AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 289
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....d penalties on the charge of clandestine removal of manufactured goods and penalty was also imposed on all the appellants. 1.2 The brief facts of the case are that M/s Rajputana Stainless Ltd. are engaged in the manufacture of Stainless Steel Billets, Bright Bars, Rounds, Flats etc. and registered with the central excise department. A search was conducted on 02.12.2015 by the Directorate of Income Tax (Investigation) at the office, factory premises and residence of Director and various key persons of the Appellant and certain incriminating documents/ records were withdrawn for further investigation by the Income Tax Department. Evidences of unaccounted sales were found in data files of 'Tally Software and Visual Udyog Software. Further, certain loose papers and diaries were found and seized which contained the quantitative details of all materials entering and leaving the factory premises. The Income Tax Authorities shared the information and unaccounted sales, purchase and production in the form of soft copies of data of Tally & Visual Software, the scanned copies of the loose papers and diaries seized by the Income Tax Department at various premises and photocopies of the Panc....
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.... to establish the clandestine manufacture. It is settled law that the income tax investigation cannot be solely relied for alleged evasion of Excise Duty. He placed reliance on the following decisions:- • Ravi Foods Pvt. Ltd. Vs. CCE - 2011 (266) ELT 399 (Tri. Bang.) • CCE Vs. Zoloto Industries - 2013 (249) ELT 455 (Tri. Del) 2.1 He further submits that in the impugned order which is based on the demand as calculated in the Annexure A to the show cause notice, on the 92,352.04 MT. quantity alleged to have been removed without payment of duty. Whereas, the Appellant has recorded its production in statutory records in from of RG-1 for the disputed period which is 74,741MT. In order to sustain the demand of duty on the alleged quantity of final goods manufactured and cleared clandestinely, it is essential whether the Appellant has capacity to produce the total quantity of recorded production on which duty is paid plus the quantity of allegedly clandestine removal. The appellant does not have the capacity to manufactured aforesaid quantity of 1,67,093.04 MT (92,352.04MT + 74741 MT.). In support of this, he produced the certificate of Chartered Engineer. ....
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....nt as per the certificate of chartered Engineer the requirement of raw material is to the extent of 1.10 MT. for production of finished goods of 1 MT. Therefore, to produce the 92,352.04 alleged clandestine manufacture and clearance of the goods the requirement of additional raw material is to the tune of 1,01,587 MT. whereas, traded raw material quantity in cash is only to the tune of 36MT. Therefore, there is not an iota of evidence qua the additional procurement of raw material adduced by the department. There is not a single evidence with respect to additional power consumption or additional consumption of manpower adduced in the show cause notice. Without establishing the essential ingredients by the revenue, the impugned demand of clandestine manufacture and clearance of finished goods is untenable. He placed reliance on the following judgments:- • Continental Cement Company vs. Union of India- 2014(309) ELT 411 (All.) • Sunrise Foods Products vs. CCE - 2017 (357) ELT 599 (Tri. Del) • Rajputana Steel Castings Pvt. Ltd. vs. CCE - 2017 (346) ELT 491 (Tri. Ahmd.) 2.4 He further submits that the department has issued the impugned show cau....
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....h are recorded by the VAT Check Posts at Gujarat Borders. In the statements of transporters for cancelled invoices, they have categorically stated that the goods were loaded and subsequently unloaded on account of cancellation of orders from buyers. They also submitted the VAT Form 402 when the goods are going out of the Gujarat State. The cross - examination of Mr. Dhwanil Shah establish that he has not destroyed any invoices after dispatch of goods. Thus the aforesaid cross examination clearly established that there was no clandestine manufacture or clearance of goods, moreover the information collected under the RTI from VAT Check Post established that all the goods which are cleared and accounted are appearing in the records of VAT Check post during the period of April 2012 to June 2015. All these materials has been submitted before the adjudicating authority but were not considered by him. Therefore impugned order is not sustainable. He placed reliance on the following judgments: • CCE Vs. Adinath Dyeing & Finishing Mills Ltd. - 2017(357) ELT 845 (Tri. Chen) • Ganpati Rolling Pvt. Ltd. Vs. CCE - 2015(315)ELT 91 (Tri.- Del) • Resham Petrot....
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.... Salem • 2013 (289) ELT 3 (SC) Telestar Travels P Ltd Vs. Special Director of Enforcement • 2015 (318) ELT 437 (Tri-Mum) (General), Mumbai PB Nair C& F P Ltd Vs. Cc General), Mumbai • 2016 (333) ELT 256 (Del) - Rajesh Kumar Vs. CESTAT • 1983 (13) ELT 1486 (SC) Kanungo & Co Vs. CC, Calcutta & Others • 2018 (15) GSTL 298 (Tri-Bang) - Paragon Steels P Ltd Vs. CCE, Calicut • 2017 (347) ELT 413 (Bom) - Sharad Ramdas Sangle Vs. CCE, Aurangabad • 2011 (269) ELT 485 (AP) - Shalini Steel Pvt Ltd Vs. CCE, Hyderabad • 2018 (360) ELT 255 (AP) - Manidhari Stainless Wire P Ltd Vs. Union of India • 2010 (255) ELT 68 (HP) - CCE, Vs. International Cylinders P Ltd The above submission in the form of synopsis has been taken on record and considered carefully. 4. We have carefully considered the submissions made at length by both sides and perused the records. On perusal of the show cause notice, we find that the entire case started with the information received by the Central Excise authorities from the Income Tax Department regarding the unaccounted sales, purchase and productio....
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....no discrepancies could be found in stock and the investigation report of the department had given a clean chit to the appellant. In these circumstances, the Tribunal was wholly justified in setting aside the order of the first appellate authority to the extent it had confirmed the demand which had no legal basis, and confirming the order to the extent it had reduced the tax liability imposed by the assessing authority. The second and third questions as proposed, therefore, also do not merit acceptance." 4.1 Without conducting the independent enquiry, the demand of Central Excise duty only on the basis of document/information/data provided by the Income-tax authorities by the Revenue legally not sustainable. The documents relied upon loses its evidentiary value in absence of any independent enquiry. As duty is payable on manufacture of the goods, Revenue have not come up with any positive evidence to show that the appellant has manufactured excisable goods and cleared without payment of duty. No evidence even regarding the excess purchase of the raw material, consumption of electricity, etc., had been adduced by the Department to substantiate the charge of clandestine removal of ....
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....the income tax authorities could not be added to the taxable value unless there is evidence to prove the same. Further, relying on the above decision, the Tribunal vide Final Order No. 581/2010-SM(BR), dated 10-5-2010 passed in the case of C.C.E., Ludhiana v. M/s. Ramesh Studio & Colour Lab dismissed the appeal of the department on the issue of demand of Service Tax on the income surrendered to the income tax department. Similar view has been taken by the Tribunal in the case of C.C.E., Chandigarh v. Bindra Tent Service - 2010 (17) S.T.R. 470 (Tri.- Del.).The Tribunal in the case of Ravi Foods Pvt. Ltd. v. C.C.E., Hyderabad - 2011 (266) E.L.T. 399 (Tri.-Bang.) has held that admission by assessee to Income Tax department as regards undisclosed/suppressed sales turnover cannot be held to be on account of clandestine removal of their final products, in the absence of any other corroborative evidence. Similarly, in the case of C.C.E., Ludhiana v. Mayfair Resorts - 2011 (22) S.T.R. 263 (P&H), Zoloto Industries [2013 (294) E.L.T. 455 (Tri.-Del.)]; and Vardhman Chemtech Ltd. v. CCE, Chandigarh [2013 (298) E.L.T. 546 (Tri.-Del.)].it was held so. 4.4 We also noticed that in the present m....
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....tion. In other words, the important point is that the print out should have been produced when the computer was in regular operation. In the present case, it is not in dispute that the print out relied upon by the revenue are shared by the Income tax authorities and obviously it was not produced during the period over which the computer was used regularly to store or process information. It is on records that tally data was taken from the Hard Disc. Thus the charge of clandestine removal based on the reconstructed or retrieved data will not in absence of strict compliance of Section 36B(2) of the Central Excise Act 1944 and prima facie such demand is not sustainable. 4.6 Further, Sub-section (4) of Section 36B requires issue of a certificate in this behalf by a person occupying the responsible official position in relation to the operation of the relevant device or the management of the relevant activity (whichever is appropriate) shall be evidence in any matter stated in the certificate and for the purpose of the sub-section, which shall be sufficient for a matter to be stated to the best of the knowledge and the belief of the persons stating it. In the present case, firstly th....
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....ssible 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 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 in operation 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 produc....
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....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." 4.7 In this context we also find that the Hon'ble Apex Court in case of M/s. Anvar P.V. v. P.K. Basheer - reported at 2017 (352) E.L.T. 416 (S.C.) has prescribed certain guidelines before accepting electronic documents as an admissible piece of evidence. The Apex court while dealing with Section 65B of the Evidence Act, 1872 (Pari materia to Section 36B of the Act,), observed as under : "13. Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure prescribed under Section 65B. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the Section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information co....
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....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 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 tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. 16. Only if the electronic record is duly produced in terms of Section 65B of the Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to Section 45A - opinion of examiner of electronic evidence. 17. The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65B of the Evidence Act are not complied with, as the law now stands in Indi....
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....o the revenue in respect of which the requirement of Section 36B has not been satisfied. On this ground, the impugned order suffers from uncurable error and hence, we do not find any merits in the impugned order, in confirming the adjudged demands against the appellants. 4.9 In the impugned matter Revenue and Adjudicating authority has relied upon the statement of Shri Sachin Govindlal Shah, Shri Shankerlal D Mehta , Shri Pravinchnadra V Shah and Shri Vikram Shah recorded by the Income tax Authorities. In this regard we find that Section 132(4) of the Income-tax Act, 1961 provides as under : "The authorized officer may, during the course of search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery to other valuable articles or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income tax-Act, 1922 (11 of 1922), or under this Act." 4.10 We find that the above provision explicitly indicates that the evidentiary value of the statement recorded under Section 132 of the Income-tax Act is restri....
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....upra), 2014 (309) E.L.T. 411 (All.), the issue of clandestine manufacture and removal came up before Hon'ble Allahabad High Court wherein it has been laid down certain norms which are reproduced below :- "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 flow back of funds, demands cannot be confirmed solely on the basis of presumptions and assumptions. Clandestine removal is a serious charge against the manufacturer, which is required to be discharged by the Revenue by production of sufficient and tangible evidence. On careful examination, it is found that with regard to alleged removals, the department has not investigated the following aspects : (i) To find out the excess production details. (ii) To find out whether the excess raw materials have been purchased? (iii) To find out the dispatch particulars from the regular transporters. (iv) To find out the realization of sale proceeds. (v) To find out finished product receipt details from regular dealers/buyers. (vi) To find out the excess power cons....
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....thout payment of duty. Here it is pertinent to note that the revenue did not rely these Statements in the show cause notice. Further Appellant also produced the information collected under RTI from Gujarat VAT Check Post authorities showing the consignments which has passed through the said Check Post. However in the said Check Post report the consignments related to the aforesaid cancelled invoices and well as the disputed invoices has not passed through the VAT Check Post. On this vital documentary evidence also the Revenue's case that appellant have clandestinely removed the goods is not sustainable. 4.16 Without prejudice, we also find that the disputed entries made in the Tally Data and Visual Udyog Software may create doubt but it cannot take place of evidence. It is observed that the allegation of suppression of production and clandestine removal is a serious allegation and it has to be established by the investigation by affirmative and cogent evidence. CESTAT in the case of Sober Plastic Pvt. Ltd. v. CCE [2002 (139) E.L.T. 562 (T)] has held that demand based on weighment slips, slips recovered from Dharamkanta etc. relied upon for raising demand not verified with refere....