TaxTMI 
TaxTMI 
2019 (12) TMI 280
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....booking register was also seized from M/s Suvidha Transport which allegedly showed details of transportation of goods from Chhatral Unit of Appellant to Mumbai. The statements of following persons were also recorded : (i) Shri MahendraManilal Shah, Director of M/s SSPL. (ii) Shri Snehal/ Bhavesh Shah, director of M/s STPL. (iii) NawalkishoreRadheyshyamDalal, Partner of M/s Allit Metals (iv) Babulal GaneshmalBhora, Proprietor of Rashmi Steels (v) Pradeep Jagdish Bhagat, Proprietor of Suvidha Roadways (vi) Jayantilal J. Sanghavi, Proprietor of Veer Ratan Steel, (vii) Mulchand J. Jain, Proprietor of Ratnaveer Metal (viii) MangilalBachrajBurad, Broker 2. Based upon pen drive/ papers and diary seized from residence of Shri Snehal/ Bhavesh Shah, kaccha slips seized from Shri Mahendra Manilal Shah, register seized at M/s Suvidha Transport and statements of traders, it was alleged that Shri Mahendra Manilal Shah in his statements accepted clearances of goods viz. S.S Pipes without payment of duty as found from the pen drive and diary seized from residence of Shri Bhavesh/ Snehal R. Shah. That in respect of challans ....
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....n' 2013 shows details of transportation of pipes from Chhatral to Mumbai and the details tallies with the sale of SS Pipes recorded in pen drive. It indicated payment of freight of Rs. 3,16,32,259/- to Shri Pradeep, Proprietor of M/s Suvidha Roadways which was accepted by him. That the statements of traders/ brokers who have purchased SS Pipes as stated in pen drive ledger data shows the clandestine removal of goods from Appellant. The ledger account of Shri Mahendra M Shah namely "M M Shah" maintained in seized pen drive indicates that during the period from 01.04.2008 to 03.07.2012, Shri Mahendra Shah received amount of approx. 6.52 Crores and paid amount of 4.17 crores mostly in cash and cheques which proves the trail of cash realised from cash sales of the SS Pipes to the accounts of Shri Mahendra Shah and contradicts the claim of Bhavesh/ Snehal Shah that cash transactions were affected by him. Based upon above investigation, the Appellant Unit was issued show cause notice dt. 01.07.2013 alleging that M/s SSPL have clandestinely cleared SS Pipes without payment of duty of Rs. 11,29,73,580/- during the period June'2008 to December'2012. The demand was based upon following insta....
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.... to DGCEI on 2.7.2013 i.e. before issuance of Show Cause Notice had claimed that there was no clandestine manufacture and clearance of SS Pipes by SSPL. The Appellant M/s SSPL has resisted the Show Cause Notice by filing replies dated 21.5.2014, 18.12.2014 and 16.1.2015. They disputed the evidentiary value of the Pen drive and papers seized from the residence of Bhavesh/Snehal R. Shah, the rough (Kachcha) documents recovered from the office of Mahendra M Shah and the transport register recovered from office of Suvidha Roadways, Vasai. There is no evidence of purchase of raw materials to manufacture the alleged huge quantity of SS pipes alleged to be cleared clandestinely and of consumption of excess electricity to manufacture such huge quantity. The Appellant's factory did not have the production capacity to manufacture such huge quantity alleged to be clandestinely cleared. They had sought cross-examination of all the persons whose statements are relied upon in the Notice and of the investigating officers which was not allowed. The demands made on the basis of Ledger Account "Pipe Sales" retrieved from Pen Drive seized from residence of Bhavesh/Snehal R. Shah is liable to be set a....
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....s Act 1962 which corresponds to Section 36B of the Central Excise Act 1944. 6. Without prejudice to his other submissions, he further submits that the Ledger Account "Pipe Sales" on the basis of which demand is raised nowhere bears the name of the Appellant M/s SSPL. The said account is appearing under the name "Star" and not Sunrise Stainless Steel P. Ltd. The persons whose statements have been relied upon in relation to the Ledger accounts retrieved from the Pen drive were not permitted to be examined under Section 9D of the Central Excise Act 1944 and their cross examination not granted to the Appellant. Since no opportunity of their cross examination has been given to the Appellant, the statements are not admissible in evidence. He places reliance judgments in case of Basudev Garg Vs. CC - 2013 (294) ELT 353 (Del), CCE v Premier Alloys Ltd - 2019 (366) ELT 659 (All). That Shri Mahendra Shah in his statement dated 5.3. 2013 stated that clearances of SS pipes were made on payment of duty and denied any cash sales without payment of duty. Shri Snehal R. Shah in his statement has stated that Sunrise Trade Wings P. Ltd, of which he was director, was trading in SS Patta, SS Coils ....
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....s/ unaccounted raw material or excess/ unaccounted finished goods when the department carried out search at the Appellant's factory. Therefore in the absence of any such evidence, no case for clandestine removal can be said to have been made out as laid down by the Hon'ble Tribunal in the case of Arya Fibres P. Ltd v CCE - 2104 (311) ELT 529. Without prejudice to the aforesaid submissions, he submits that the name of Sunrise Stainless Steel P. Ltd, nowhere appears in the Diary and loose documents recovered from Snehal R. Shah. In case of confirmation of demand under Annx-4 based on rough documents (Kachcha challans) recovered from office of Mahendra M. Shah he submits that the same is liable to be set aside. Merely based on Kachcha/ rough documents, without any evidence of clandestine manufacture in the form of purchase and consumption of excess raw materials and power, case for clandestine removal cannot be made out. In respect of demand under Annx-5 based on transport register recovered from Suvidha Roadways, he submits that demand is not sustainable as no case of clandestine removal can be made out on the basis of third party documents, particularly when such third party is not ....
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....h Shah. Some loose slips were also seized from Shri Mahendra M Shah. Statements were recorded of dire tor of M/s SSPL, Shri Bhavesh/Snehal R. Shah and traders/ brokers. From Suvidha Roadways register containing details of booking was also seized. Based upon above records and statements, the demand has been made against M/s SSPL. We find that Shri Snehal/ Bhavesh Shah in his statement has stated that the Pen Drive ledger pertained to trading done by him of SS Patta, SS Coils and SS Pipes in his personal capacity. The show cause notice and the impugned order has alleged that the persons whose statements have been relied upon has stated that they were doing trading or acting as broker in SS Pipes of M/s SSPL. They have also verified the Pen drive ledger as pertaining to their firm. 10. We find that the Appellant Unit in its reply to show cause notice had challenged the authenticity/ genuineness of such pen drive data on the ground that the same is inadmissible in evidence as the requirements of Section 65B of the Indian Evidence act and procedure required under Section 36B of the Central Excise Act was not followed. We find that Section 36B of Central Excise Act is parimateria to S....
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....ocessed and created on computing devices consisting of processor and working on variety of factors. After processing the raw information, like strokes from a keyboard, the computer processor creates the `machine readable' information and sends it to the default storage memory device. However, before so storing, the said machine readable electronic record is created through the computer language; which is a binary digital language comprising of '1' and '0'." (page 13 of the judgment) "This digital information is stored on memory device of computer. This processed information can also be stored on as small device as a Micro SD card or the Pen Drive. Besides this, the electronic record can be reproduced on the optical and magnetic devices like the CD or the tape record. As is obvious, the tape records are already phased out. Its only the optical devices like the Hard Disc Drive, CD or the electronic storage devices like the Solid State Drive, Pen Drive and Data Cards, which are used. But all this information is readable only by machines. For making this information cognizable by human beings, it would be required to be converted in suitable output through other dev....
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....digital codes, created through the computer processor. The same piece of machine readable information can be retrieved in different manner and different forms on different types of output devices. For example, a page of information typed as electronic information in M.S. Word can be seen on screen; as well as; can be printed out on a sheet of paper. Therefore, the original electronic information is the information which is present in the forms of digital codes stored on default memory device. The computer output of the same is only reproduction of the same in different formats. Therefore, it is only this default memory device which contains the `Primary' information created by the computer processor. Any copy of this on any other device is only a `Secondary' information or the secondary evidence in legal parlence. However, what is normally sought to be produced before the Court in evidence is either the `output' or the `copy' of the original information stored as digital codes. Therefore, the conventional catagorization of evidence in `Primary' and `Secondary' evidence does not strictly holds good in case of electronic record or the computer output. Hence, S....
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....ise reported in 2011 (22) S.T.R. 225 (Del.) = 2009 (242) E.L.T. 189 (Del.). 10. Insofar as the general propositions are concerned, there can be no denying that when any statement is used against the assessee, an opportunity of cross-examining the persons who made those statements ought to be given to the assessee. This is clear from the observations contained in Swadeshi Polytex Ltd. (supra) and Laxman Exports Limited (supra). Apart from this, the decision of this court in J&K Cigarettes Ltd. (supra) clinches the issue in favour of the appellant. In that case, the validity of Section 9D of the Central Excise Act, 1944 was in question. The said Section 9D of the Central Excise Act, 1944 reads as under :- "9D. Relevancy of statement under certain circumstances. - (1) A statement made and signed by a person before any Central Excise Officer of a gazette rank during the course of any inquiry or proceedings under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains :- (a) When the person who made the statement is dead or cannot be found, or is incapable of giving evid....
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..... Bare reading of the above section manifests that under certain circumstances, as stipulated therein, statement made and signed by those persons before any Central Excise Officer of a gazette rank during the course of inquiry or proceedings under this Act can be treated as relevant and taken into consideration if under the given circumstances such a person cannot be produced for cross-examination. Thus, this provision makes such statements relevant for the purposes of proving the truth of the facts which it contains, in any prosecution for an offence under the Act in certain situations. Sub-section (2) extends the provision of sub-section (1) to any proceedings under the Act other than a proceeding before the Court. In this manner, Section 9D can be utilized in adjudication proceedings before the Collector as well. In the present case, provisions of Section 9D of the Act were invoked by the Collector holding that it was not possible to procure the attendance of some of the witnesses without undue delay or expense. Whether such a finding was otherwise justified or not can be taken up in the appeal." 14. The Division Bench also observed that though it cannot be denied that ....
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....ved at by the Division Bench in the case of J&K Cigarettes Ltd. (supra) would apply with equal vigour to the provisions of Section 138B of the Customs Act, 1962. We find that this aspect of the matter has not been considered by any of the authorities below. In fact, Section 138B of the Customs Act, 1962 has not been examined at all. Further in case of Premier Alloys Ltd. 2019 (366) ELT 659 (ALL), the Hon'ble High Court held as under : 32. In the present case, it is not a case of admission on the part of assessee himself or his authorized representative but statements relied herein are that of proprietors of transport companies and others. It would be travesty of justice to hold that ex parte statements recorded of other persons than assessee or its representatives can be relied as a sufficient evidence to pass an order adverse to assessee without allowing such persons to be cross-examined by assessee and that too despite demand. 33. So far as Section 9D is concerned, we find that it only renders statement made and signed by any person before any Central Excise Officer of a Gazetted Rank, relevant, for the purpose of proving anything in any prosecution for an of....
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....out corroborating with any evidence from Appellant's unit. Similarly in case of demand made in Annexure - 4 the same is based upon documents recovered from Shri Mahendra M Shah. We find that Shri Mahendra in his statement dt 05.03.2013 has clearly stated that the clearances from M/s SSPL were made on payment of duty and no clearances were made in cash. Further the clearance in such papers was shown to M/s Vinod Steel which was not investigated. In absence of any evidence and merely on basis of such slips, the demand cannot be made. Similarly in case of demand made in Annexure - 5 the demands are based upon Transport Register seized from office of Suvidha Roadways at Vasai, We find that except said transport register which is a third party record, no other evidence of clandestine removal has been adduced. There is no corroboration of such register with no any incriminating document recovered from factory and hence the demand based upon such register cannot be made. We also find that the Appellant Unit in their reply had also stated that they do not have production capacity for manufacture of quantity as alleged to have been cleared clandestinely. The adjudicating authority has confi....
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....cord to indicate that the appellant had purchased the Quartz, Feldspar, Zinc, Borax Powder, Calcium and Dolomite and without accounting them used for the manufacture of Frit for clandestine removal. There is also nothing on record nor there is any statement of the suppliers of other raw materials, which would indicate that the appellant had received unaccounted raw material from the suppliers of these raw materials. There is a solitary evidence in the form of statement of supplier of one of the raw material i.e. Borax Powder, who indicated that the appellant had procured Borax Powder and not accounted the same in his record; and the said entries and information were deduced from the documents of the premises of Shri Anil Jadav and whose evidence has been discarded for having not been produced for cross examination; in the absence of any other tangible evidence to show that the appellant had been procuring the other major raw materials required for manufacture of Frit without recording in books of accounts, we are unable to accept the contentions of the ld. AR appearing for the Revenue and the findings of the adjudicating authority, that there was clandestine manufacture and clearan....
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....l without payment of duty. As already discussed the said statements are devoid of probative value and cannot be considered to be supportive of charges of clandestine removal." In yet another case in the case of T.G.L. Poshak Corporation - 2002 (140) E.L.T. 187, the co-ordinate Bench of the Tribunal held as under. "6. We have carefully considered the submission and perused the impugned order. Insofar as the assessee's appeal is concerned, we notice from the extracted portion of the Commissioner's order that Revenue is solely relying on the exercise note books mainly balance sheets. The Tribunal in large number of cases which have already been noted above in the tabulated list of citations furnished by the Counsel has held that unless there is clinching evidence on the nature of purchase of raw materials, use of electricity, sale, clandestine removals, the mode and flow back of funds, demands cannot be confirmed solely on the basis of note books maintained by some workers. The facts in the case of Aswin Vanaspati Industries would be identical to the facts herein as in that case also the allegation was with regard to removal of Vanaspati based on the inputs maintaine....
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....n figures were so manipulated that the clandestine removal could take place without receipt of other raw materials. The investigating authorities, during the course of raid, had even seized the records of security at the factory gate, but from these records, Revenue was not able to show that there was illicit receipt of the raw materials in the manufacture of final product in the factory premises. 15. We find that Hon'ble High Court of Gujarat, in the case of Nissan ThermowarePvt. Ltd. - 2011 (266) E.L.T. 45 (Guj.), has specifically held as under : "7. Thus, on the basis of findings of fact recorded by the Tribunal upon appreciation of the evidence on record, it is apparent that except for the shortage in raw material viz., HD which was disputed by the assessee and the statement of the Director, there was no other evidence on record to indicate clandestine manufacture and removal of final products. On behalf of the revenue, except for placing reliance upon the statement of the Director recorded during the course of the search proceedings, no evidence has been pointed out which corroborates the fact of clandestine manufacture and removal of final products. In the c....
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.... discrepancies in the seized documents relied upon by the Revenue. He has further pointed out that A-21 does not even refer to the quantity of DTY produced by GSL. It is also difficult to establish that all the quantities of DTY were made out of 115/68 denier of POY. Annexure B-1 and B-2 have been prepared only on the basis of presumptions. He, further, submitted that the conclusion that A-19 and A-21 refer to the quantities being loaded in the crill is also without any evidence. There is no proof that GSL has used 100% of its capacity for production of DTY. Except for these entries, there is no substantial material to show that such a huge quantity of POY has been cleared to GSL without payment of duty and that the entire quantity has been used of production of DTY. There is no proof of purchase of such huge quantity of POY from Nova by GSL. No evidence has been led by the Revenue to show that GSL had actually produced DTY out of POY supplied by Nova. There is no evidence of transportation of POY from Nova to GSL factory. Undoubtedly, huge quantities of raw material would be required for manufacturing such a huge quantity of POY. No evidence has been brought either in the SCN or i....
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....ave doubts cannot take place of legal proof. To establish the charges against the respondents, it was, in our judgment, essential for the prosecution to establish that the secret books of account related to the business transactions carried on by the respondents and none else. This it could have established in a variety of ways viz. (1) by adducing satisfactory proof to the effect that the place from which the secret books of accounts were seized formed part of the place of business of the respondents or was in their exclusive possession and control, (2) that the secret books of account were maintained by or under the orders of the respondents, (3) that the said books of account were in the handwriting of either of the respondents or their accountant, or clerk or some other person employed by them". Admittedly none of the documents marked as A-19 to A-23 was recovered from the premises of Nova. It is not the case of the Revenue that these note books were maintained by V.N. Parab under the instructions of Nova. Further, these note books were not in the handwriting of any of the persons of Nova or its accountant or clerk or any employees of Nova. Applying the ratio of the de....
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....ies of POY from Nova to GSL or, even for that matter, from GSL to the buyers of DTY produced by GSL. No evidence has been forthcoming of purchase of raw materials by Nova for production of POY in such huge quantities, or of payments effected by GSL to Nova for the excess quantities of POY, clandestinely manufactured and cleared by Nova and sold to GSL, or even of payments made by the buyers of DTY from GSL made out of quantities alleged to have been purchased by GSL from Nova. The only basis of the demand is the figures contained in A/19 and A/21, seized from GSL premises, of which V.N. Parab is the author. Even if the figures in the seized documents tally (this is disputed by Nova, since V.N. Parab has not, when he was being examined during the investigation, stated that they tally), that by itself cannot prove clandestine manufacture and clearance, the tests for which have been adequately explained by this Tribunal in the decisions cited earlier, amongst several others. The documents in question, have not been resumed from Nova's premises, nor is the author of the documents (V.N. Parab), a person in Nova's employment or acting under Nova's instructions. Reliance by the ld. Senior....
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....a for further manufacture of POY which was further clandestinely cleared by them. According to the Revenue, the diaries were maintained by Ashok Chiripal in his own handwriting showing production and captive consumption of Polyester Chips. Excess production of Polyester Chips was recorded in these diaries. According to Nova, these diaries by themselves do not speak of any clandestine procurement of raw-materials, manufacture of Polyester Chips and excess production of Polyester Yarn. Inferences have been drawn from the entries made in these diaries without corroborating the same with any concrete evidence. Merely because Ashok Chiripal has stated that the entries mentioned in the diaries are true and pertains to the excess production of Polyester Yarn, would not be enough to fasten the liability upon Nova. There is no evidence of procurement of raw material i.e. Mono Ethylene Glycol (MEG) and Purified Terephtalic Acid (PTA) for the production of such a huge quantity of Polyester Chips in a period of less than 6 months. Not a single person has been identified by the Revenue who has supplied such a huge quantity of raw materials for the manufacture of Polyester Chips. That apart, no ....
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.... issued to him. The question of his statement being regarded as "confession" does not, therefore, arise, because confession, by its very nature, has to be made by a person charged with breach of law. In fact, at the time of hearing, the ld. Special Counsel did not dispute the submissions made by the ld. Senior Advocate of Nova that there was no "confession" by Ashok Chiripal. It was only his statement that has been relied upon. According to the submission made by the ld. Senior Advocate, who, once again relied heavily on the tests laid down by the Tribunal regarding the nature of evidence required to affirm a finding of clandestine manufacture and clearance, a very important consideration which failed to be appreciated by the Adjudicating Authority was that, in respect of the instant demand, there was no evidence whatsoever of the procurement of the required raw materials (MEG & PTA) for production of the alleged 1910587.5 kgs of Polyester Chips in less than 6 months. Nor was there any evidence of actual production of such quantities by Nova. There is also no evidence of transportation of POY, if at all manufactured, to any buyer. No payments made by Nova to suppliers of r....
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.... In reply to the submissions made on behalf of Nova, the ld. Senior Special Counsel for the Revenue filed written submissions on 30-7-2013 and explained the same. The diaries had been maintained by Ashok Chiripal, showing production and consumption of polyester chips in Nova's factory from March, 2002 to August, 2002. The statement of Ashok Chiripal was not retracted by him, which stated that the figures were showing actual production of polyester chips by Nova and captive consumption thereof for manufacture of POY. A quantity of 17,69,298 kgs of polyester chips shown to have been transported were not entered in the Excise records. The statements of Vikram Oza and Nitin Patel, employees of Nova were to the effect that Nova was receiving PTA (one of the raw materials) which was not accounted for in the records. The ld. Special Counsel also showed us certain figures in the diaries about production on 31-3-2002 and submitted that the records and the statements cannot be belittled. We have considered the rival submissions. We are constrained to reiterate that it is one thing to make out the content of entries made in a document. It is totally a different thing to assess the....
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....ed by M/s. Hyderabad Beverages and not by the Appellants. No evidence has been brought on record to show any excess production of the impugned product by the Appellants by way of procuring necessary raw materials. In a similar situation in the case of Moon Beverages wherein the charges of clandestine removal was made on the basis of computerized sheets of sales figures maintained by M/s. Parle Exports Ltd. whom the figures were sent by the assessee, the Tribunal has held that "the charge of clandestine removal cannot be established on the basis of one single factor.....Other corroborative evidence such as evidence of other inputs required for manufacture of aerated waters namely sugar, carbon dioxide being purchased and utilized in the manufacture of the final product during the period in dispute is required. There is no such corroborative evidence in the present case. There is also no evidence of higher electricity consumption." In the present appeal before us also there is no corroborative evidence except the PMX Reports. Revenue has also not contradicted the submission of the learned Advocate that the Managing Director of the Appellants was not even questioned about these report....