TaxTMI 
TaxTMI 
2024 (1) TMI 82
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....ets and clandestine removal of the same, the officers of Directorate General of Central Excise Intelligence (DGCEI) conducted simultaneous search operations at the factory at Salem and Head office at Coimbatore on 15.03.2008. The search operations resulted in recovery of various incriminating documents as well as Central Processing Units (CPUs) of computers which were seized under mahazar dt.15.03.2008 drawn at the respective premises. The seized documents prima facie appeared to indicate large scale evasion of Central Excise duty by M/s.Hi-Tech. 3. During the search conducted at the factory premises on 15.03.2008, the officers inter alia found one computer containing the Hard Disk of Seagate model bearing S/N: 9RX4MWAD, 160GB, ST 3160215AS. The 'Recycle Bin' of the said computer contained a file titled 'Scrap'. On restoring the said file and browsing the said file 'Scrap', the officers noticed that the same contained inter alia the details of unaccounted transactions relating to sale of sponge iron and MS ingots / billets. Shri P.S.B. Kamath, Office Manager and Sri K.M. Ramesh, Accounts Assistant of M/s.Hi-Tech who were present during the search operation informed the officers ....
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.....2008. These files contain interalia details of coal received by Hitech from various coal suppliers, the proximate analysis of the coal received to verify the quality, correspondences with the suppliers of coal and production of sponge iron by Hitech for a few days. (v) One box file titled "Sponge Iron Sales" under SI.no. 8 of Annexure Mahazar dated 15.03.2008, This file contains interalia details of correspondences with various customers of Hitech for sale of sponge iron, quality problems faced and production of sponge iron for certain periods. (vi) Six paper board files titled "Iron Ore" under Sl.no.9 of Annexure to Mahazar dated 15.03.2008. These files contain the details of receipt of iron ore which are accounted in the books of accounts by Hitech. (vii) Made up file under Sl.no.30 of Annexure to Mahazar dated 15.03.2008. This file inter alia contains correspondences with various buyers of sponge iron, MS ingots / billets from Hitech, certain transactions with a buyer for supply of MS ingots / billets and payments received / due from him and end cuttings received from the said buyers. (viii) An assembled computer system bearing serial No.5527....
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....ansporters were also recorded. 9. Scrutiny of documents seized from the office premises of M/s.Hi-Tech on 15.03.2008 and the data contained in the printouts seized from the factory premises indicated that M/s.Hi Tech had purchased raw material viz. Iron Ore and Coal without accounting. Hence the investigation was conducted at the premises of suppliers of raw materials. On perusal of the made-up file, it showed that certain details regarding receipt of coal from various parties under 17 Railway Receipts along with quantity invoice / receipts were recorded under the title "wagon details (coal)" for the period from April 2007 to January 2008 with the remark "A" or "W" against each of the 17 entries. On verification of the receipts of coal with the details available in the form of mineral purchase file, it was found that there were receipts of coal as mentioned in the Sheet No.219 with the remark "A" which alone were found to be accounted by M/s.Hi- Tech. 10. Investigation was conducted with the coal suppliers and statements were recorded. Search was conducted at the premises of M/s.S.P Coal Resources (P) Ltd., Chennai on 08.02.2011 and the statement of Mr. N. Jagadesh, Manager (....
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.... Ranjit Chandar before the Tribunal. It is also brought to our notice that insolvency proceedings were initiated against the company and that by an order dt. 23.03.2015 passed in C.P. No.385 of 2014, the Hon'ble High Court has ordered for winding up of M/s. Hi-Tech Minerals Industries (Covai) Pvt. Ltd. and appointed Official Liquidator attached to the High Court. The Tribunal vide its Final Order Nos.41388-41389/2017 dt. 02.08.2017 had earlier dismissed the appeals for non-appearance on the part of the Official Liquidator as well as the Appellant, Sri P. Ganesh. The appellant thereafter approached the Hon'ble High Court and vide Tribunal's Interim Order Nos.40049-40050/2019 dt. 22.03.2019 these appeals were restored to the files of the Tribunal. 14. When the matter was listed for final hearing, the Official Liquidator filed a report on 29.05.2023 as to the status of the proceedings in regard to the winding up of the company. It is stated in this report that in compliance of the order of winding up passed on 23.03.2015 the Official Liquidator took possession of available assets of the company in Provisional Liquidation in the presence of the Petitioner-Creditor and the representa....
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.... of confiscation of goods. There is no allegation in the SCN that the Appellant has made some personal gains out of the alleged activities. 15.4 Adjudicating Authority confirmed the demand of Rs.13.11 crores on the Company and imposed equal penalty of Rs.13.11 crores on the company. A penalty of Rs.50 lakhs was imposed on the Appellant under Rule 26. 15.5 Under Rule 26, a penalty not exceeding the duty on such goods or two thousand rupees, whichever greater can be imposed. The power is discretionary and not absolute. It is submitted that such power is not to be exercised arbitrarily. The imposition of such huge penalty of Rs.50 lakhs is without reasonable explanation and not on the basis of the prescribed rules, procedure and law. It is not founded on reasons and facts. 15.6 The Ld. Counsel argued that the impugned order is passed without following the principles of natural justice and also without considering the statutory provisions of Sections 9D, 36A and 36B of the Central Excise Act, 1944. SCN was received on 02.05.2011. Repeated requests were made by appellants to return the not relied upon documents to defend the case on 19.05.2011, 14.06.2011, 29.07.2011, 17.09.201....
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....(340) ELT 67 (P&H) emphasizes the requirement to comply with the procedure under Rule 9D. 15.8. The role of the Appellant Sri P. Ganesh has been determined arbitrarily by the adjudicating authority without any basis. In para 23.2 of the SCN, though it is alleged that Sri P. Venkittapathy, Managing Director was the person at the helm of affairs of Hitech, who has masterminded the entire gamut of nefarious activities, in the said para of the SCN, it is never alleged that the appellant is at the helm of affairs. However, the adjudicating authority in para 56.02 of the impugned order has given a finding that the appellant is also at the helm of affairs, which is contrary to the facts alleged in the SCN. 15.9. Penalty imposed by invoking Rule 26 is without jurisdiction. Under Rule-26, the condition precedent is that the person has dealt with any excisable goods, which such person knows or has reason to believe to be liable to confiscation. In the present case, there is no allegation or findings that the goods are liable for confiscation and the appellant is also not aware of any order of confiscation passed. Therefore, Rule 26 is not applicable. Reliance is placed on paras 9 and 1....
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....ining the hard disk was also supplied to the appellant on 02.05.2011. Since the appellant is insisting for imaged version of the hard disk they are ready to provide the same. Letters dt. 06.07.2023, 08.08.2023 & 30.08.2023 were filed by the Ld. A.R in this regard. Letter dt. 08.08.2023 reads as under : "F. No. E/40812/2013-C (AR)-CESTAT Date : 08/08/2023 URGENT / COURT MATTER To The Additional Director General, DGGI Coimbatore Zonal Unit, 155-1, Lakshmanan Street, Behind Ukkadam Bus Stand, Ukkadam, Coimbatore - 641001. Sir, Sub: Appeal filed by M/s. Hi-Tech Mineral Industries Covai Pvt Ltd and Shri.P. Ganesh, Commercial Director -Appeal Nos. E/408 12 & 40813 of 2013 -Reg. Please refer to this office letter dated 06.07.2023, on the above subject and your reply vide F.No.DGGI/INV/CM/65/2023-Gr F-O/oADG/1064 dated 27.07.2023. 2. It is evident from your letter dated 27.07.2023 and its enclosures that all relied upon documents were received by the ap....
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.... searches were conducted regard to the buyers' end who have purchased the finished products from the appellant. Their records tallied with the details in the computer printouts. So also, investigation and search operations were conducted with regard to transporters and the accounts maintained by them tallied with the details in the computer printouts which corroborated the evidence contained in the hard disk. The Department has also conducted investigations from whom the appellant company has purchased raw materials as they mainly used coal and iron ore as raw materials. The evidence gathered showed that the appellants have procured raw materials which have been used in the manufacture of finished products which were cleared clandestinely. Added to this, the appellant has been penalised for using unauthorized electricity which also indicates that the appellant has used unaccounted power for manufacture of unaccounted finished products and clandestine clearance. Apart from the documents, the Department has also recorded statements of various persons whose statements corroborated the documentary evidence seized from the appellant's factory as well as others. Ld. A.R prayed that the a....
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....Deputy Director, DGCEI and Commissioner, Salem. The appellant has produced the proof of delivery of this letter also. In the said letter, the appellant has given details of non-relied upon documents taken away by the department and have requested to return the same. So also, they have given the details of documents they need for preparing their defence. The said letter reads as under : "2.0 We are yet to receive the copies of the relied upon documents and also the imaged version of the hard disks, as detailed below. It is requested to provide the same so as to enable us to reply to the show cause notice. LIST OF RELIED UPON DOCUMENTS Description of Documents / Records Quantity Hard Disk of Seagate Model bearing S/N:9RX4MWAD, 160GB, ST 3160215AS - Sl.N:3 of list of relied upon documents 1 Paper board Files Coal & Coal Inward Statement (3 ½ to 3 2/2) - Sl.No: 7 of list of relied upon documents. 2 Box Files - Mineral Purchase - Period 01.04.2006 to 22.02.2007 (1 1/5 to 1 5/5) - Sl.No.8 of list of relied upon documents 5 Paper Board File - Iron Ore (9 1/6 to 9 6/6) - Sl.N: 11 of list of relied upon documents 6 Hard Disk (SEAGATE BARRA....
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.... 1 Flat File Containing lorry trip sheets with bill of expenses 1 Monthly matter 2007 book containing 1 Telephone Diary bearing 1 One HCL laptop computer 1 Summon Dated 15.03.2008 Description of the Documents / Records Quantity General Ledger for the year 2005-06 6+4 Books Iron Ore Rejects Bills 01.04.2005 to 31.03.2006 1 Purchase Order file 1 Steam Coal Register 2 Iron Ore Inward 2006-07 1 Iron Ore Inward Statement Box File 1 RG 23A Part 1 2007-08 1 RG 23A Part 1 2006-07 1 RG 23A Part 1 2005-06 1 RG1 Register 2004-05, 2005-06 2 Letter Dated 16.07.2008 (HM/DGCI/2008-09) Description of the Documents / Records Quantity Purchase Documents for the period 01.04.2007to 31.03.2008 11 Box Files 4.0 It is also respectfully submitted that, we have been directed to reply within 30 days from the date of receipt of show cause notice vide paragraph 28 of the show cause notice; but, we are unable to reply to the show cause notice since the copies of the above mentioned relied upon documents, imaged version of the hard disks and the not relied upon documents w....
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....he documents including the soft copy of the data contained in the hard disk is already supplied to the appellant on 02.05.2011. As regards non-relied upon documents, it is informed that the appellant can obtain the same after getting prior appointment from the office. The said letter reads as under : " Please refer to your letter dated 17/09/2012 wherein you have stated that you have not received some of the relied upon documents. All the relied upon documents were given to you on 02.05.2011 including soft copy of the data contained in the hard disk. The receipt of the relied upon documents have been acknowledged by M/s.Hi-Tech Mineral Industries Covai Pvt. Limited, Omalur Road, Shri P. Ganesh, Director and Shri P. Venkittapathy, Managing Director. As regards non-relied upon documents are concerned, you are requested to visit this office after getting prior appointment and obtain the same." 26. On the same date, the counsel for appellant issued a letter to the Commissioner, Salem to provide required documents to enable the counsel to file reply to SCN and also expressing their inability to appear for personal hearing on 25.09.2012 as they are not able ....
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....ve crippled us from making an effective reply to the show cause notice because the managing Director, Mr. Venkitapathy, who was fully conversant with the entire issue, has demised on 31/8/2012; if we have received proper replies for our letters dated 19.5.2011, 14.6.2011 and 29.7.2011, Mr. Venkitapathy, managing Director and also one of the notices, would have filed a fitting reply to the show cause notice; but, we missed an opportunity because of your delay in taking action for our letters; therefore, principles of natural justice have already been violated. 7.0 Therefore, it is requested to make necessary arrangements at the earliest (i) to provide the copies of relied upon documents (ii) to provide the imaged version of the hard disk and (iii) to return the non relied upon documents." 28. Thereupon the Deputy Director vide letter dt. 03.10.2012 informed the appellant that all relied upon documents are already supplied. Soft copy of the data of hard disk was given in CD and non-relied upon documents can be obtained after appointment. The relevant part of the letter reads as under : "Once again this office would like to place on record that all the relied upon....
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....of the files. It is to be noted that the appellant had requested for imaged version of the hard disk to analyse the details on which the demand has been quantified by the department. Even after repeated requests the department has not bothered to provide copies of such hard disk and documents. 31. It can be seen that the SCN was issued on 02.05.2011 and only after the appellants issued letters dt. 19.05.2011, 14.06.2011 and 29.07.2011 and 24.08.2011, the department has responded on 24.09.2012 to the appellant stating that the soft copy of the data in the hard disk has already been given in a CD and they can collect the non-relied upon documents after getting prior appointment. Only on 24.09.2012 i.e. after almost a year of continuous requests, the Department has obliged to respond to the appellant and that too in a evasive way stating that the data contained in the hard disk has already been supplied to them in the CD. The appellant in their written submissions filed at the time of hearing has stated that the documents are necessary for them to prepare the defence. The relevant part of the submissions reads as under : "2.2 Out of the relied upon documents, we have reque....
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....ake only one day with our assistance but we do not know as to why such an opportunity was denied. ... ... 4.0 The entire case rests on the computer print outs (B-4) for the period from April 2006 to March 2008, containing pages from 1 to 293. These computer printouts are retrieved from the computer, having the hard disk number 9RX4MWAD, seized from the factory on 15.3.2008 (B-3). The said computer print outs cannot be relied upon because of the following reasons. 4.1 Conditions of Section 36B should be satisfied before relying on the computer printouts. In this case, the show cause notice is silent on this aspect, which proved that the conditions were not fulfilled. One of the conditions of Section 36B is that the computer should be used regularly over a period of time for which the print outs are available. In the instant case, the print outs are for the period from April, 2006 to March, 2008, which means that the computer should have been used since April, 2006. But, the said computer was purchased only on 18.2.2008 vide invoice number 37 dated 18/2/2008; it was installed on 24/2/2008; payments were made vide cheque No: 652029 dated 25.2.2008. Copy of t....
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....The Rule reads as under : "RULE 24A. Return of records. - The books of accounts or other documents, seized by the Central Excise Officer or produced by an assessee or any other person, which have not been relied on for the issue of notice under the Act or the rules made thereunder, shall be returned within thirty days of the issue of said notice or within thirty days from the date of expiry of the period for issue of said notice : Provided that the Commissioner of Central Excise may order for the retention of such books of accounts or documents, for reasons to be recorded in writing and the Central Excise Officer shall intimate to the assessee or such person about such retention." 36. The Ld. Counsel appearing for the appellant has submitted that these documents which were ledger accounts, financial statements, invoices, bank related documents, financial statements were extremely necessary to reconcile the details of transactions mentioned in the SCN on the basis of which the demand of duty has been raised. Needless to say that during investigations when majority of the documents are taken away, the assessee will be handicapped to prepare their defence. Rule 24....
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....id not heed to the request of the appellant, if they had no problem to provide the imaged version. 39. In the written submissions dt. 09.10.2012, the appellant (in para-2.2 already noticed above) has given the reasons why the appellant was insisting on getting an imaged version of the hard disk. It would help the appellant to know the details of the files created, accessed and modified. It would provide information as to how long the hard disk was in use before seizure. 39.1 At this juncture, the fact that department has failed to establish that Section 36B was complied while taking the printouts from the hard disk attains significance. It is brought out from evidence that the department has seized the hard disk and taken the print outs by themselves. These print outs were filed as 'Made-up file' with 293 pages. These print outs are the foundation for initiating the investigation. Only after taking the printouts the hard disk has been sent to the DGCEI. In the case of U.P. Bone Mills (P) Ltd. Vs CGST, Dehradun - 2022 (382) ELT 713 (Tri.-Delhi) it was held that on failure to follow the mandatory procedure prescribed under Section 36B of Central Excise Act, 1944, the electronic....
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....om the custody or control of the person concerned. Section 36A the Central Excise Act, 1944 is reproduced below :- Section 36A. - Presumption as to documents in certain cases. - Where any document is produced by any person or has been seized from the custody or control of any person, in either case, under this Act or under any other law and such document is tendered by the prosecution in evidence against him or against him and any other person who is tried jointly with him, the Court shall, - (a) unless the contrary is proved by such person, presume - (i) the truth of the contents of such document; (ii) that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the Court may reasonably assume to have been signed by, or to be in the handwriting of, any particular person, is in that person's handwriting, and in the case of a document executed or attested, that it was executed or attested by the person by whom it purports to have been so executed or attested; (b) admit the document in evidence, notwithstanding that it is not duly stamped, if such document is otherwise a....