TaxTMI 
TaxTMI 
2020 (1) TMI 532
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....sited by the Appellant, M/s Shiv Shakati Sponge Iron Limited, towards the amount of duty confirmed and recovery of interest under the provisions of Section 11AB of the Act and the imposition of Rs. 1,02,75,737/- (Rs. One crore two lakhs seventy five thousand seven hundred and thirty seven only) under the provisions of Section 11AC of the Act. However, the benefit was given penalty as per law if the amount so confirmed is deposited within thirty days from the communication of the order. 2. The Adjudicating Authority imposed penalty of Rs. 20 lakhs on Shri Bharat Bhushan Sachdeva, Director of M/s Shiv Shakti Iron (for short SSIL) Sponge Limited under Rule 26 of the Central Excise Rules 2002 (for short 'the Rules'). Being aggrieved by the above order the Appellant Company along with Director of the Company are in appeal by the two separate appeals. 3. Brief facts of the case are that M/s Shiv Shakti Sponge and Iron Limited, Mayurbhanj, Orissa (hereinafter for short 'SSIL) is registered with the Department and is engaged in the manufacture of Sponge Iron (in short 'the impugned goods') falling under Chapter heading 72 of the Central Excise Tariff Act, 1985 ( in short 'CETA') and ....
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..... Learned Advocate reiterated the grounds contained under the appeal memorandum and also submitted as under; (i) The documents contained in the pen drive for which print outs were taken, the document 61 was purchase ledger of Union, document 62 ledger again of Union, document 64 of ATL and document 65 was purchase ledger of ATL. The Entire demand appeared to have been calculation based on the comparison of the data contained in the pen drive/ printouts with the statutory recorded maintained by the Appellant under the provisions of Central Excise Act and Rules. (ii) No search or investigation were conducted in the premises of the Appellant and; no cash was found; no excess raw material found; no stock discrepancies; no evidence/ statement of transporters; electricity consumption, capacity to manufacture. (iii) The entire demand has been raised on the basis of a pen drive/print outs record obtained from the premises of the third party and also the private records of the third party which were compared with the Appellant's statutory records. (iv) The confession statement of Shri Bharat Bhushan Sachdeva who were the common Director of all the four co....
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....record that the Department has solely relied upon the data in the pen drive without any further corroboration by the independent investigation conducted for the activity by the Appellant. Although the statement of Shri Sachdeva dated 26.09.2009 was retracted and the existence of data in the pen drive from where the various files were extracted is not disputed. But any data contained in the pen drive/printouts has to be as per the provisions of Section 36B of the Act which has definitely not been followed by the Adjudicating Authority. We find that the issue stand settled by the various decisions which has been quoted by the Appellant to this effect, however, we reproduce only a few of them in case of Premium Instrument (supra) which is held as under; "9. On the demand of duty on waste and scrap, again the appellants have made out a strong case on merits. The demand covering the period November 1993 to September 1998 is based on certain computer print-out relating to the period February, 1996 to September, 1998. These printouts were generated from a personal computer of Shri G. Sampath Kumar, a junior officer of the Company, whose statements were also recorded by the depart....
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....t of the computer print-out taken from the personal computer of Shri Sampath Kumar. It appears from the statement of Shri Sampath Kumar and the averments in the memorandum of appeal that it is an admitted fact that Shri Sampath Kumar was the person having lawful control over the use of the computer. The computer was not shown to have been used regularly to store or process information for the purposes of any activities regularly carried on by the company. It was also not shown that information of the kind contained in the computer print-out was regularly supplied by the Company to the personal computer of Shri Sampathkumar in the ordinary course of activities. Again, it was not shown that, during the relevant period, the computer was operating in the above manner properly. The above provision also casts a burden on that party who wants to rely on the computer print-out, to show that the information contained in the print-out had been supplied to the computer in the ordinary course of business of the company. We find that none of these conditions was satisfied by the Revenue in this case. We have considered the Tribunal's decision in International Computer Ribbon Corporation v. ....
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.... for cross-examination of 30 persons which was rejected by the Adjudicating authority. The appellants contended that the statements are pre-drafted computer statements and it cannot be voluntary nature. After considering the submissions of the appellant, the Commissioner (Appeals) allowed the cross-examination of 4 persons randomly selected. Three of them stated that they were made to sign the pre-drafted statements on a promise that no action shall be taken against them. 8. For the purpose of proper appreciation of the case, the relevant portion of the findings of the Commissioner (Appeals) is reproduced below : - "4.5 Another contention of the appellant is that department has brought artificial evidence in the form of 30 statements from the buyer parties. The appellant stand is that the statements of the 30 parties are pre-drafted computer statements and involuntary. Four of the buyers (randomly selected) deposed before me. Three of them stated before me that they were made to sign a pre-drafted statement on a promise that no action shall be taken against them. One of them stated that his statement was voluntary. In the statements it has been recorded that these....
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.... for the purpose of this Act and the rules made thereunder and can be admissible in proceedings. Subsection (2) of Section 35B provides the condition referred to in sub-section (1) in respect of the computer printout shall be the following viz. "(a) the computer printout containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; (b) during the said period, there was regularly supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement of the kind from which the information so contained is derived; (c) throughout the material part of the said period, the computer was operational properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of that period was not such as to affect the production of the document or the accuracy of the contents; and (d) the information contained in the statement reproduced or i....
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....nd scrap. The question now arises as to whether these printouts are admissible as evidence, in this case. Ld. Sr. Counsel has pointed out that the computer print-outs did not satisfy the statutory conditions. He has referred to the relevant provisions of Section 36B of the Central Excise Act which deals with admissibility of computer printouts etc. as evidence and says that the statement contained in a computer printout shall be deemed to be a document for the purposes of the Act and the rules made thereunder and shall be admissible as evidence of the contents of its original, if the conditions mentioned in sub-section (2) and other provisions of the Section are satisfied in relation to the statement and the computer in question. Sub-section (2) reads as under : - "2. The conditions referred to in sub-section (1) in respect of the computer printout shall be the following, namely : - (a) the computer printout containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly, carried on over that period by the person having lawful control ove....
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....t case had disowned the printouts and was not even confronted with what was contained therein. The Tribunal rejected the printouts and the Revenue's finding of clandestine manufacture and clearance. We find a strong parallel between the instant case and the cited case. Nothing contained in the printouts generated by Sampath Kumar's PC can be admitted into evidence for non-fulfilment of the statutory conditions. It is also noteworthy that the computer printouts pertained to the period February, 1996 to September, 1998 only but the information contained therein was used for a finding of clandestine removal of waste and scrap for earlier period also, which, in any case, was not permissible in law. In the result, we hold that the entire demand of duty on waste and scrap is liable to be set aside." 11. Taking into consideration the overall facts and circumstances of the case, I find that the entire case was made out on the basis of statements of the buyers and the computer printout. Commissioner (Appeals) already held that the evidentiary value of the statements is weak. It is also noted that the statements of the 30 persons were mostly similarly predrafted. The investigating o....
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...., without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible. (2) The conditions referred to in sub-section (1) in respect of a computer printout shall be the following, namely:- (a) the computer printout containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer; (b) during the said period, there was regular supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived; (c) throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of period was not such as to affect the production of the document or the accuracy of the contents; and (d) the infor....
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....ether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities; (c) a document shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment. Explanation. -For the purposes of this section, - (a) "computer" means any device that receives, stores and processes data, applying stipulated processes to the information and supplying results of these processes; and (b) any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process." 14.1 In our considered view the computer printouts in the facts at hand do not fulfill the mandatory provisions of Section 36B-(2) & (4) of the Central Excise Act, in so far as there are serious irregularities about....
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....om the information fed into the computer in the ordinary course of the said activity." 14. In view of above, there cannot be any reliance on the data contained in the pen drive, which has been taken as gospel truth in the case at hand. 15. We also find that the statement of Shri Bharat Bhushan Sachdeva can also not be relied upon for not following the prescription under Section 9D of the Act. Shri Sachdeva has not been examined by the Adjudicating Authority and also not cross examined by the Appellant. In the circumstances even the statement which has not been retracted cannot be taken as an admissible piece of evidence. 16. We also find that the demand has been passed on the third party documents recovered from the premises of the Union and SEWPL which cannot be relied upon in view of decision of this Tribunal in case of Rhino Rubber, Rama Shayama Papers, Bhandari Industries, Jai Mata Industries and Shri Sidhbali Ispat and Shri Sidhbali Ispat(Supra) is reproduced as under; "7.We have considered the submissions made at length by both sides and perused the records and also considered the case laws quoted by both sides. 8.The issue involved in these cases i....
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....the notice contains no reference to any investigation with the actual transporter. Neither any statements of such other transporters are on record, nor is there any explanation available as to why such statements could not be recorded. 9.4Shortage of raw materials and finished goods during stock taking in the factory has been alleged on the basis of theoretical calculation of weight rather than actual physical weighment. 9.5Documents said to have been obtained from the Octroi have been, are neither recovered under a panchnama nor is there any letter or document on record evidencing the same having been supplied/furnished by the Octroi Authorities. 9.6Demands are based on documents which were recovered/seized not from the assessee's premises but from premises of third parties such as transporter's premises, premises of an employee who was residing with his brother-in-law of a key transporter in this case etc. Since these documents were not seized from the premises of the appellant, the burden of proving that the same pertain to the appellant lies upon the Revenue. The notice has however, without establishing how the said documents could be correlated with ....
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....unal) which approved of by the Hon'ble Delhi High Court in Flevel International v. CCE - 2015-TIOL-2230-HC-DEL-CX = 2016 (332) E.L.T. 416 (Del.). The said tests are extracted hereinbelow : "(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity for in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof of actual transportation of goods, cleared without....
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....pies of 123 LRs obtained from the Octroi department is the same. One of the most appalling aspect of the investigation is that the Revenue has not even placed on record the document under cover of which these photocopies of LRs and invoices were obtained from the Octroi department. Further the said documents are admittedly photocopies. It is settled law that photocopies are not credible evidence and it becomes necessary for any investigating authority to place on record authenticated copies of such photocopies in case the originals are not available. Here, not only there is lack of authentication from the Octroi department but there is not even a covering letter available on record to establish that these photocopies are obtained from the Octroi department. These photocopies are therefore rendered unreliable. Whatever little case that the Revenue could have, if at all made out, based on such unauthenticated photocopies, does not survive in the instant case in the absence of any investigation with the consignees/purchasers shown in these invoices/LRs. 9.12Further it is relevant to note here that with respect to the said 276 parallel invoices, statements of Mr. Pandey, Vice-....
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....any case the statements being unreliable no adverse inference can be drawn solely based on them. 9.15The position with regard to the demand of Rs. 55.92 lakhs which is based on the copies of Truck Destination Register maintained by another transporter, namely M/s. Akola Goods Transporter, Chandrapur, is no different. Here again, no investigation seems to have been conducted at the end of the alleged consignees whose name appear in the said Truck Destination Register. The actual receipt of the goods by the consignees is thus not established. No investigation was undertaken to bring on record the author of the said truck destination register. The said statement of Mr. Shakheel Khan shows that M/s. Akola Transport Co. was only acting as a commission agent and were merely arranging for transportation rather than actually transporting the goods themselves in their own trucks. No investigations have been conducted with the actual transporters engaged by M/s. Akola Transport Co. The Books of Account of M/s. Akola Transport Co. have also not been examined to find out the names of the actual transporters. In any case it is settled law laid down by the Hon'ble High Court of Patna in....
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....landestinely removed goods made by the investigating authority. (vi) Any cash amounts seized from the factory premises or dealer's premises or residential premises searched during investigation. (vii) Confessionary statements of the persons concerned with the clandestine manufacture/removal of excisable goods. 9.It is observed from the case records that in the present proceedings, there are few confessional statements of the persons which were later retracted by the persons concerned. The confessional statements subsequently retracted can be argued to be an afterthought under a proper legal advice but to observe the principles of natural justice, it becomes necessary to provide crossexamination of such witnesses, as held by various judicial courts including the Hon'ble Supreme Court relied upon by the appellants. In the case of CCE v. Omkar Textiles - 2010 (259) E.L.T. 687 (Guj.), it was held by the Jurisdictional Gujarat High Court that onus is on the Revenue to furnish the evidence to prove the charges of clandestine removal and it is not sufficient if some confessional statements have been given by the Director of the Company. Similarly, in the case of....
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....-examination and the documents seized from third parties' premises have not been corroborated by adducing evidence of any of the customers though the enquiries were conducted at different places as deposed by Shri Anurag Sharma, Inspector, in his crossexamination on 4-3-2002. Out of 19 consignments said to have been cleared by the Appellant No. 1 without payment of duty on the basis of five transporter, we observe that in respect of two consignments, it has been mentioned by the Revenue that the same may not pertain to the Appellants. Further, only one transporter Shri Sanjay Garg of M/s. Balaji Transporter Co. was produced for cross-examination which accounts for only two consignments out of 19 consignments in question. Shri Garg, it is observed from the record of cross-examination, has deposed that they generally work as commission agent and provide transport to Appellant No. 1; the payment is used to be received directly by the drivers after delivery of the goods at the consignee's end and in case the driver did not report back for the next 3-4 days, it was presumed that the goods had reached the consignees end. Further, the name of the Applicant No. 1 on one GR No. 34 had been ....
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....as been taken that the allegations of clandestine removal of the goods will not stand established when based on the entries made by the assessee's employee in a diary or on the basis of third party's record in the absence of any corroborative evidence. It has also been the consistent view of the Tribunal that the statements of the witnesses, without allowing the assessee to test the correctness of the same by cross-examining those witnesses; cannot be made the basis for holding the allegation against the assessee. (Takshila Spinners v. CCE, supra). Similar views have been expressed by the Tribunal in the case of Haryana Petrochemicals Ltd., supra wherein the Tribunal has held that reliance cannot be placed on the documents maintained by a third party "who did not have the courage to come forward for crossexamination in order to test the veracity and correctness of the private record maintained by him." It has also been held by the Tribunal in the case of Kothari Synthetics Industries v. CCE, Jaipur - 2002 (141) E.L.T. 558 (T) that entries made in the transport Register of the transport company could not be accepted as a conclusive proof of clandestine receipt of goods from that tra....
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....record may at the most create a doubt only. But doubt cannot take the place of evidence. The Revenue has, thus, not proved its case against the Appellants in respect of 149 consignments. We, therefore, set aside the demand of duty and penalty imposed on Appellant-company and consequently the demand of interest." 11.From the above settled law, it is clear that in a clandestine removal case, the facts of clandestine removal of excisable goods cannot be established only on the basis of certain statements which are retracted later but there has to be positive evidences like purchase of excess raw materials, shortage/excess of raw materials/finished goods found in the stock/factory premises of the appellant, excess consumption of power like electricity, any seizure of cash during the investigation when huge transactions are made in cash. In the present case also, it is observed, from the annexures to the show cause notice dated 1-5-2009 issued to the appellants, that there were huge cash transactions to the tune of Rs. 11.23 Crores. When such large number of transactions involving huge amounts are being undertaken in clandestine removal activities, it is very likely that some c....