TaxTMI 
TaxTMI 
2024 (9) TMI 1844
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....on of Sponge Iron in their aforesaid factory. 2. Acting on the intelligence that the appellant are engaged in manufacture and clandestine clearance of excisable goods, namely sponge Iron, the officers of DGCEI, Regional Unit, Jamshedpur (hereinafter referred to as "DGCEI") conducted simultaneous searches at many places associated with the appellant on 11.04.2013 and retrieved one laptop, two pen drives and two detachable hard disks. The said laptop was opened and some files and folders related to RSIPL were found. The print outs of data in tally format were taken and seized in the presence of Om Prakash Singh, Manager (Accounts). On the basis of the documents recovered from the residence and office of Mr. Om Prakash Singh, Document No. 50/DGCEI/JRU/RSIPL/SO/13 and 51/DGCEI/RSIPL/SO/JRU/13 which were the documents related to his client Ganesha Industries and Document Serial No. 8, 9, 11, 12, 13, 29, 33, 35, 46, 47, 48, 49, 50, 52 and 53/DGCEI/RSIPL/SO/JRU/13 which were documents related to Vinayak Enterprises, were created. After analysing these documents, the officers of DGCEI alleged that stocks of both the companies, namely, Ganesha Industries and Vinayak Enterprises were that....
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....terprises were used by RSIPL for effecting Kachha sales, i.e., clandestine clearances. However, Mr. Mahabir Prasad Rungta, Director of RSIPL categorically stated that the appellant company has no relation with neither M/s. Ganesha Industries nor M/s. Vinayak Enterprises. On the basis of the statement from Shri Om Prakash Singh, the officers came to the conclusion that the documents relating to the two companies, M/s. Ganesha Industries and M/s. Vinayak Enterprises were actually belonged to the appellant company only. Accordingly, it was alleged that all the sales of Sponge Iron shown against the said two companies are to be considered as the manufacture and clandestine clearance of the said goods by the appellant company. Thus, it was proposed to demand central excise duty from the appellant company as if all the sale transactions shown against the said two companies were actually done by the appellant-company themselves. 2.5. Accordingly, on completion of the investigation, a Show Cause Notice dated 03.07.2015 was issued to the appellant demanding central excise duty of Rs. 22,56,24,372/-, including Cess, along with interest and penalty. On adjudication, the Ld. adjudicating au....
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....Singh cannot be admitted into evidence without complying with Section 36B(2)/36B(4) of the Central Excise Act, 1944. It is contended that the print out taken from the computer, pen drives and laptop are not accompanied with the Certificate as mandated under section 36B(4) containing the following details: (a) describing the manner in which the data contained in the printouts/electronic record are produced. (b) the certificate must furnish the particulars regarding the computer, pen drives and laptop which were used for production of the printouts/ electronic record. 3.3. Further, the appellants submit that in the instant case, the computer, pen drives and laptop were seized from a third party premises, namely from the office of the Tax Practitioner Mr. O.P. Singh; pen drives and laptops are floating devices and they can be taken anywhere and used by any person to enter data; there was no enquiry conducted to ascertain the person who entered the data contained in the computer, pen drives and the laptop. In support of their contention, the appellants relied upon the decision of the Hon'ble Orissa High Court in the case of CCE Vs. Shivam Steel Corp. (2023) 2 CENTA....
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.... allegation of unaccounted production and clearances of 80283.470 M.T of Sponge Iron during the period from September 2010 to 8th April 2013; to establish clandestine clearances of such huge quantity of finished goods, there must be corroborative evidences in the form of purchase of raw materials, deployment of labour, arrangement of transportation, receipt of the clandestinely cleared goods by the customers and financial transactions, receipt of money etc. It is pointed out by the appellants that in the instant case, no such corroborative evidence is available; there is no recovery of parallel invoices showing clandestine clearance of finished goods; the conclusion of clandestine clearance has been drawn from the data recovered from a third party premises; the documents relating to the two companies viz., M/s. Ganesha Industries and M/s. Vinayak Enterprises, seized from the premised belonged to a third-party Mr. Om Prakash Singh, which has been presumed to belong to the appellant company without any evidence. Thus, the appellant submits that the allegation of clandestine clearances in this case is only based on assumptions and presumptions, which vitiates the entire proceedings. I....
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....r confirming the demands, along with interest and penalties. 5. Heard both sides and perused the appeal records. 6. We find that the allegation against the appellant company (RSIPL) is with respect to manufacture and clandestine clearance of 80283.470 M.T of Sponge Iron during the period from September 2010 to 8th April 2013 without payment of appropriate duty. The demand is confirmed on the basis of data recovered during the course of search, relating to the two companies, M/s. Ganesha Industries and M/s. Vinayak Enterprises, from the premises of Mr. Om Prakash Singh, a Tax Practitioner. The demand has been raised based on the data retrieved from the computers, pen drives and laptop available in the office of Shri Om Prakash Singh as well as various statements recorded from the responsible persons of the appellant-company. 7. Thus, we observe that the issues to be decided in the present appeals are: (i) Whether evidences available on record from the data retrieved from the computers, pen drives and laptop at the premises of Shri Om Prakash Singh, who is a Tax Practitioner maintaining data relating to various companies, including that of the appellant-company, are....
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....ounting of his various clients. The appellant-RSIPL was one of his clients. 7.1.2. From the factory and office of the appellant company, verification was conducted on raw material stock and finish goods stock and they were found to be in order. All the stock statements, raw materials stock, finished goods stock, sales invoices, etc. were found to be matching with the computerized weighing scale of which printouts were taken and matched. From the office premises various documents such as Document No. 10, 21, 30, 37 and 41/DGCEI/RSIPL/SO/JRU/13 and43/DGCEI/RSIPL/R/13 were seized. These documents also contained weigh bridge records from September 2010 to April 2013. These weigh bridge records were computer generated. No incriminating documents were found showing any clandestine clearance. Statements of various work staff, lineman and supervisors, gate supervisors were taken. We observe that the search of the office and factory premises of the appellant-company has not yielded any incriminating document evidencing clandestine manufacturing and clearance. 7.1.3. A search was also conducted at the office of Shri Om Prakash Singh, a Tax Practitioner who maintains accounts of many cl....
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....y RSIPL. In support of these allegations the officers cited the Documents no. 56, 57, 59, 60, /DGCEI/JRU/RSIPL/R/13 & DGCEI/RSIPL/SO/JRU/13-. We observe that these files, inter alia, contain VAT invoices of M/s. Vinayak Enterprises together with permits, weighment slips and transport documents. The allegation of the Department is that sponge iron shown as dispatched to parties under tax invoices of M/s. Vinayak Enterprises, were actually loaded in and dispatched from the factory of RSIPL. Accordingly, the investigating officers concluded that VAT invoices of M/s. Vinayak Enterprises were used for clandestine clearances of sponge iron from the factory of RSIPL. The same allegation has been made against M/s. Ganesha Industries also. We observe that both M/s. Vinayak Enterprises and M/s. Ganesha Industries are VAT registered firms. There is no evidence available on record to prove that they were created by RSIPL. We also observe that the Department alleged that M/s. Vinayak Enterprises's proprietor viz. Mr. Rajesh Kumar Pandey was an employee of RSIPL. However, we observe that this claim is unsubstantiated as no statement was recorded from Mr. Rajesh Kumar Pandey. Even if it is tr....
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.... the sides and on perusal of the records, I find that the Central Excise officers while visiting the factory of the appellant, recovered a USB drive in the appellant's premises. The USB drive was connected with computer and a printout was taken by the computer expert accompanied with the Central Excise officers. The printout gives the details of the certain sales (date-wise) commencing from 1-4-2005. The delivery challans for various chemicals for the month of December, 2005 and January, 2006 were found and seized during the search. The appellants disowned the contents of the printout and stated that it has manipulated the data base with motive, to take revenge from the partner and the firm for the refusal of the loan of Rs. 1 lakh sought by the Computer Operator. The appellant filed an affidavit disclosing this fact on 13-2-2006 i.e. immediately after the raid and a copy of the affidavit was also given to the investigating officer. The Central Excise officers attempted to corroborate the contents of the printout with the statements of 30 persons viz. buyers, transporters etc. The appellants requested for cross-examination of 30 persons which was rejected by the Adjudicating author....
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....liers and the purchasers of the finished goods. It is seen that the statements were recorded to corroborate the contents of the printout and the Commissioner (Appeals) had held that the said statements has no strong evidentiary value. Shri Anil Gupta, Partner of the appellant firm had stated that he was not aware of the details contained in the USB drive. 10. Learned Advocate submitted that the clandestine manufacture and removal of the goods cannot be upheld based on the printout of the data contained in the USB drive without following the requirement of condition of Section 36B of the Central Excise Act, 1944. Section 36B of the said Act provides admissibility of microfilms, facsimile copies of documents and computer printouts as documents and as evidence. Clause (c) of Section 36B(1) states that the statement contained in a document and included in a computer printout would be an evidence if the condition mentioned in the sub-section (2) and other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be the document for the purpose of this Act and the rules made thereunder and can be admissible i....
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....M/s. Premier Instrument & Controls Ltd. (supra), the Tribunal has held that the printout of the personal computer of the company's officer, had not fulfilled the statutory condition laid down under Section 36B(2) of the Act and the demand is not sustainable. The relevant portion of the said decision is reproduced below : - "9. On the demand of duty on waste and scrap, again the appellants have made out a strong case on merits. The demand covering the period November, 1993 to September, 1998 is based on certain computer printout relating to the period February, 1996 to September, 1998. These printouts were generated from a personal computer of Shri G. Sampath Kumar, a junior officer of the Company, whose statements were also recorded by the department. Admittedly, whatever facts were stated by Shri Sampath Kumar, in his statements, were based on the entries contained in the computer printouts. The statements of others, recorded in this case, did not disclose any additional fact. Therefore, apparently, what is contained in the computer printout is the only basis of the demand of duty on waste and scrap. The question now arises as to whether these printouts are admissible as ....
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....on by the company. It was also not shown that information of the kind contained in the computer printout was regularly supplied by the Company to the personal computer of Shri Sampath Kumar in the ordinary course of activities. Again, it was not shown that, during the relevant period, the computer was operating in the above manner properly. The above provision also casts a burden on that party, who wants to rely on the computer printout, to show that the information contained in the printout had been supplied to the computer in the ordinary course of business of the company. We find that none of these conditions was satisfied by the Revenue in this case. We have considered the Tribunal's decision in International Computer Ribbon Corporation v. CCE, Chennai (supra). In that case, as in the instant case, computer printouts were relied on by the adjudicating authority for recording a finding of clandestine manufacture and clearance of excisable goods. It was found by the Tribunal that the printouts were neither authenticated nor recovered under Mahazar. It was also found that the assessee in that case had disowned the printouts and was not even confronted with what was contained there....
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....be deemed to be a document only if the conditions mentioned under sub-section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under Section 65B(2). Following are the specified conditions under Section 65B(2) of the Evidence Act : (i) The electronic record containing the information should have been produced by the computer during the period over which the same was regularly used to store or process information for the purpose of any activity regularly carried on over that period by the person having lawful control over the use of that computer; (ii) The information of the kind contained in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity; (iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and ....
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....Hon'ble Apex Court and the decision in the case of Ambica Organics referred above, we find that unless the conditions of Section 65B(2) of the Evidence Act, which is pari materia with Section 36B(4) of the Central Excise Act, are complied with, no reliance can be placed on any data recovered from computer printouts. Admittedly, the procedure set out in Section 36B has not been followed in this case. Thus, by following the judgement of the Hon'ble Apex Court and the other decisions cited above, we hold that the data resumed from the computer printouts alone cannot be relied upon to demand duty, without any corroborating evidence. 7.1.9. From the facts on record, we observe that in the present case the author of entry of data has not been identified. Hence, the data recovered from the computers, pen drives and laptop in the office premises of Shri Om Prakash Singh cannot be relied upon as evidences to substantiate the allegation of clandestine manufacture of sponge iron by the appellant company. Further, except statement of Shri Om Prakash Singh, there is no other evidence available on record to substantiate the allegation that entire sale of sponge Iron effected by the two co....
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.... drives and laptop recovered from the premises of the Tax Practitioner namely, Shri Om Prakash Singh and the statements recorded from various persons associated with the appellant company. With regard to relying on the statements recorded in this case to substantiate the allegations, the appellants submit that such statements cannot be relied upon in this case as the mandate as prescribed under Section 9D of the Central Excise Act, 1944 are not followed. 7.2.2.In his statement Shri Om Prakash Singh stated that wherever the name of M/s. Ganesha Industries, appears it denotes that the actual transactions were carried out by RSPIL. Shri Om Prakash Singh submitted that M/s. Vinayak Enterprises is a trading firm registered with commercial taxes department, but the invoices of Vinayak Enterprises were used by RSPIL for effecting Kachha sales, i.e., clandestine clearances. However, Shri Mahabir Prasad Rungta categorically stated that RSPIL has no relation with M/s. Ganesha Industries or M/s. Vinayak Enterprises. On the basis of the statement of Shri Om Prakash Singh, the officers came to the conclusion that the documents relating to the two companies, viz. M/s. Ganesha Industries and M....
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....Singh stand retracted and not admissible as evidence. 7.2.5. Shri Suman Kumar Jha, Proprietor of M/s. Vinayak Enterprises was also cross examined and he stated that the documents shown to him were his documents and he was paying VAT and local taxes. He has no connection with RSIPL. 7.2.6. Thus, after the cross examination, we observe that the appellants have demonstrated that M/s. Vinayak Enterprises and M/s. Ganesha Industries had engaged Shri Om Prakash Singh as their Tax Adviser and he filed their returns. Shri Om Prakash had taken the premises on rent and he also filed a rent agreement for the office premises from where he was operating, i.e. Umar Niwas, Shastri Nagar, Ramgarh Cantonment, Ramgarh. This shows that he had an independent office from where he was operating. Shri Om Prakash Singh filed reply wherein he stated that he was not aiding or abetting any person and categorically stated that the trading done by M/s. Ganesha Industries and M/s. Vinayak Enterprises were lawfully done and shown in VAT returns which he has vetted and advised; that his office was filing their returns and doing all data processing works. 7.2.7. Thus, we observe that during the course of ....
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....ancy of statements under certain circumstances. - (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, - (a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or (b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. (2) The provision of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court." 5. A plain reading of sub-section (1)....
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.... 10. Once the ambit of Section 9D(1) is thus recognized and understood, one has to turn to the circumstances referred to in the said sub-section, which are contained in clauses (a) and (b) thereof. 11. Clause (a) of Section 9D(1) refers to the following circumstances : (i) when the person who made the statement is dead, (ii) when the person who made the statement cannot be found, (iii) when the person who made the statement is incapable of giving evidence, (iv) when the person who made the statement is kept out of the way by the adverse party, and (v) when the presence of the person who made the statement cannot be obtained without unreasonable delay or expense. 12. Once discretion, to be judicially exercised is, thus conferred, by Section 9D, on the adjudicating authority, it is self-evident inference that the decision flowing from the exercise of such discretion, i.e., the order which would be passed, by the adjudicating authority under Section 9D, if he chooses to invoke clause (a) of sub-section (1) thereof, would be pregnable to challenge. While the judgment of the Delhi High Court in J&K Cigarettes Ltd. (....
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....s. It is obviously in order to neutralize this possibility that, before admitting such a statement in evidence, clause (b) of Section 9D(1) mandates that the evidence of the witness has to be recorded before the adjudicating authority, as, in such an atmosphere, there would be no occasion for any trepidation on the part of the witness concerned. 16. Clearly, therefore, the stage of relevance, in adjudication proceedings, of the statement, recorded before a Gazetted Central Excise officer during inquiry or investigation, would arise only after the statement is admitted in evidence in accordance with the procedure prescribed in clause (b) of Section 9D(1). The rigour of this procedure is exempted only in a case in which one or more of the handicaps referred to in clause (a) of Section 9D(1) of the Act would apply. In view of this express stipulation in the Act, it is not open to any adjudicating authority to straightaway rely on the statement recorded during investigation/inquiry before the Gazetted Central Excise officer, unless and until he can legitimately invoke clause (a) of Section 9D(1). In all other cases, if he wants to rely on the said statement as relevant, for pr....
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.... statements, recorded during investigation under Section 14 of the Act. He has not invoked clause (a) of sub-section (1) of Section 9D of the Act, by holding that attendance of the makers of the said statements could not be obtained for any of the reasons contemplated by the said clause. That being so, it was not open to Respondent No. 2 to rely on the said statements, without following the mandatory procedure contemplated by clause (b) of the said sub-section. The Orders-in-Original, dated 4-4-2016, having been passed in blatant violation of the mandatory procedure prescribed by Section 9D of the Act, it has to be held that said Orders-in-Original stand vitiated thereby. 23. The said Order-in-Original, dated 4-4-2016, passed by Respondent No. 2 is, therefore, clearly liable to be set aside. 24. In view of the above facts and circumstances, the impugned Order-in-Original dated 4-4-2016 passed by respondent No. 2 stands set aside. Resultantly, the show cause notice issued to the petitioner is remanded to respondent No. 2 for adjudication de novo by following the procedure contemplated by Section 9D of the Act and the law laid down by various judicial Authorities in....
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....recorded from the three persons who were cross examined, we observe that they have retracted their statements before the adjudicating authority, Hence, the statements recorded from them during the course of investigation cannot be relied upon as they were not given voluntarily. In respect of the other statements relied upon in the impugned order, the mandate as provided under Section 9D ibid. has not been followed and hence they cannot be relied upon as evidences against the appellant company. Further, the appellants have submitted before us that they were taken to the office of DGCI, Jamshedpur without summons where they were tortured and confessional statements were taken from Shri Om Prakash Singh and Shri Mahanand Kumar and others and they were forced to pay Rs.1 Crore, which was paid by them under severe threat to life; that after they came out from the office of CGCEI Jamshedpur, the appellant's representatives and Shri Om Prakash, Shri Mahanand Kumar, Account Assistant of Shri Om Prakash Singh, all retracted their confessional statements. The appellants contested forceful realisation of the amounts by filing a Writ Petition before the Hon'ble High Court at Ranchi wherein....
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.... Om Prakash Singh to confirm the demands in the impugned order. We observe that during the course of cross examination of the proprietors of the trading firms viz. M/s. Ganesha Industries and M/s. Vinayak Enterprises, they have categorically stated that the transaction recorded in the name of their company belonged to them only and they have not dealt with the sponge iron manufactured by RSIPL. With regard to the alleged clandestine removal of the goods i.e., sponge iron, on behalf of the manufacturing companyRSIPL, the appellant submitted that the data recovered from the premises of Shri Om Prakash Singh contained the names of purchasers and their addresses. However, no verification was done at their end to ascertain the factual position of the clearances. We observe that a verification at the end of the recipients would have clarified that with whom they placed the orders and who actually supplied the goods. 7.3.2. The appellants also cited many judgments wherein it has been categorically laid down that when the names of the buyers were available in the seized records it would be incumbent on the investigation to make inquiries from the buyers for establishing clandestine remo....
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.... are of the view that the sufficient evidence does not exist in the present case, so as to uphold the findings of clandestine activity against the appellant." 7.3.4. In the instant case, we find that the investigation has not brought in any corroborative evidence to substantiate the allegation of clandestine removal. In order to confirm the demands for clandestine clearances, there should be tangible evidence of clandestine manufacture and clearance and merely inferences or unwarranted assumptions are not sufficient. There must be evidence in the form of: a. Raw materials, in excess of that contained as per the statutory records; b. Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty. c. Discovery of such finished goods outside the factory. d. Instances of sales of such goods to identified parties. e. Receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; f. Use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validity cleared on paym....
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....SIPL). 7.5.2. Regarding the penalty of Rs. 50,00,000/- imposed on Shri Mahabir Prasad Rungta, Director of the RSIPL, we observe that the Director in his statement maintained that they have nothing to do with the transactions recorded in the name of M/s. Ganesha Industries and M/s. Vinayaka Enterprises, which are trading firms. We also find that there is no evidence available on record to show that Shri Mahabir Prasad Rungta, Director was concerned with transporting, removing, depositing, keeping, concealing, selling and purchasing of excisable goods, which he had knowledge, or reason to believe were liable to confiscation. We find that no evidence has been brought on record to establish that the Directors are involved in clandestine manufacture and clearance of the goods. As the evidence available on record does not establish the clandestine manufacture and clearance, we hold that the penalty imposed on the Director is not sustainable. Accordingly, we hold that no penalty imposable on him and hence we set aside the penalty of Rs.50,00,000/- imposed on the Director. 7.5.3. Regarding the penalty of Rs. 5,00,000/- imposed on Shri Om Prakash Singh, Manager (Accounts) of the appel....