Electronic evidence and investigation statements need strict statutory compliance before they can support a clandestine removal demand.

Electronic records retrieved from CDs and pen drives cannot be relied on unless the statutory conditions for computer-output admissibility, including the required certificate under Section 36B and compliance with Section 36B(2), are established. Statements recorded during investigation also lose evidentiary value where cross-examination is denied and the mandatory procedure under Section 9D is not followed. Clandestine removal allegations require independent, tangible corroboration such as evidence of excess production inputs, electricity use, transport, buyers, or flow-back of funds; electronic data and untested statements alone are insufficient. The stated result is that duty demand, interest, penalties, and the director's penalty were set aside.

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Issues: (i) whether the data retrieved from CDs and pen drives could be relied upon in the absence of the certificate and conditions required under Section 36B of the Central Excise Act, 1944; (ii) whether statements recorded during investigation could be used when the requested cross-examination was denied and the procedure under Section 9D of the Central Excise Act, 1944 was not followed; (iii) whether the charge of clandestine removal could be sustained without corroborative evidence.

Issue (i): Whether the data retrieved from CDs and pen drives could be relied upon in the absence of the certificate and conditions required under Section 36B of the Central Excise Act, 1944.

Analysis: The electronic material was the principal basis of the demand, but the record did not show compliance with the statutory safeguards governing admissibility of computer output and electronic records. No certificate under Section 36B(4) was obtained, and the conditions in Section 36B(2) were also not established. In such circumstances, the retrieved printouts and electronic data could not be treated as reliable evidence for fastening duty liability.

Conclusion: The electronic data was not admissible or dependable in support of the demand.

Issue (ii): Whether statements recorded during investigation could be used when the requested cross-examination was denied and the procedure under Section 9D of the Central Excise Act, 1944 was not followed.

Analysis: The adjudication relied on statements of persons connected with the investigation, but the persons whose statements were relied upon were not examined in the manner required by the statute, and cross-examination sought by the appellant was denied. In the absence of compliance with the mandatory procedure governing relevancy of such statements, they could not be treated as substantive evidence against the appellants.

Conclusion: The statements lost evidentiary value and could not be relied upon.

Issue (iii): Whether the charge of clandestine removal could be sustained without corroborative evidence.

Analysis: Clandestine removal is a serious allegation and requires tangible and affirmative corroboration. The record did not establish supporting evidence of excess raw material, excess electricity consumption, transport of unaccounted goods, buyers, flow back of funds, or other independent material normally expected in such cases. The demand rested substantially on electronic data and untested statements, which was insufficient to sustain the allegation.

Conclusion: The charge of clandestine removal was not proved.

Final Conclusion: The duty demand, interest, and penalties were set aside, and the penalty imposed on the director was also vacated, resulting in complete relief to the appellants.

Ratio Decidendi: Electronic records and investigation statements cannot sustain a clandestine removal demand unless the statutory requirements for admissibility and examination are strictly complied with and the allegation is corroborated by independent tangible evidence.

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