustained; the demand and penalty based on the faulty evidence fail.Final Conclusion: The appellate order sets aside the adjudicating order in its entirety as the key electronic records and investigative statements were inadmissible; consequential relief follows in favour of the appellant.Ratio Decidendi: Non-compliance with the statutory requirements for admissibility of electronic records under Section 36B of the Central Excise Act (and Section 65B of the Evidence Act) and failure to follow the mandatory procedure under Section 9D for recorded statements render such evidence inadmissible, and absent admissible evidence the allegation of clandestine manufacture, resulting demand and penalty cannot be sustained.