TaxTMI 
TaxTMI 
2020 (9) TMI 645
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....cise Duty by clearing/removing their goods clandestinely. Four dispatch slips were recovered which were kept in file which is marked as Annexure 'A' to the Panchnama dated 17/7/2012. A follow up raid was conducted at the factory of M/S. WILSON PAPER MILLS PVT. LTD. on 20-21/7/2012. Two delivery challans were recovered during search. The Investigating Officers conducted the Stock taking and recovered various documents which they found that a) There was alleged shortage of finished goods i.e. as per daily stock account 87,845 KGs. of Kraft paper was recorded whereas physical stock was found as 65,364 KGs. Therefore, there was shortage of 22,481 KGs. of kraft paper. b) Four dispatch slips claimed to have been recovered from M/s. Gajanand Packaging, Morbi. c) Two delivery challans claimed to have been recovered from factory of M/s. Wilson Paper Mill Pvt. Ltd & d) Print outs claimed to have been obtained from computer CPU available at residence to one of the directors M/s. Wilson Paper Mills Pvt. Ltd. 2.1 After retrieving the same with the help of Computer forensic expert, a Show Cause Notice No.V.48/AR-MORBI-DIV.II./144/COMMR./2013 dated 02/07/2013 was issued upon M/s. Wilson ....
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....ispatch slips would be 48,813 KGs. valued at Rs. 9,24,110/- and it would attract Central Excise Duty along with Cesses valued at Rs. 58,302/- only. However, by no stretch of imagination such huge demand could be supported. He submits that the statements are not admissible in evidence and could not be relied as they are full of confliction. As far as statements of Rajesh P. Detroja billing clerk and Pritesh P. Vadhadiya, Loading supervisor both dated 20/7/2012 are concerned it is important to note that panchnama dated 20-21/07/2012 states that it started at 9:30 PM of 20/7/2012 and completed on 7:35 AM on 21/7/2012. However, the panchnama did not make any mention about recording of statements of the Billing Clerk and Loading Supervisor. It is not known as to when were the statements recorded. 4.2 The statements of Director are also far from truth, they are not supported by any corroborative evidence. Signatures were obtained under pressure, threat and duress without even allowing the director to read the contents of the statements which were prepared by officers themselves. The copies of the statements were provided only along with Show Cause Notice and not prior thereto therefore,....
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....lso invited our attention to the judgments of Hon'ble Gujarat High Court in case of COMMISSIONER OF CENTRAL EXCISE Vs. SAAKEEN ALLOYS PVT. LTD.- 2014 (308) ELT 655 (Guj.). He submits that the statements were recorded only in respect of seventeen customers, the statements of many more alleged customers were not recorded. This is also the reason that the allegation of clandestine removal would not sustain. He further submits that the entire demand was worked out on the basis of computer print out. It is not clear from Annexure 'A' to the panchnama that which CPU was seized and which files are containing said data. It is also mentioned that computer print outs taken from seized CPU and said three files contains different data than what is discussed in panchnama. The data of the computer was not retrieved/recovered in accordance with Section 36B (2). He submits that print outs could be admissible only when it is produced in computer during the period for which computer was used regularly to store/process information. 6. In the present case, it is not in dispute that to store/process information, the data is reconstructed from retrieved data. According to panchnama dated 20-21/07/2012 ....
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....tered. 4. Who deleted data immediately after completion of search. 7. However, all these things are mentioned in the statements dated 1.7.2013 of Girishbhai (i.e. after nearly one year from panchnama dated 20- 21/07/2012) just to fill up the lacuna and clear the lapse. He submits that CPU was not seized in accordance with proviso of law as there is no mention about the Model, make, Configuration of CPU or its Hard Disc anywhere in the panchnama. Without establishing identity of hardware no reliance can be placed on alleged printouts. He submits that there was serious lacuna as regard computer forensic expert as how is Alpesh Vyas identified as Computer Forensic Expert? No certificate or authorization of Government approved agency was obtained. Panchnama does not disclose that Alpesh Vyas was informed of deleted program yet he is claimed to have recovered data. Software used by Alpesh Vyas is not identified. It is not confirmed that it was authentic and reliable software, neither panchnama nor printouts bear signature of Alpesh Vyas, no statement of Alpesh Vyas was recorded. He further submits that there is serious lapse on the part of the Investigating Officers regarding seizure....
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.... AHMEDABAD-II-2014 (311) ELT 529 (Tri.-Ahmd.) * AMBICA CHEMICALS V/S. COMMISSIONER OF CETRAL EXCISE, CHENNAI, 2002 (148) ELT 101 (TRI-CHENNAI) * R.A. CASTINGS PVT. LTD. V/S. COMMISSIONER OF CENTRAL EXCISE 2009 (237) ELT 674 (TRI-DELHI). * SAID JUDGMENT IS UPHELD BY HON'BLE HIGH COURT IN 2011 (269) ELT 337 (ALL) * SAID JUDGMENT IS FURTHER UPHLED BY HON'BLE SUPREME COURT IN 2011 (269) ELT A108 (SC) * PAN PARAG INDIA LTD. V/S. COMMISSIONER OF CENTRAL EXCISE, KANPUR - 2013 (291) ELT 81 (TRI-DELHI) * RAMA SHYAMA PAPERS LIMITED V/S. COMMISSIONER OF CENTRAL EXICSE, LUCKNOW 2004 (168) ELT 494 (TRI-DELHI) 9. Shri Trivedi, Learned counsel further submits that the appellant M/S. WILSON PAPER MILLS PVT. LTD. was also actively involved in trading of kraft paper as such. It is on record the printouts clearly reveal that kraft papers were produced from various mills. The entries were made on the debit side. Shri Girishbhai Detroja, Director of M/S. WILSON PAPER MILLS PVT. LTD. has stated in his statement that purchased craft papers was not brought to the factory premises but was directly traded and supplied to various buyers. He submits that as per the statement the appellant had pur....
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....intouts the clandestine manufacture and clearance cannot be established. It is his submission that statements of seventeen buyers were arbitrarily taken, this seventeen buyers are said to have admitted the panchnama drawn at premises of M/s. Wilson. It is important because panchnama contains narration pertaining to M/s. Wilson and supplies made to various other parties. A particular person cannot admit and accept allegation and sale made to other parties. Not only that but after long time of more than three years nobody can accept and admit documents recovered from suppliers when no documents are recovered from their premises. Therefore it clearly shows that the statements were recorded as per the version of Investigating Officers not voluntarily given by the persons whose statements were recorded. He further submits that the raw material required for manufacture of Kraft paper is waste paper, paper board, resin, etc. The waste paper is generally procured from foreign country, the import of waste paper cannot be cleared without payment of Custom duty. Procurement of indigenous waste paper also not verified except sterotype statements of two very small scale suppliers, both of them ....
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....bmits that despite making categorical submission in reply to show cause notice before the adjudicating authority that the appellant have no manufacturing facility and capacity to manufacture such huge quantity of alleged clandestine removal. He submits that the adjudicating authority has brushed aside the same. The Learned Counsel referred to various documents such as ER7, ER1, electricity bill project report whereby he submits that the appellants' unit's manufacture capacity is 10,000 MTs P/A, therefore, it is beyond imagination that huge quantity of alleged manufacturing of clandestine removal were manufactured over and above the installed capacity of 10,000 MTs P/A the appellant was supposed to utilize the capacity as under:- 50% of production capacity in the first year, i.e. 2006-07 55% in second year 2007-08 60% in third year 2008-09 65% in fourth year 2009-10 70% in fifth year 2010-11 75% in sixth year 2011-12 80% in seventh year 2012-13 85% in eight year 2013-14 12.2 He submits that the statutory auditor certified that the appellant have purchased machinery for installed capacity in Financial Year 2005-06 and 2006-07 only and thereafter no new machinery was ....
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....ires for cross examination of person whose statements are relied upon in the Show Cause Notice must be allowed. If the same is not allowed despite that their being a specific request such statements could not be admissible in evidence. He takes support for this submission from the following judgments :- * J & K CIGARETTES LTD. v/S. CCE 2009 (242) ELT 189 (DEL) * BASUDEV GARG V/S. CCE 2013 (294) ELT 353 (DEL) * CCE V/S. GOVIND MILLS LTD. 2013 (294) ELT 361 (ALL) * ANDAMAN TIMBER INDUSTRIES V/S. COMMISSIONER- 2005 (324) ELT 641 (SC). * MUKESH APPLIANCES PVT. LTD. V/S. COMMISSIONER OF C.Ex & ST, DAMAN- 2016 (343) ELT 246 (Tri-Ahmd). 12.4 He submits that in view of the above detailed submission the demand of duty confirmed against the appellant deserves to be set aside. As regard appeals filed by directors of M/s. Wilson i.e. Shri Girishbhai Chaturbhai Detroja & Baldevbhai Devjibhai Nayakpara. He submits that both the appellants have challenged the imposition of personal penalty. He submits that since the demand itself is not sustainable, penalties on director also will not sustain. Without prejudice he submits that no penalty under Rule 26 is imposable on said directors. As....
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....d the entire panchnama, it means no mention that said buyers are not expected to know and admit the details pertaining to the other parties. Such blind admission itself suggests that the statements are fabricated. 14. In view of the above factual submission of the co-appellants also deserve waiver of penalties. 15. On the other hand Shri H.K. Jain, Learned Assistant Commissioner (Authorized Representative) appearing on behalf of the revenue reiterates the finding of the impugned order. He filed a detailed submission dated 24.8.2020 wherein he submitted that the appellant have raised many points and cited case laws in their grounds of appeal, the Adjudicating Authority has given detailed finding of all the points, the case laws cited by the appellant are not relevant particularly in the present case. As the directors themselves have destroyed the data of illicit clearances only to escape from duty involved in illicit clearances. The statement of director has been recorded on various dates spreading over a period of 12 Months and he has never retracted his statements, he has accepted to purchase raw material from open market in all the statements. So far as statements of suppliers ....
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....ished goods by the appellant through confessional statement deposed by the person of Angadia firm. The raw material were supplied to the appellant without invoice as per the evidence collected during investigation therefore, the adjudicating authority has rightly imposed penalties under Rule 26 of the Central Excise Rules, 2002 on buyers, raw material suppliers and Angadia firm as there were documentary and oral evidences to prove their involvement in evasion of duty. In respect of his submission he placed reliance on the following judgments:- * HON'BLE HIGH COURT OF MADRAS IN THE CASE OF M/S. LAWN TEXTILE MILLS PVT. LTD. 2018 (362) ELT 559 (Mad) * WINDSON CHEM. IND v/S. COMMN DAMAN-2012 (2) ECS (118) (Tri.Abad) * COMM v/S. RA CASTINGS PVT LTD- 2011 (269) ELT A108 (SC) * COMM v/S. BHAWAANI SHANKIER CASTING- 2012 (275) ELT A57 (P&H) * COMM C EX RAIPUR v/S. MAMTA ELECTRO- 2018 (363) ELT 493 (Tri-Del) 16.2 He further submits that there were valid reasons for denying the cross examination which was discussed in detail in Order-In-Original therefore, the adjudicating authority has reason for not allowing the request of crossexamination which is supported by the following case....
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....clandestinely manufactured and cleared 1,41,72,571 KGs of kraft paper which was valued at Rs. 24,71,33,466/- by evading excise duty to the tune of Rs. 1,15,72,496 during the period from April, 2009 to July, 2012. The investigating officers have conducted thorough investigation, during the investigation the officers found a) alleged shortage of finished goods to the tune of 22,481KGs of kraft paper. B) four dispatch slips claimed to have been recovered from M/s. Gajanand Packaging, Morbi. C) two delivery challans claimed to have been recovered from factory of M/s. Wilson. The officers during investigation taken printouts from the computer CPU available at residence of one of the directors of M/s. Wilson. However, the major demand was worked out on the basis of data available in the computer print out and small demand of Rs. 58302/- is based on aforesaid four dispatch slips and two delivery challans. Therefore, the main evidence for making allegation of clandestine removal and raising demand is computer printouts. The investigation reveals that the printout was taken from seized computer wherein, the data was copied and the computer on which the data was produced originally the hard ....
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....f the document or the accuracy of the contents; and (d) the information contained in the statement reproduces or is derived from information supplied to the computer in the ordinary course of the said activities. (3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether- (a) by a combination of computers operating over that period; or (b) by different computers operating in succession over that period; or (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....
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....2) the statement of computer printout must be produced by the computer during the period for 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. In the present case it is admitted by the revenue itself that the statement was not produced in the computer which was seized, it is only having the backup data the data originally produced in different computer. As per the department the hard disc of the said computer was destroyed. Therefore it is clear that the computer which was seized, the data was not produced on the seized computer. No evidence was brought on record that the data retrieved from the computer was originally produced on different computer and the hard disc of the same was destroyed. It is only as per the statement of the director which was claimed by the appellant having been taken under duress and threat. As per clause (b) of Sub-section (2) of Section 36B the information must be regularly supplied to the computer during that period. In the present case the period involved is April, 2009 to June, 2012 during that ....
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....ts wanted to have access to the peripherals and requested for obtaining the information or data from those peripherals, some floppies were found blank while some even could not run on the computer. The hard disc even could not be opened for the reason best known to the Department as all these peripherals remained in their custody after the date of seizure i.e. 30-7-1999." 21. Applying the ratio of the above judgment, in the above case also the data was not recovered from the data on which it was regularly supplied during the relevant period. In the present case also the undisputed fact is that the computer seized by the department, the data was not supplied in the said computer. Therefore, in terms of the Section 36B(2) the computer printout in the present case cannot be accepted as admissible evidence. 22. We also find that the computer printouts does not bear the name or logo of the appellant company M/s. Wilson. Whether it belongs to M/s. Wilson or otherwise is based on the statement of directors of M/s. Wilson. Since the statements are under serious dispute and as per our above discussion in the forthcoming paras, the statements are not admissible evidence. For this reason al....
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....has retracted their statement at any point of time. We find that copy of all the statements were not supplied by the department to the persons whose statements were recorded. The appellant have lodged their retraction while filing reply to Show Cause Notice as the statement copies were supplied only along with Show Cause Notice and not before that. When the appellant have retracted the statements in the reply to the Show Cause Notice then the burden was on the adjudicating authority to allow the cross-examination of the witness. However, the adjudicating authority has denied the cross-examination. In this admitted position, the statements recorded by the investigating officers cannot be accepted as their confessional statement in absence of statutory compliance of section 9D of Central Excise Act, 1944 by the adjudicating authority. In the case SULEKHRAM STEELS PVT. LTD.(supra), the coordinate bench of this tribunal on the issue of cross-examination held as under:- "15. After carefully considering the submissions and appreciating the evidences available on record, we first take up the issue of clandestine manufacture and clearance of goods by M/s. SULEKHRAM STEEL PVT. LTD. Admitt....
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....ally supplied by them to M/s. A.S. CORPORATION under the cover of invoices raised by them and it was only bills which were issued against which payments were received by them by cheque from M/s. A.S. CORPORATION." 25. From the above judgment it is clear that even if there is no retraction of the witnesses and if the statement is sought to be relied on in the Show Cause Notice it is incumbent on revenue to present witness for cross-examination. Therefore, without cross-examining the witness the statement cannot be relied upon as admissible evidence. In the case of COMMISSIONER OF CENTRAL EXCISE, RAIPUR v/S. ANIL AGRAWAL(supra) this tribunal has held that statement of director accepting the clandestine removal is not conclusive proof of clandestine removal. "6. On going through the Grounds of Appeal raised by the Revenue, I find that they have placed reliance on the Supreme Court's Judgment in the case of Commissioner of Customs, Madras v. Bhoormul - 1983 (13) E.L.T. 1546 (S.C.) to support their argument that the demand should have been confirmed on the basis of such degree of possibilities. They have also referred to some other decisions of the Tribunal upholding the demand of cl....
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....re visited, the stock of raw-material and finished goods were tallying with the recorded goods. Further, nothing on record was found by the authority, which showed that unrecorded raw-materials were purchased or consumed by the respondent or that the respondent had clandestinely manufactured or removed the goods. It is necessary to extract Paragraph Nos. 12, 13 and 16 of order of the Tribunal, which reads as under :- "12. Be that as it may be, it is to be noted that there is no dispute that to manufacture of said final product 'Frit' requires the use of Quartz, Feldspar, Zinc, Borax Power, Calcium and Dolomite as inputs/raw material. On the date of visit of the officers to the factory premises of the appellant, it is undisputed that the stock of raw materials as well as finished goods was tallying with recorded balances. This conclusion can be reached from perusal of records, as there is nothing on record to indicate otherwise. 13. On careful perusal of the entire records of the case, we find that there is nothing on record as to unrecorded purchases or consumption of various other raw material in the manufacture of Frit, there is also nothing on record to indicate that the app....
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....tions raised by the appellant do not involve any substantial question of law and therefore, the appeal is dismissed." 28. The above judgment of the Hon'ble High Court has been upheld by the Hon'ble Supreme Court reported as VISHWA TRADERS PVT. LTD. V/S. COMMISSIONER OF C.EX,- 2014 (303) ELT A24 (SC). This tribunal in another case of ICYCOLD COMMERCIAL ENTERPRISE V/S. COLLECTOR OF CENTRAL EXCISE, CALCUTTA-1- 1994 (69) ELT 337 (Tribunal), considering the issue of clandestine removal held that clandestine removal is a positive act and burden of proving is on the department and not to depend merely on conjunctures and presumptions. In the said case since the order was nonspeaking and the assessee's explanation was not accepted, therefore was not sustained and the tribunal also held that remand of the matter not justified when impugned order are non-speaking one. Benefit of doubt extendable to the appellant in this circumstances. In the present case also the appellant's request of cross-examination was not accepted by the adjudicating authority which is very vital and in the absence of cross-examination the statements are not admissible evidence. Therefore, the case ought to have been ....
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....relevant direction. 6.4 It is not a case that any authorised persons of the company admitted to unaccounted production and clandestine removal and therefore the officers felt that there was no need for further investigation. The authenticity of the documents seized and the veracity of the entries made therein have not been corroborated by any meaningful investigation, even though show cause notice has been issued nearly after 3 and half years after the commencement of investigation. If the private records indicate the position as claimed by the department it is a clear case of failure to gather necessary evidence to support the allegation. 6.5 As already mentioned there was no difference in stock found by the officers on the date of visit. The authenticity of documents relied upon and the locus standi of the persons who have explained the document have not been bought out. There is no admission of unaccounted production and clandestine removal by any of the authorised persons. There is no corroborative evidence relied upon in support of entries in the private record sought to be relied upon especially when their authenticity is in serious doubt. 7. Under these circumstances,....
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....low back from buyers or cash payment of suppliers. 31. Accordingly, no credible independent evidence found therefore, the allegation of clandestine clearance is not sustainable. This is supported by the following judgments:- * RAJ RATAN INDUSTRIES LTD. v/S. COMMISSIONER OF CENTRAL EXCISE, KANPUR- 2013 (292) ELT 123 (Tri.-Del.) "6. On going through the impugned order I find that the duly demand stand confirmed in respect of shortages detected at the time of visit of the officers read with the statement of Shri Jai Kishan Khatri. The appellants have strongly contended, the manner of weighment of the final product. It is seen that the Revenue has not produced any inventory on record to show that the weightment was actually done and the shortages were not on the basis of average weight system but real and based upon actual weighments. Similarly reliance of the revenue on the statement of the authorized representative cannot ipso facto lead to the inevitable conclusion of clandestine removal of final product especially when there is no variation in the stock of the raw material. There is no other evidence on record to reflect upon the above fact. Hon'ble Delhi High Court in the cas....
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....ly recorded in the detailed findings of the Hon'ble President are to be ignored. I agree with the reasons and findings recorded by the Hon'ble President that entire proceedings had lost their credibility and serious doubt arises about the credibility of the materials stated to have been collected in the course of such proceedings. Therefore, it would not be justified to rely on these records to fasten the duty and penal liability on the appellants even by applying the principles of preponderance of probability. 137. I find that the Revenue failed to substantiate the findings recorded in the impugned Order regarding production capacity, to persuade me to reject the contention of the appellant that there is failure on the part of respondent to collect any evidence in relation to either procurement of raw materials by the appellant or production of huge quantity of final goods alleged as removed clandestinely to sustain the charge of clandestine removal. Once unaccounted production is not established, even otherwise there can be no clandestine removal thereof. Unaccounted removals have in any case not been established on the basis of the evidence available on record. 138. The rati....
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....llegation of clandestine procurement and use of raw material. (This initial statement was retracted by the dealer, later). 23. A unit under physical control is visited by the officers of the department regularly and clearance of the goods is effected in their presence. In such a situation, it is not understandable as to how it can be said that that there was clandestine removal of the goods. Clandestine removal in such situation can only be effected with the connivance of the department's officers. It is not the case of the department that their officers connived with the assessee for removal of the goods clandestinely and any officer was proceeded against. In Kalekhan Mohd Haniff v. CCE, Nagpur, reported in 2001 (132) E.L.T. 374, (Tri.-Mumbai) the Tribunal made the following observation : " 4. The Tribunal, in LML Limited v. CCE. - 1991 (51) E.L.T. 434 (Tribunal) = 1991 (32) ECR 63 has held that in a case where the factory is under the physical control of the officers of the Department, extended period cannot be invoked on the ground of suppression of facts relating to manufacture and clearance. This is so for the reason that virtually every step of the manufacture and clearan....
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....ot be sustained. In the Harinath Gupta case, it was held that the clandestine removal charge is not sustainable as the source of procurement of raw material has not been established, buyers of finished goods had not been contacted and the receipt of sale proceeds has not been proved. This is a case where investigation has miserably failed to get any corroborative evidence to strengthen the Revenue's case. The adjudicating authority, in his zeal to decide the issue in favour of Revenue, has not displayed a judicious approach and concluded that there has been clandestine removal in the absence of corroborative evidences." 25. The above ratio squarely applies to the facts of the present case. The impugned order is not a speaking order and its findings are not supported by facts and acceptable evidence or reasoning. In the circumstances the impugned order is set aside and we allow the appeals."  COMMISSIONER OF CENTRAL EXCISE, CHENNAI v/S. R.V. STEEELS PVT. LTD.- 2009 (243) ELT 316 (Tri.-Chennai) "3. We have heard both sides. On a careful consideration of the case records and the rival submissions we find that the Commissioner (Appeals) vacated the demand and penalties ord....
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....riginal authority based on sound grounds. We do not find that Revenue has raised any valid ground in the appeal and that the impugned order calls for any interference by us. 4. The case of the Revenue was that SSL diverted imported scrap violating provisions of law and had knowingly dealt with excisable goods liable to confiscation. However, the Revenue has not challenged the order of the Commissioner (Appeals) vacating the penalty imposed on SSL. It would appear that the Revenue has no reliable case that SSL had diverted scrap unauthorizedly for manufacture and clearance of excisable goods without payment of duty thereby incurring liability to penalty under Rule 209A of the CER. 5. We find that the following judicial authorities cited by therespondents amply support our finding : (i) In Commissioner of Central Excise, Patna v. Universal Polythelene Industries - 2001 (130) E.L.T. 228 (T), the Tribunal held that clandestine removal and clearance was a serious charge against the manufacturer which was required to be discharged by the Revenue by production of sufficient and tangible evidence. Standard of proof in such cases had to be on the basis of absolute proof and not ....
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....be proved by the Department by adducing cogent, convincing and tangible evidence and not on assumptions and presumptions. It was also held that statements of Director and authorized signatory regarding receipt of raw material in a clandestine removal and manufacture of finished goods therefrom was not conclusive evidence in the absence of any other material/tangible evidence. 6. In the circumstances we dismiss the appeal filed by the Revenue as devoid of merit." 32. The appellant also made a submission that they were involved in the trading of kraft paper, since we have discarded the computer printout being not admissible evidence, we need not to discuss about the content of the data available in the printouts therefore, we need not to give finding on the aspect of trading of kraft paper, whether the same was factually carried out by the appellant or otherwise. 33. As discussed above, the majority of demand amounting to Rs. 11514194/- is based entirely on computer printout which we held that demand on the basis of computer printout is not sustainable. Accordingly, the demand of Rs. 11514194/-, consequential penalties and interest are set aside. In addition to aforesaid demand, ....