TaxTMI 
TaxTMI 
2018 (8) TMI 473
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....tainers, clandestinely, to a numbers of buyers including the appellants. In follow up action enquiries were initiated against the appellants by the officers of Raipur Central Excise Commissionerate. 3. The factory and office premises (separately located) of the appellants were searched on 19/20-10-2012 and, apart from other records/papers, three computers were seized from the factory premises and six computers and one laptop and two hard disc drives were seized from the office premises. Another computer was handed over to the central excise officers by the appellants themselves on 20.10.2012, after completion of the search/panchnama proceedings. 4. During the search of the factory premises stock-taking was also carried out and some discrepancies were noticed in respect of raw materials as well as finished goods. The finished goods found in excess valued at Rs. 30,82,565/- were seized and separate proceedings were initiated vide show cause notice dated 08.04.2013. This SCN dated 08.04.2013 was adjudicated by the Deputy Commissioner of Central Excise Raipur, who confirmed the confiscation of the seized goods but the same was set aside in Appeal by the Commissioners (Appeal) vid....
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....re of the 9+1 computers. As for example, the two panchas, namely Shri Bhaskar Bagh and Sh. Mohammad Shahid who had purportedly witnessed the search and seizure of the computers at the factory, categorically stated during their cross examination on 28.01.2016 that they were not present throughout the search proceedings and were only called later to simply sign the panchnamas. Further, both these witnesses were not independent, being employees of the appellants. The panchas who purportedly witnessed the seizure of computers/documents at the office premises of the appellants, also denied having witnessed the proceedings. In fact, one of the witnesses in this case too, was an employee of the appellants. Hence these panchnamas cannot be accepted as evidence. ii. Further, the panchas who reportedly witnessed the cloning of date from the seized computer (RUD-7.1 and 7.2), did not appear for cross examination. iii. The data retrieval and taking printouts from the seized computers was done behind the back of the appellants and without the presence of any panchas. Hence these print-outs cannot be relied upon. iv. The panchnama drawn at the factory premises on 19/10....
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.... alleged that during 2011-12 the appellant affected sales amounting to Rs. 12,31,70,653/- just by 4 of the sales executives. If one takes into account the sales by other sales executives also the sale value would have been much more. However, for the year 2011-12 the department itself has taken the clearance value as Rs. 11,60,17,271/-. This shows that the said data is incorrect. ix. In para 11.1 and 11.2 of the SCN it has been mentioned that hard copies of Sales Ledgers of some buyers were seized from the office premises. It may be observed that the panchnama for seizure of records and computers from the office premises does not mentioned recovery of any Sales Ledgers. These are nothing but computer printouts whose source is doubtful. Shri Hussain Zafar, one of the Partners of the appellant firm denied existence of such ledgers in his statement dated 09.02.2013. x. Para 14 of the SCN talks of recovery of production reports from the office. The panchnama drawn at the office does not mention this. Further, there is no record of, or comparison with, actual production on those dates, to come to any conclusion about unaccounted production. xi. No enquiries we....
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....unted raw materials. b. No investigation conducted as to consumption of excess electricity, or employment of extra labors. c. No investigation conducted as to whether the appellants had installed capacity for manufacturing additional quantities of finished goods. d. No investigation conducted about involvement of huge cash for procurement of unaccounted raw materials. Similarly, no investigation conducted to find whether the appellants had received huge cash of about 24 crore during the disputed period from the buyers of finished goods. Further neither any trail of unaccounted cash was found nor any unaccounted cash was seized. e. No investigation conducted with the transporters to find out whether the appellants received unaccounted raw materials or cleared finished goods without invoices. f. Though, the names of the alleged buyers were available but investigations were conducted only from six buyers. xv. That in respect of raw materials, packing material and finished goods allegedly found in excess at the time of stock taking in the factory on 19/20.10.2012, a separate Show Cause Notice dated 08.04.2013. The matter went upto C....
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....val submissions. The basic issue which is to be decided is as to whether the appellants indulged in clandestine clearanceof paints and varnishes during the period, 2010-11 to 2013-14 or not. The main evidence which has been relied upon by the Revenue are the computer printouts retrieved from the computers, which were seized from the factory as well as office premises of the appellants on 19/20-10.2012 and also the one computer which was handed over to the investigating officer by the appellants themselves on 20.10.2012 after following the due process of law, in accordance with per Central Excise Act and Rules. According to the findings of the adjudicating authority the appellants had created two fictitious accounts in the names of (i) M/s SMB & Co. and (ii) SMB PPC&Co. which pertains to the clandestine clearances on their part. The unaccounted sales for the year 2010-11 were alleged to have shown in the name of M/s SMB & Co. whereas the unaccounted sale for the year 2011-12 and 2012-13 were shown in the name of M/s SMB PPC & Co. 12. We find there are serious irregularities in preparing panchnamas both at the factory premises of the appellants as well as their office on different....
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.... and taking of printouts from the cloned data was done, by them stated to be at the back of the appellants and any panchas in as much as such retrieval was effected by M/s Omnicorpat their office in Delhi. This gives a fetal blow to the whole case made by the Department based on the computer printouts obtained from the various computers seized by the Revenue. 14. We hold that computer printouts cannot be held to be an admissible evidence unless the conditions as laid in the provisions of Section 36B of the Central Excise Act are fully complied with. A perusal of section 36B would indicate that the Act has prescribed very stringent conditions for computer printouts to be a piece of admissible evidence. The Ld. Counsel for the appellants has invited our attention particular to provisions of Section 36B(2) and (4) of the Central Excise Act. For the better appreciation of facts, it is relevant to cite Section 36B of Central Excise Act is as below: - 36B. Admissibility of microfilms, facsimile copies of documents and computer print outs as documents and as evidence (1) Notwithstanding anything contained in any other law for the time being in force, (a) a mi....
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.... (c) by different combinations of computers operating in succession over that period; or (d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly. (4) In any proceedings under this Act and the rules made thereunder where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say,- (a) identifying the document containing the statement and describing the manner in which it was produced; (b) giving such particulars of any device involved in the production of that document as may be appropriate for the purpose of showing that the document was produced by a computer; (c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official positio....
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....proved only in accordance with the procedure prescribed under Section 65B.Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the Section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub- Section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under Section 65B(2). Following are the specified conditions under Section 65B(2) of the Evidence Act: (i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on ....
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....he Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to Section 45A - opinion of examiner of electronic evidence. 18. The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65B of the Evidence Act are not complied with, as the law now stands in India." 15.2. Thus, it has been clearly laid down by the Supreme Court that the computer printout can be admitted in evidence only if the same are produced in accordance with the provisions of Section 65B (2) of the Evidence Act. A certificate is also required to accompany the said of computer printouts as prescribed under section 65B(4) of Evidence Act. It has been clearly laid down in para 15 of this judgment that all the safeguards as prescribed in Section 65B (2) & (4), to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tempering, alteration, transposition, excision etc without such safeguards, the whole trial based on proof of electronic records can lead to travesty of j....
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....udgment are clearly distinguishable from the facts of the present case. In this case computer prints were duly corroborated with bank statements, statements of Directors and employee of the company, statements of the buyer and some of them endorsed the same during cross examination which clearly proved clandestine removal of photocopiers. Hence the reliance placed by Ld. AR on this issue, is of not much help to the Revenue. 16. We find that the computer printouts are not corroborated by any independent evidence establishing clandestine removal of paints and varnishes, as would be evident from the following: - (i) That four sales executives of the appellants, who were regularly taking orders from the buyers were questioned and also confronted with the computer printouts but none of them confirmed sales/quantity shown in the computer printouts. (ii) That four statements of Sh. Hussain Zaffar Partner was recorded. He was confronted with the computer printouts but he denied any knowledge of any printouts. (iii) That the Department during the course of investigation contacted only six of the appellants customers. Out of these six, four denied having made an....
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.... department to confront the two, in the adjudicating process. Thus, the benefit accrues only to appellant in such a situation. In any event, nothing has been brought on record to prove that the entries in the said Register relate to clandestine removal of the finished goods. ix. That the department on the date of search on 19/20.10.2012 has seized stock of finished goods valued at Rs. 15,77,732/- apart from raw material and packing material of Rs. 12,38,173/- &Rs. 2,66,660/- respectively.A separate show cause notice dated 08.04.2013 was issued to the appellants proposing confiscation of the seized goods. It was alleged that the finished goods were not accounted for with the intention to keep the turnover below 150 lakhs by suppressing the production and clearance value of their finished goods with an ulterior motive to evade payment of duty. Though the adjudicating had taken an adverse view but on appeal the Commissioner (Appeals) vide Order-in-Appeal dated 10.09.2014 has set aside the Order-in-Original and rendered the findings that there was nothing on record which could establish that the appellants had crossed SSI exemption limit of Rs. 150 lakhs on 18.10.2012. It has ....