TaxTMI 
TaxTMI 
2020 (1) TMI 321
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....engaged in the manufacture of Sponge Iron (dutiable) falling under Chapter Heading 72 of the Central Excise Tariff Act, 1985. The department conducted simultaneous search at the factory and office premises of the appellant on 05.05.2015. During the course of search at the factory premises, the department recovered incriminating documents and electronic data devices in the form of 2 pen drives and 2 computer hard disks. Prima facie if appeared a case of evasion of central excise duty. Shri D.P. Singh, General Manger of the appellant declared the stock on 06.05.2015. Thereafter, the department conducted stock verification on 06.05.2015, and found shortage of finished goods and raw materials (coal). The data contained in the two electronic memory devices (hard disks) recovered and seized on 05.05.2014 was retrieved under Panchnama dated 03/04.07.2014, at Computer Cell of Central Excise Hqrs, Raipur. The department has retrieved one hard disk on 03.07.2014 and sealed it (the said Panchnama has not been relied upon in SCN). That, vide Panchnama dated 04.07.2014, the officers took printout of the retrieved data, however, the other hard disk was not retrieved on 04.07.2014. The print out ....
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....494/- for the period April, 2011 to Nov, 2013 on allegation of suppression of production and clandestine removal of Sponge Iron on the basis of incriminating data recovered from computer:, and the statements recorded. 3.2 It is urged that the huge demand has been confirmed merely on the basis of records retrieved from the computer (which is otherwise not admissible as per Section 36B of the Central Excise Act, 1944) and various statements (which is otherwise not admissible as per Section 9D of the Central Excise Act, 1944), without adducing any other corroborative evidence. It is well settled law, that as held by the Hon'ble High Court of Allahabad in the case of Continental Cement Company Vs Union of India, 2014 (309) ELT 411 (All.), the department is required to adduce clinching evidence of the purchase of raw material, use of electricity, sale of final products, payment, realization of sale proceeds, mode and flow back of funds. The relevant extract of the judgment is reproduced here for ready reference:- "12. Further, unless there is clinching evidence of the nature of purchase of raw materials, use of electricity, sale of final products, clandestine removals, the mode and f....
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....e provisions of Section 36B of the Central Excise Act, 1944. 3.6 It is urged that the demand raised in the show cause notice was on the basis of data retrieved from hard disk and such data is not admissible under the provisions of Section 36B of Central Excise Act, 1944.It is further submitted that, as per ruling of Hon'ble Supreme Court in the case of Anvar P.V. v. P.K. Basheer, reported at Manu/S.C./0834/2014 = 2017 (352) E.L.T. 416 (S.C.), as held in Para-13 of the said ruling, that on interpreting the provisions of Section 65B of Evidence Act, 1872 (which is para materia with Section 36B of Central Excise Act, 1944). The purpose of these provisions is to sanctify secondary evidence in electronic form and that the Section starts with a non obstante clause, which says that notwithstanding anything contained in the Evidence Act, any information contained in an electronic form, shall be deemed to be a document only if the conditions mentioned under sub-sec (2) are satisfied and that the admissibility of such document retrieved from electronic record needs to satisfy four conditions. It is further submitted that on interpretation of Section 65B(4) of Evidence Act the Hon'ble Suprem....
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....v, 2013, which itself raises suspicion on the reliability of the said documents (electronic record) to prove the charge of clandestine removal. 3.9 The appellant places reliance on the following judgments that the department has to comply with the provisions of Section 36B of the Central Excise Act, if the department wants to rely upon the said evidence: (i) Kuwer Industries Vs CCE, Noida, 2018 (11) TMI 1033 - CESTAT Allahabad (ii) Premier Instruments & Controls Ltd. Vs CCE, Coimbatore, 2005 (183) ELT 65 (Tri-Chennai) (iii) Anwar P.V. Vs P.K. Basheer, 2017 (352) ELT 416 (SC) (iv) Popular Paints and Chemicals Vs CCE, Raipur, 2018 (8) TMI 473 - CESTAT New Delhi 3.10. It is urged that no employee has been charged in the show cause notice with respect to alleged activities of suppression of production and removal thereof. The appellant would also rely upon the grounds taken in the appeal. 3.11 It is urged that the statements recorded under Section 14 of the Central Excise Act, 1944 during investigation cannot be straight away relied upon as evidence as held by the jurisdictional High Court in the case of Hi-Tech Abrasives Vs CCE&ST, Raipur, 2018 (362) ELT 961 (Chhattisgarh).....
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.... confiscated or held liable to confiscation. 3.18 It is respectfully submitted that the extended period cannot be invoked in the present case inasmuch show cause notice has been issued beyond one year of normal limitation period. It is further submitted that no interest and penalty can be imposed against the appellant. In view of the submissions made above, impugned order is liable to be set aside, and appeals be allowed with consequential relief. 4. The learned AR appearing on behalf of the department reiterated the findings in the impugned order and further relied upon the ruling of this Tribunal in the case of M/s Guruharkishan Industries Vs CCE, Delhi-II, Final Order No. 51970-51979/2018 dated 23.05.2018 and Shri Ulaganayagi Ammal Steels Vs CCE, Trichy, reported as, 2008 (231) ELT 434 (Tri-Chennai), to support his plea that computer prints out are admissible as evidence and the provisions of Section 36B of the Central Excise Act, 1944 has been complied with. He therefore further requested to dismiss the appeals of the appellant. 5. Having considered the rival submissions at length and pursued the records, we find that the entire case of the department is based upon the compu....
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....ed 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 microfilm of a document or the reproduction of the image or images embodied in such microfilm (whether enlarged or not); or (b) a facsimile copy of a document; or (c) a statement contained in a document and included in a printed material produced by a computer (hereinafter referred to as a "computer printout"), if the conditions mentioned in sub-section (2) and the other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be also a document for the purposes of this Act and the rules made t....
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....cate certify 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 position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it. (5) For the purposes of this section,- (a) information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment; (b) whether in the course of activities carried on by any....
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.... 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 over that period by the person having lawful control over the use of that computer; (ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity; (iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and (iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity. 15. Under Section 65B(4) of....
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....at 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 justice. We may add here that the provisions of Section 65B of Indian Evidence Act and Section 36B of Central Excise Act are parimateria." 15.3 It is evident from the appeal that the investigation officers while seizing has failed to take safeguards as mandated under section 36B of Central Excise Act. Further the cloning process of the hard-disks and retrieval of the data is inadmissible for want of cross examination of, Sh. Vipul Saxena, who has done cloning of the data from the computer system. We, therefore, hold that the computer printouts cannot be held to admissible evidence in terms of Section 36B (2) & (4) of the Central Excise Act in the case at hand. 7. We find that similar view has been taken by the Gujarat High Court and this Tribunal in the following cases. (i) Ambica Organics V/S C....
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.... evidence without following the rigor of Section 9D of the Act. It has been further held that the provisions of Section 9D is mandatory in nature. The Hon'ble High Court held as under:- "9.5 Undoubtedly, the proceedings are quasi criminal in nature because it results in imposition of not only of duty but also of penalty and in many cases, it may also lead to prosecution. The provisions contained in Section 9D, therefore, has to be construed strictly and held as mandatory and not merely directory. Therefore, unless the substantive provisions contained in Section 9D are complied with, the statement recorded during search and seizure operation by the Investigation Officers cannot be treated to be relevant piece of evidence on which a finding could be based by the adjudicating authority. A rational, logical and fair interpretation of procedure clearly spells out that, before the statement is treated as relevant and admissible under the law, the person is not only required to be present in the proceedings before the adjudicating authority but the adjudicating authority is obliged under the law to examine him and form an opinion that having regard to the circumstances of the case, the ....