TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 82
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....e 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 that the said computer was used for recording....
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....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.55274 653914802423092. (ix) On a request from Hitech, the Hard Disk ('SEAGATE BARRACUDA 7200.7 80 GByte....
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.... 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 (Operations) of the said firm was also recorded. 11. Search operation and investigations were conducted with regard to Iron ore s....
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....d 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 representatives of the Ex-Directors. Further, the Indian Overseas Bank took possession of the property of the company in liquidation on 20.05.2014 ....
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.... 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, 17.09.2012, 24.09.2012, 29.09.2012 and 09.10.2012. The documents were not returned as per Rule 24A of Central Excise Rules, 2002. Such requests were not even ad....
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....ned 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 10 of the decision of the Hon'ble Karnataka High Court in the case of CCE Vs Vijaya Steels (P) Ltd. - 2012 (282) ELT 215 (Kar) and also on para 11 of CESTAT's....
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....e 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 appellant on 02.05.2011 and the non-relied upon documents were returned by the department on 17.11.2014. Further, as per DGGI letter dated 03.10.2012 (enclosed with the above reply), the soft copy of data contained in the hard disk was als....
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....counts 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 appeals may be dismissed. 19. Heard both sides. 20. At the outset, it requires to be noted that there has been no representation for the main appellant though the duty of Rs.13,11,35,087/- has been confirmed on the appellant and equal penalty imposed. The Ld. Counsel appeari....
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.... 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 BARRACUDA 7200.7 80 Gbytes Model ST 3800 11A, S/N 5JVVSXPS, P/N 9W2003-399) seized from office of HITECH vide Mahazar dated 15.03.2008 - Sl.No: 13 of list of relied upon documents. 1 Invoice Files 2006-07, 2007-08 - Sl.No.17 of list of relied upon documents 23 Nos Two Notes titled "Full Load Enquiry" - Sl.No:33 of list of relied upon documents. Two "Lorry Booking Note" - Sl.No:34 of li....
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.... 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 were not provided to us; therefore, it is requested that the date of receipt of the above documents may please be considered as the date of receipt of show cause notice for replying to show cause notice." 22. A letter again was sent by the counsel for the appellant to the Commissioner on 24.08.2012 requesting for the documents as mentioned in letters dt. 19.05.2011, 14.06.2011 and 29.07.2011. It is seen that even though the appellant has made so many requests there has not been any response from the side of the department either stating that the documents have already been supplied or informing....
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....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 to prepare the defence. The very next date, the appellant was issued an intimation letter informing the hearing date as 09.10.2012. 27. On 29.09.2012, the appellant replied to the Deputy Director, DGCEI and Commissioner, Salem requesting to provide documents and informing that they would be able to bring their xerox copier, computer printouts for imaging the hard disk and that they are ready to take copies on their own expenses. The said letter is issued by Sri P. Ganesh and in para 6 it is informed to the department that the Managing Director Sri P. Venkittapathy who was fully conversant with the entire issue demised on 31.08.2012. The relevan....
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....elied 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 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.Hitech 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 he same." 29. On 06.12.2012, the appellant again has issued a letter requesting for copies of documents. On 09.10.2012, the appellant made a written statement before Commissioner during the hearing stating the importance and the necessity to get image....
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....12 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 requested for the imaged version of the hard-disks at Sl. No: B-3, B-13 and B-18. The Department had given a CD and informed that the data of the three exhibits are transferred into the CD. In this connection, it is submitted, the date in the CD is not sufficient for us; and we require the imaged versions to verify the following : * Details of files created, accessed and modified; * How long the hard disk was in use before its seizure; * Whether the hard disk was used for the period from April 2006 to March, 2008 regularly. * Whether the hard disks have satisfied the conditions of Section 36B of the Central Excise Act, 1944. * To prepare ourselves for the cross examination of the witnesses. We ha....
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....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 the invoice 37 dated 18.2.2008, copy of the ledger accounts for the period from 1.4.2007 to 31.3.2008 and bank statements are enclosed herewith. This proved that the computer was in use only from 24/2/2008. In this connection, we wish to chief examine the authorised person of Softline Computers, 5, Thirunavukarasu Street, AVK Nagar, Opposite, New Bus Stand, Salem - 636 004." 32. The appellant has also requested for cross examination of several witnesses. None of the witnesses have been examined or cross examined and Rule 9D Central Excise Act, 1994 has not been complied. It has been held in the case of Jindal Drugs Pvt. Ltd. Vs Union of India - 2016 (340) ELT 67 (P&H) that the statements recorded during the investigation cannot be relied straightaway by the adjudicating officer and can be re....
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....ncial 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 24A is a safeguard provided to an assessee to get the non-relied documents. This is necessary not only for preparing defence but also for continuing the business. It is the right of the party to get back the documents, and if the department intends to retain, the same has to be intimated to the assessee. We find that the strong inference that can be made due to delay on the part of the department to respond to the letters of the appellants is that the contention of the department that they have supplied entire data in CD and have returned all the non-relied documents is not believable. Even as per the letter of the department the non-relied documents have been returned only on 27.11.2014. The impugned order is passed on 31.12.2012. There is indeed violation of principles of natural justice due to non-supply of entire....
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....e 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 evidence cannot be accepted in evidence. 40. Besides, the evidence of the printouts from the hard disk, the other evidence relied by department are the documents seized from Third parties like the Buyers of finished products, Transporters of goods, Suppliers of raw materials etc. Some of these documents are again, pen driver and computer printouts. The department has recorded statements from persons who are running these establishments. But none of them have been examined by the adjudicating authority as required under Section 9D of Central Excise Act, 1944. The appellant has requested for cross examination and the same has not been complied. The Ld. Counsel for appellant has adverted to Rule 36A of Central Excise Act, 1944. As per this provision, the documents so seized can be used in evidence, if the person from whose ....
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....ticular 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 admissible in evidence. In view of above Section 36A of Central Excise Act, 1944 it is only when such document is tendered in evidence against the person who produced the same or from whose custody or control it was seized that the presumption under Section 36A is available. In the present case admittedly none of the alleged invoices/documents was produced by the Appellant or seized from the Appellant's premises or control. In view of the above, when the presumption under Section 36A is not available, the burden of proof is squarely on the Department to prove that the source documents are related to the Appellants and that any taxable services under the source documents were actually provided by the Appellant. This burden has not at all been discharged in the present case. The department could not have simply accepted the customers' documents provided by them on its ....