TaxTMI 
TaxTMI 
2022 (5) TMI 1164
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....g with penalty and interest; penalty was also proposed to be imposed on the Directors. The show cause notice was adjudicated by the Commissioner of Service Tax and Central Excise, Jamshedpur vide Order-in-Original No.26/Commr./2018 dated 21.12.2018. Learned Commissioner passed the following order: (i) Confirmed the demand on the Central Excise duty amounting to Rs.11,44,27,725/- in terms of Section 11A(10) of Central Excise Act, 1944 and appropriated amount of Rs.37,50,000/- deposited during the course of investigation. (ii) Imposed penalty equivalent to the duty demanded in terms of Section 11AC (1)(C) of Central Excise Act, 1944 read with Rule 25 of Central Excise Rules, 2002. (iii) Imposed penalty of Rs.2 crore and Rs.1 crore respectively on Shri Gyanchand Jaiswal and Sh. Raj Jaiswal, Directors of M/s MCPL under Rule 26 of Central Excise Rules, 2002. Hence, the appeals preferred by the Company as well as Directors. 2. Shri Hari Om Tewari & Shri Amit Awasthi, counsels appearing for the appellants at the outset submits that the whole case made out against the Appellant No. 1 is entirely based on unwarranted and unsubstantiat....
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....ances made as per ER-1 Returns from the quantum of clearances allegedly found the seized documents i.e. Printout (assessable value however, was taken as reflected in the ER-1 Returns). 2.2. Learned Counsels submit that the inferences drawn from the above- mentioned computer printouts and loose private documents are sought to be corroborated firstly, by pointing out mutual corroboration and matching of entries between and amongst the said seized private documents themselves and the retrieved computer printouts, and, secondly, by relying upon the oral statements of persons of M/s MCPL. 2.3. Learned Counsels submit thatthough the department attempted to draw inferences drawn from the said printouts from the seized external hard disc, for the period 01.04.2011to 30.11.2015, only sporadic details are matching and inferences were further drawn relying on statements of one employee viz. Dharmendra Kumar (who was admittedly not the author of the relied upon private documents) and Mr. Vicky Kumar, who was not even a regular employee but only a part-time trainee; neither the said external hard disc nor the so called 'Computer Print-outs' fulfil mandatory conditi....
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.... (ii) Kuber Tobacco Products 2013 (290) ELT 545 (Tri.), (iii) RaghuveerIspat (P) Ltd. - Appeal No. E/70481-70482/2017 - EX (SM) 3.1. Learned Counsels submit that the allegation of clandestine removal of 26799.732 MT of M.S. Ingots valued at Rs. 97,13,49,575/- during the period from01.04.2011 to 30.11.2015 has been levelled merely on the basis of comparison of figures of quantity sold and assessable value appearing in monthly ER-1 Returns for the period Apr, 2011 to Nov, 2015 with corresponding figures appearing in coded form in decimal points, in the printouts of the sale ledger obtained from the seized hard disc; such comparison is legally impermissible and invalid; since the figures appearing in coded form in the printouts of sale ledger cannot be considered and treated as true and authentic figures more so, because they are totally unsubstantiated with any independent, tangible and positive corroborative evidence; there is no mention of the name of the Appellant Company anywhere in the printouts of the sale ledgers; printouts merely show the name of the selling firms as 'Rajesh' and 'Om Namah; Daily Production and Dispatch....
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....ty of M.S. Ingots mentioned therein to CHPL; there is no mention of value of the goods in any of the documents and no enquiries have been conducted from officers from CHPL to verify and confirm whether CHPL actually received the quantity; just four entries finding appearance of ledger of CHPL were compared with entries appearing in the printouts from the seized hard disc; one entry relates to Nov, 2011 and the other three entries to Jan, 2012; daily production and dispatch report for the said four dates does not exist to corroborate actual quantity removed; purchase ledger of CHPL is a third party private document, whose authenticity, genuineness and reliability is not free from doubt; inferences drawn on the basis of a single weighment slip and the four entries in the ledger of a third party to conclude clandestine removal for the entire period i.e. Apr, 2011 to Nov, 2015, is not maintainable. 3.4. Learned Counsels submit thatthe impugned SCN had placed reliance on the oral statements of a few employees and the Directors of the Appellant Company, namely Shri Dharmendra Kumar, Accountant, Shri Vicky Kumar, Data Entry Staff (Trainee), Shri Gian Chand Jaiswal, Director, Shri....
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....illegally requires to be examined carefully; in the case of Khet Singh (Supra) it was held that liberty with following a procedure is allowed only if collection of evidence was not possible (Para 16); findings of the Commissioner is patently erroneous and make procedure laid down under Section 100(3) Cr. P.C. irrelevant; while relying on such findings, learned commissioner has in fact conceded lapses in the conduct of the searches; Commissioner has nowhere denied or rebutted the allegation regarding routine or multiple use of Panch witnesses; commissioner simply observes that even if it is assumed that the Panch witness Shri BirKarmarkar was an interested witness, the same does not negate search proceedings; Commissioner cannot disregard and digress from the settled legal position which mandates independent Panch witnesses;examination/cross examination conducted revealed that the Panchnama proceedings at all the impugned premises were carried out in contravention of of the provisions of Section 100(3) Cr.PC; Panchnamas were pre-typed and were made to be signed by the witnesses; submission that Panch witnesses are used in routine manner across various investigations at various place....
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....c pertained only to MCPL; Commissioner has committed a grave error by disregarding provisions of Section 36B(2) & (4) of the Act; there appears no mention, whatsoever, of existence of any computer or computers in the office, factory or any other places searched by the investigating officers; it's not the case of SCN that the said internal hard was of any computer installed or being used in any computer operated by MCPL at any of their premises. 4.3. Learned Counsels submit further thatCommissionerthough dismissed the retracting deposition made by Shri Vicky Kumar during his cross examination as an afterthought or tutored; Shri Vicky Kumar stated on 04.12.2015 that entry of sales and purchase of M/s Makers Castings Pvt. Ltd was made on daily basis in the computer and data of sale and purchase are also stored in a hard disc (Transcend Storejet 500GB348228 1030) given by the Company M/s Makers Castings Pvt. Ltd.); itwould be obvious that there existed at least one computer in MCPL in which the data entry was originally made by him and the data so stored in the said computer was transferred and stored by him in another hard disc which is described by him as (Transcend Storejet....
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....perintendent from the Department to appear for cross- examination.Learned Counsels submit further thatCommissioner held that Shri Vicky Kumar was an employee of MCPL and notwithstanding the false and fabricated deposition made by him during his cross- examination, the statement dated 04.12.2015 is found to be a voluntary statement and hence the same is held to be an admissible evidence in the instant case; this finding is erroneous and legally untenable; Commissioner has only relied upon the printouts of the sale details retrieved from the seized hard disc to conclude that the same matched with the contents of the hand written private documents thereby affirming the statement of Shri Vicky Kumar that the printouts contained the details of actual sale and purchase made by MCPL. 4.5. Learned Counsels submit thatconclusions, drawn by Commissioner on Shri Vicky Kumar statement that it has evidentiary value, suffer from following infirmities. • the authors of the private handwritten note books and diaries had neither been identified nor questioned to confirm the handwriting and meaning of the contents therein. • Shri Vicky Kumar stated during his cross....
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....aimed to have given the hard disc has not been identified; no enquiries as to the ownership of the hard disc and about the contents therein were made; • owners of transport vehicles (JHO 5L-9303 & JHO 5AJ-3346) were not questioned on the alleged clandestine removal to Chanduka Hi-Tech; • Panchnama at the residence of Director of MCPL does not reveal as to from where the diary (Document No. 04) was recovered; therefore, this evidence is not admissible as per Kuber Tobacco - 2013 (290) ELT 545 (Tri. - Del.); • Though commissioner relies upon the evidence resumed during investigation at M/s Chanduka Hi-Tech Pvt Ltd and the SCN dated 17.03.2015 issued to M/s M/s Chanduka Hi-Tech Pvt Ltd, copies of alleged evidence or SCN were not served upon the appellants; they were not even made 'Relied Upon Document'; • Commissioner finds that MCPL has resorted to undervaluation in the said invoices and but had also hidden the actual data, in the printouts taken from the seized hard disc, by deliberately placing the decimal point two digits from the right side and thus they can be corroborated with details in other documents; • the har....
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....ces of the case have to be looked into and a decision has to be taken on the yardstick of 'preponderance of probability' and not on the yardstick of 'beyond reasonable doubt'. Appellants submit that the adjudicating authority is wrong for the following reasons: • Commissioner ignored the fact that the department had itself committed procedural irregularities in resumption of evidences; he ignored the fact of routine use of BirKarmarkar as panch witness; under no provision of Jurisprudence, the Adjudicating Authority can justify to accuse the Appellant for failure to lead the positive evidence; onus to prove is on the department; appellant submitted evidence that witnesses were interested and data/ documents were resumed from third party; • Commissioner relies on 'undated comments' forwarded by DGCEI Office; • Shri Vicky Kumar clearly retracted his statement dated 04.12.2015 during the course of his cross-examination; he confessed that he had clearly told the officers that he did not know what the entries in the printouts were about and that he was compelled to write the replies as per the dictation given by the officers; no reliance can be pla....
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.... the excess production details, production capacity, raw materials purchased and consumed, dispatch particulars from the regular transporters, realization of sale proceeds, details of the receipt of finished product from the regular dealer or buyers, excess power consumption etc. 4.6. Learned Counsels submit that there are major flaws and legal infirmities and as such impugned order is not sustainable for the following reason that it is well settled position of that the charge of suppression of production and clandestine removal is a serious charge which is required to be established by production of sufficient tangible and positive corroborative evidence of clandestine manufacture and clearance and not merely on the basis of inferences or unwarranted assumptions; in the instant case the entire demand of duty has been raised on the basis of legally inadmissible computer printouts retrieved from external hard disc, private unauthentic diaries, loose sheets or third party private documents recovered through illegal Panchnama proceedings; no adequate corroborative and independently reliable evidence in regard to installed capacity of production, procurement/purchase and utili....
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.... the charge of clandestine manufacture and clearance is sufficiently substantiated with the evidence of purchase and utilization of requisite quantity of raw-materials and further with duly supporting testimony of the labourers working in the factory; they place reliance on • Mohan Steel Vs CCE, Kanpur2004 (177) ELT 668 (Tri. - Del.) • Auto Gallan Industries (P) Ltd. Vs CCE, Rohtak2015 (317) ELT 139 (Tri. - Del.) • Amba Cement & Chemicals Vs Collector2000 (115) ELT 502 (Tri.) • Balashri Metals Pvt. Ltd. Vs UOI2017 (345) ELT 147 (Jhar H.C.) • Triveni Rubber & Plastics Vs CCE1994 (73) ELT 7 (SC) • Galaxy Indo Fab Vs CCE, Lucknow2010 (258) ELT 254 (Tri. - Del.) • CCE, Chandigarh Vs Dashmesh Castings (P) Ltd.2010 (257) ELT 225 (P & H) 4.7. Learned Counsels submit that there is no evidence whatsoever to surplus production or stock of finished goods in excess of that recorded in the statutory records to support the allegation of suppression of production with intent to remove the same clandestinely; there is no corroborative evidence to prove even a single instance of actual removal of una....
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....g the search of secret office, date-wise production and dispatch records, prepared manually by Shri Chitharanjan Sharma, Plant Supervisor of M/s. MCPL were recovered; seized diary contained details of deposit and withdrawal of cash in the name of sellers and buyers of M/s. MCPL during 2.4.2013 to 1.4.2015; • On the appellant's claim of non-adherence to the provisions of Section 36B (2) of Central Excise Act, 1944 that computer print-outs are not the only document relied upon; as the details are matching with the documents recovered from the residence of the Director, requirements of Section 36B (2) are covered; It's true that the documents are matching for a short period. It is to submit in this regard that, in any type of clandestine activities, the persons indulging in it take sufficient precautions to hide/destroy the evidences and it cannot be expected of him to faithfully put the details of all such clearance/transactions in some register/records/electronic devices for any agency to come and lay hands on it. • The assessees involved in clandestine activities normally prefer to store data of clandestine activities in some electronic devices in some....
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....ight of available evidence; (v). whether the penalties imposed are justified? 7. As per the show cause Notice and as found by the Learned Commissioner, the allegations made in the SCN are based on the seized documents, both soft and hard, as well as statements of the concerned persons. Documents mainly consist of (i). Hard Disk (R Transcend Store jet 500GB, 348228 1030 Black Colour with Orange Strip-) recovered and seized from the possession of Vicky Kumar @ Vicky Kumar Jha, and numbered 05/DGCEI/JRU/MCPL/O/15. This is said to contain details of actual sale of M.S. Ingot by MCPL during 01.04.2011 to 30.11.2015; printouts were taken in presence of Vicky Kumar and two independent witnesses and were seized; (ii). Dairies alleged to contain party-wise transaction details and a date-wise transaction details of MCPL for the period April, 2015 to July, 2015,numbered 04/DGCEI/JRU/MCPL/R/15 and 03/DGCEI/JRU/MCPL/R/15, recovered from the residence of Mr.Gyan Chand Jaiswal; (iii). Documents No. 01, 02, 03, 04 & 05/DOCEI/JRU/MCPL/0/15, recovered search of secret office of MCPL and alleged o contain daily dispatch ....
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....ould be known people from the locality of search; it was not the case in the impugned proceedings. They rely on the ratio of Pan Parag India Ltd. (supra) and M/s. Kuber Tobacco Products Pvt. Ltd. (supra). Per contra, the learned Authorised Representative submits that even if there are some procedural infractions during the Panchnama proceedings, the records seized during such Panchnama do not lose the evidentiary value in so far as the taxation law is concerned. We find that Learned Commissioner also finds that it is settled by the Hon'ble Apex Court that the probative value of the evidence, gathered during the search is not effected, even if the search is irregular or illegal. It will not affect the validity of seizure and further investigation by the departmental authorities or the validity of the trial. The Hon'ble Supreme Court, relying on the judgement of the Radhakishan V State of UP case reported in AIR 1963 SC 823, held that due to illegality of search, the court may be inclined to examine carefully the evidence regarding the seizure. Beyond this, no other consequence ensured. The Constitutional Bench in the Pooran Mal case, reported in (1974) 1 SCC 345, he....
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....ed cannot be held invalid per se despite the procedural infractions. However, courts need to weigh such evidence in the facts and circumstances of the case. In other words, if other evidence available corroborates the facts of such evidence, the same can be used. 10. Coming to the second issue of whether or not the recovery of printouts from the hard disc found in alleged secret office of the appellants from the possession of Shri Vicky Kumar, an employee of the appellants, the appellants have vehemently submitted that the hard disc in question was not established to belong to them or established to be used with a computer which was in use by the staff of the appellants in course of regular business; the printouts taken from the said hard disc and recovery of documents thereof is in clear violation of the provisions of Section 36B of Central Excise Act, 1944. They further submit that the hard disc does not belong to the company and was handed over to Shri Vicky Kumar by one Mr. Shekar just before the proceedings started. Neither the investigating agency nor the Learned Commissioner have bothered to enquire the veracity of the statement of Mr. Vicky Kumar and no efforts wer....
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....formation 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 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 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 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 co....
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....ctivities; (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.] 11. From a reading of the above provisions and on-going through the facts of the case, we find that the appellants claim that the impugned order has failed to appreciate and ensure due compliance to the procedures and the requirements stipulated under the said Section; during the course of Panchnama proceedings in the so-called secret office, none of the representatives of the owners of the premises i.e., Cadbury / Bournvita were present and they were not even questioned as to how the premises were permitted to be used or permitted to be used b....
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..... Nothing would have stopped the agency to seal the Hard Disc, take a certificate from the owner and to send it for aforensic examination. Procedural infirmities in taking the printout have added to the violations of the provisions of Section 100 of CrPC. We find that Tribunal in the case of S.N. Agrotech 2018 (361) ELT 761 (Tri. - Del.), following the judgment of Hon'ble Supreme Court in the case of Anvar PV (supra), held as follows : - "8. On close reading of Section 138C of the Act, 1962, it is seen that the Legislature had prescribed the detailed procedure to accept the computer printouts and other electronic devices as evidences. It has been stated that any proceedings under the Act, 1962, where it is desired to give a statement in evidence of electronic devices, shall be evidences of any matter stated in the certificate. In the present case, we find that the provisions of Section 138C of the Act were not complied with to use the computer printouts as evidence. The Ld. Counsel for the appellants submitted that there is a gross illegality committed during the retrieval of the electronic documents. It appears from the Panchnama and record of proceedings that the alleged....
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....n any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied : (a) There must be a certificate which identifies the electronic record containing the statement; (b) The certificate must describe the manner in which the electronic record was produced; (c) The certificate must furnish the particulars of the device involved in the production of that record; (d) The certificate must deal with the applicable conditions mentioned under Section 65B(2) of the Evidence Act; and (e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device. 16. It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, compact disc (CD), video compact disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken....
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....s claim of receipt of hard disc from one Shri sheker was not questioned or claimed either by the investigating agency or by the Commissioner; the retraction of the statement dated 4.12.2015, by Mr. Vicky Kumar, during the cross-examination was not rebutted by the learned Commissioner. Regarding the other documentary evidence, the appellants submit that the diary from the residence of the Director was seized without mentioning the place from where it is seized; the nature of the contents were not examined; nobody was questioned on the code words alleged to have been used in the diaries; it was presumed that decimal points were moved two places to left while recording figures; similarly, in respect of other documents also, the ownership of the documents is not established and the authenticity of the same becomes suspect. The appellants contend further that the learned Commissioner has relied upon a show-cause notice issued to M/s. Chanduka -Hitech; however, the copy of such show-cause notice was not given to the appellants; the owners of the trucks JHO 5L 1303 and JHO 5AG 3346 were not even questioned. 15. The appellants argued that the learned Commissioner has sweepingly ge....
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....nd confirm the demand of tax. We find that as submitted by the appellants, charge of suppression of production and clandestine removal is a serious charge which is required to be established by production of sufficient tangible and positive corroborative evidence of clandestine manufacture and clearance and not merely on the basis of inferences and assumptions. In the instant case of the appellant the entire demand of duty has been raised on the basis of legally inadmissible computer printouts retrieved from external hard disc, private unauthenticated diaries, loose sheets or third-party private documents recovered through illegal Panchnama proceedings.The appellants relied upon heavily on the ratio of the judgements in Kuber Tobacco and Pan Parag (Supra). We find that it was held in Kuber Tobacco, with regards to seizure, documentary evidence and statements that 12. The credibility of the documentary evidence which is relied upon to hold that the appellants were involved in clandestine removal of the products is sought to be disputed on various grounds. Firstly, the seizure proceedings are themselves contended to be illegal, secondly, the author of those documents h....
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....he Senior Advocate for the appellants that Hisaba Book makes reference to various firms and persons as the buyers of the quantity mentioned therein. However, there was no attempt to record any statement of any such person at all. Contention was sought to be raised that the names were fictitious and attempt to locate did not yield fruitful result. In fact, there is no material to support this contention. Besides, the statement recorded of the appellants' Director discloses the disclosure of the names of their suppliers and buyers and yet there is no recording of statement of those persons. It is pertinent to note that the statement on behalf of the appellants not only disclose the names but even the telephone numbers. It was, therefore, necessary to collect proper evidence to establish the said fact by collecting cogent evidence regarding the actual production in the appellants' factory. 17. We find that the Panchnama proceedings were clouded by procedural infractions as discussed above. In gathering of electronic evidence also due care was not taken. Other than the documents the evidence is mostly oral in the form of statements. The adjudicating authority has relied mostly....
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....nting of sold goods in the books of account of the buyers; and, realisation of sale proceeds from the buyers etc.; no evidence of procurement and consumption of excess raw material, excess consumption of electricity and excess deployment of labour have been placed on record; no evidence to show surplus production and stock of finished products has been put on record and no single removal without payment of duty has been established and therefore, the charge of clandestine removal cannot be fastened to the appellants. We find that Learned Commissioner finds that in the calculation put forward by MCPL in their defence reply, they have deducted the quantity shown in the ER-1 returns from the quantity shown in the print-outs to arrive at the difference quantity. Thus, they have no objection so far as the quantity of clearances of M.S. Ingots as shown in the seized hard disk and print-outs taken there from is concerned. Moreover, MCPL have also lost sight of the fact that when they were storing relevant sale details in the seized hard disk, there was no need for them to keep hard documents for such a long period. It is relevant here to reiterate (refer para 3.4 above) that, ....
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.... on record to show clandestine removal, conclusively establishing at least by way of sample transaction. We also find that no commensurate discrepancy in the finished stocks and raw material was found. The discrepancies found, adopting a method of averaging, were nominal and explainable. The allegation is about clandestine removal of a huge quantity of 26799.732 MT valued at Rs 97.13 Cr. To prove evasion of such magnitude, the department should have established the purchase of raw material, consumption of electricity, deployment of labour, arrangement of transportation, receipt at the customers' end and financial transactions. Receipt of money in respect of not even a single transaction in the hands of the appellants has been proved with evidence. We find, in fact, that the department has not at all attempted to investigate in that direction to prove the alleged clandestine removal. The show cause notice and the impugned order rely upon recovery of documents from the so called secret office and the alleged committal statement of Shri Vicky Kumar. We find that this is not just enough.We find that leaving alone proof with a mathematical precision, in the instant case, evidence made a....
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....ding to draw an inference that the fact must be more probable. Standard of proof cannot be put in a strait jacket formula. No mathematical formula could be laid on degree of proof. The probative value could be gauged from facts anti circumstances in a given case. The standard of proof is the same both in civil cases and domestic enquiries." 22. As per our discussion above, we find that the standard of proof in taxation cases is different from criminal offences. It is now settled principle that cases of this nature need not be proved with mathematical precision. At the same time, a single piece of evidence cannot be accepted to encompass the whole gamut of transactions. A word of caution must be added here that while the principle of preponderance probability demands us to believe that under the given facts and circumstances, the alleged tax evasion must have occurred. However, the principle ends here. Issues like quantification of duty evaded, requires concrete reliable dependable data. Reliance on principle of preponderance of probability, no way confers a License to demand duty on the basis of assumptions/presumptions/ vague imputations. The actual quantum of duty requir....
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....the data available from the hard disc from the alleged secret office and the data recovered from office premises contains data for the period 1.4.2011 to 30.11.2015. However, in addition to the disputable manner of collection of evidence, the concerned persons who have been alleged to have been maintaining such records have not been questioned. The handwritings thereof have not been identified/ established. Procurement of raw materials, consumption of labour, manufacture, removal and realisation of sale proceeds in a clandestine manner has not been established even by a sample case. Sad part is that, the investigation did not deem it fit to enquire from either the alleged buyers or transporters, even in the case of sale to M/s Chanduka Hitech, whose name came in to light though for a miniscule portion. The submissions during cross examination were not countered. A Show cause Notice, issued in some other proceedings, was relied upon and a copy of the same was not provided to the appellants. We find that Learned adjudicating authority has largely relied upon the clarifications given by the investigative agency. Learned Commissioner instead of appreciating the evidence vis-a-vis the a....