TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 360
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....DGCEI obtained some loose sheets and a purported weekly wages register from a pen drive alleged to have been recovered from Sujit Dubey, the cashier of the company. A physical stock taking of the said goods was also conducted by the DGCEI at the said premises and a Report dated 26.2.2014 was prepared by them in pursuance thereof. Further to the search operation conducted as aforesaid, the DGCEI also obtained statements from Ramesh Choudhary, factory-incharge of the company, Sujit Dubey, cashier of the company, and Jaiprakash Choudhary, Director of the company. Thereafter, DGCEI issued to the company a Show Cause Notice bearing DGCEI No. F.No.45/KZU/KOL/JRU/ Gr.C/2016/1376 dated March 17, 2015. By the said Show Cause Notice it was alleged that the appellant had during the said period, clandestinely cleared the said goods without issuing excise invoices or paying duty thereon, or without making any declaration in respect thereto in the ER1 returns filed by it before the concerned jurisdictional authorities. The company was accordingly required to show cause as to why an amount of Rs. 97,97,194/- should not be recovered from it with interest thereon and as to why penalty should not al....
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....as required to establish that the purported documents obtained from the said pen drive did not bear any relation to the subject impugned transactions, failed to appreciate further that the burden of establishing such relation rests on the authorities concerned and not on the appellant company. Apart from a mere averment that the purported data contained in the pen drive pertained to the subject transactions or had any connection with the manufacturing operations of the appellant company, there was no evidence put forward in support of the same apart from a reference to statements of witnesses who had subsequently retracted the same. The said impugned order is thus, plainly arbitrary and founded on mere presumptions and assumptions. 2.3 The stated documents obtained from the pen drive allegedly recovered from Sujit Dubey, have been sought to be corroborated by the statements of Jai Prakash Choudhary and Sujit Dubey. However, a perusal of the statement of Jai Prakash Choudhary dated 14.3.2014, particularly his response to Question No. 27, it is apparent that he did not agree with the materials purportedly recovered from the said pen drive and had disputed the same. 2.4 Further ....
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....es in the relied upon materials. 2.6 Even otherwise, the contents of the said seized loose sheets bearing No. 04/DGCEI/JRV/VSPL/F/14, are irreconcilable and contradictory in nature. Specifically, in the said seized document, for several weeks listed therein, the number of workers alleged to have been engaged by the company is shown as being in excess of 150. However, on comparing the same with the monthly attendance register of workers maintained by the appellant, and duly verified by the ESIC and EPF and other statutory authorities periodically, it will be apparent that the number of workers engaged by the company at the said premises, at no point of time during the said period, exceeded 3536. Incidentally, ESI and EPF benefits accorded to such workers are provided on the basis of records maintained in the said attendance register, which the Commissioner (Appeals), without reason, failed to take into consideration in confirming the demands and allegations contained in the impugned order. No attempt was made by such authorities either to verify with the ESIC and EPF authorities as to the correctness and reliability of the said attendance register mainlined by the appellant at th....
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.... at the said premises was correct in view of it having been conducted in the presence of witnesses. 2.12 Furthermore, from the outset, the ingots or/are fed into the rolling mills on piece basis approximately whereof is 72.5 kg per piece (and not 100 kg as alleged). The manufacturing process and the rolling mills of M.S.flats and M.S.bars take place under separate production schedules. The M.S.flats which are produced are 22 mm x 6 mm long pieces, which are then cut into further pieces. The M.S.bars which come out of the rolling mills are of 160 feet length approximately, having a diameter between 8 mm and 25 mm, which are cut into 44 feet length pieces each, and the balance as random pieces. From the said weights, the burning loss and missroll, to the extent of 2 ½% to 3% are deducted, and the balance 97.5% and 97% are taken as finished goods weight (M.S.bars/M.S.flats) in the DSA. However, at the time of clearance of the said M.S.bars/M.S. flats, they are cleared on actual weighment and duty is paid on actual weighment basis. In making the ingots, the raw materials required are sponge iron, pig iron and other scrap materials. They are fed together in the induction furna....
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....asers of the said goods manufactured by the appellant, and no evidence has been forwarded in respect of any clearance of excess goods from the said premises, in addition to those declared by the appellant in its returns and statutory records. 2.14 In the entire of the show cause notice and the RUDs enclosed therewith and the impugned order there is no positive evidence disclosed which establishes that the purported entries which allegedly are not supported by central excise invoices related to the said goods removed without payment of duty. It is a settled principle of law that the onus to establish clandestine removal is on the Department. The purported basis adopted in the impugned order to get around this specific requirement of law is patently erroneous and has no merit or substance whatsoever. 2.15 In this regard reliance is placed upon, inter alia, the following decisions:- (i) Shree Krishna Laxmi Steel Udyog Pvt. Ltd.Vs.Commissioner of Central Excise and Service Tax, 2024 (12) TMI-738-CESTAT KOLKATA. (ii) Commissioner of Central Excise Vs. Brims Products 2011 (271) ELT 184 (Pat), paras 8-10, (iii) Commissioner of Central Excise Vs. Shingar La....
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....ce are material to the present case. Therefore, he justifies the confirmed demand, interest and penalties. He prays that the appeals may be dismissed. 5. Heard both the sides. We have also gone through the appeal papers, and submissions made by both the sides. 6. Admittedly, the entire case has emanated from the search operations taken up by Dept officials, wherein they have come across several private documents, pen drive etc. showing the details of removals, which as per Revenue, are not backed by proper Central Excise Invoices. As per the Dept., the statements of various officials have been recorded, wherein the role of the company, its executive in such clandestine activities are described. 7. The crux of the arguments of the appellant company can be summarized as under : (a) The so called private records / loose sheets, as per Revenue are the Wages paid details for the appellant company's workers. Based on the amounts paid under these sheets, the quantification of the finished goods have been arrived at. Since there is no perfect formula to arrive at the production details based on the wages paid pages alone, the quantification cannot be said to be proper. ....
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....corded statements cannot have any evidentiary value. Some of such decisions are discussed below : 9. The Punjab and Haryana High Court in the case of G-Tech Industries Vs. Union of India-2016 (339) E.L.T. 209 (P&H) has held as under:- 3. The petitioner seeks, by means of the present writ petition, to challenge Order-in-Original No. V(29)15/ce/Commr.Adj/Chd-II/44/2015, dated 4-4-2016 issued by respondent No. 2 whereby respondent No. 2 has confirmed differential Central Excise Duty (hereinafter referred to ―as duty") demand of Rs. 7,08,38,008/- with interest and equivalent penalty. It is contended that the impugned order-in-original has been passed in flagrant violation of Section 9D of the Central Excise Act, 1944 (hereinafter referred to as ―the Act") by relying upon the statements recorded under Section 14 of the Act without first admitting them in evidence in accordance with the procedure prescribed in this regard by Section 9D(1)(b) of the Act. 4. In view of the fact that the case of the petitioner is essentially premised on Section 9D of the Central Excise Act, 1944, it would be appropriate to reproduce the said provision, in extenso, thus : ....
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....Excise Officer, shall be relevant for the purpose of proving the truth of the facts contained therein. If these circumstances are absent, the statement, which has been made during inquiry/investigation, before a Gazetted Central Excise Officer, cannot be treated as relevant for the purpose of proving the facts contained therein. In other words, in the absence of the circumstances specified in Section 9D(1), the truth of the facts contained in any statement, recorded before a Gazetted Central Excise Officer, has to be proved by evidence other than the statement itself. The evidentiary value of the statement, insofar as proving the truth of the contents thereof is concerned, is, therefore, completely lost, unless and until the case falls within the parameters of Section 9D(1). 9. The consequence would be that, in the absence of the circumstances specified in Section 9D(1), if the adjudicating authority relies on the statement, recorded during investigation in Central Excise, as evidence of the truth of the facts contained in the said statement, it has to be held that the adjudicating authority has relied on irrelevant material. Such reliance would, therefore, be vitiated in ....
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....uthority, and (ii) the adjudicating authority has, thereafter, to form the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice. 14. There is no justification for jettisoning this procedure, statutorily prescribed by plenary parliamentary legislation for admitting, into evidence, a statement recorded before the Gazetted Central Excise officer, which does not suffer from the handicaps contemplated by clause (a) of Section 9D(1) of the Act. The use of the word ―shall" in Section 9D(1), makes it clear that, the provisions contemplated in the sub-section are mandatory. Indeed, as they pertain to conferment of admissibility to oral evidence they would, even otherwise, have to be recorded as mandatory. 15. The rationale behind the above precaution contained in clause (b) of Section 9D(1) is obvious. The statement, recorded during inquiry/investigation, by the Gazetted Central Excise officer, has every chance of having been recorded under coercion or compulsion. It is a matter of common knowledge that, on many occasions, the DRI/DGCEI resorts to compulsion in order to extract....
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.... plenary parliamentary legislation, is not followed, it has to be regarded, that the Revenue has given up the said witnesses, so that the reliance by the CCE, on the said statements, has to be regarded as misguided, and the said statements have to be eschewed from consideration, as they would not be relevant for proving the truth of the contents thereof. 20. Reliance may also usefully be placed on Para 16 of the judgment of the Allahabad High Court in C.C.E. v. Parmarth Iron Pvt Ltd.,2010 (260) E.L.T. 514 (All.), which, too, unequivocally expound the law thus : "If the Revenue choose (sic chose?) not to examine any witnesses in adjudication, their statements cannot be considered as evidence." 21. That adjudicating authorities are bound by the general principles of evidence, stands affirmed in the judgment of the Supreme Court in C.C. v. Bussa Overseas Properties Ltd.,2007 (216) E.L.T. 659 (S.C.), which upheld the decision of the Tribunal in Bussa Overseas Properties Ltd. v. C.C.,2001 (137) E.L.T. 637 (T). 22. It is clear, from a reading of the Order-in-Original dated 4-4-2016 supra, that Respondents No. 2 has, in the said Orders-in-Original, plac....
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.... said statements to support the case sought to be made out in the show cause notice. (iv) Once examination-in-chief, of the makers of the statements, on whom the Revenue seeks to rely in adjudication proceedings, takes place, and a copy thereof is made available to the assessee, it would be open to the assessee to seek permission to cross-examine the persons who have made the said statements, should it choose to do so. In case any such request is made by the assessee, it would be incumbent on the adjudicating authority, i.e., on Respondent No. 2 to allow the said request, as it is trite and well-settled position in law that statements recorded behind the back of an assessee cannot be relied upon, in adjudication proceedings, without allowing the assessee an opportunity to test the said evidence by cross-examining the makers of the said statements. If at all authority is required for this proposition, reference may be made to the decisions of the Hon'ble Supreme Court in Arya Abhushan Bhandar v. U.O.I.,2002 (143) E.L.T. 25 (S.C.) and Swadeshi Polytex v. Collector, 2000 (122) E.L.T. 641 (S.C.). 25. The writ petition is allowed in the aforesaid terms. 10. In the c....
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....side and in case of minor inconsistencies/no inconsistency, if the adjudicating authority is of the opinion, having regard to the circumstances of the case that the statement should be admitted in evidence in the interests of justice, the adjudicating authority can do so as per this Section 9D(1)(b). 59. However, implicit in this procedure stipulated in 9D(1)(b) is the necessary requirement for the adjudicating authority to depose all the deponents who have given statement under Section 14, save as those that are unavailable in the scenarios given in 9D(1)(a), for the purposes of evaluating whether the statements are voluntary, to attest that he had deposed the contents of the statement and then take a considered decision whether the truth of the facts contained in the statement stand proved or disproved in the facts and circumstances of the case. In other words, it is only after such examination in chief, that the adjudicating authority can arrive at a considered decision, whether to declare the witness appearing before it as a hostile witness and then to decide in the facts and circumstances whether to rely on the earlier statement; or if upon finding major inconsistenci....
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....sions 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 contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall 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 ....
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....onic 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 India." 12. CESTAT New Delhi dealing with both Section 9D and Section 36B, in the case of Surya Wires Pvt. Ltd Vs Principal Commissioner, CGST, Raipur (EXCISE APPEAL NO. 51096 OF 2022) - Final Order No. 50453-50454/2025 dated 1.4.2025, has held: 4. xxxxxxxxxxxxxx Statements of Harsh Agrawal and Surendra Kumar Jain (Directors of the appellant), Narendra Kumar Rathod (security guard), Satyanand Soi (security-in-charge) and Ishwar Prasad Verma (loading-in-charge) were recorded under section 14 of the Central Excise Act. 6. The show cause notice also deals with duty liability arrived at on the basis of loose papers recovered from the premises of the appellant. The relevant portions of the show cause notice relating to this allegation are reproduced below: "11.1 Loose papers recovered from the premises of the Noticee No. 1 containing details of truck number, Estimated Bill of loaded vehicle, description of goods, name of the party, ....
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.... of the appellant. These statements were recorded by the Officer under section 14 of the Central Excise Act. 13. The first and foremost issue that arises for consideration is whether such statements could have been considered as relevant and relied upon without following the procedure contemplated in section 9D of the Central Excise Act relating to relevancy of statements under certain circumstances. 14. The statement of witnesses are recorded under section 14 of the Central Excise Act and section 9D of the Central Excise Act deals with relevancy of these statements under certain circumstances. 15. The statement of witnesses are recorded under section 108 of the Customs Act, 196223 and section 138B of the Customs Act deals with relevancy of statements under certain circumstances. 16. It would, therefore, be appropriate to examine these sections of the two Acts at length. Central Excise Act 17. Section 14 of the Central Excise Act deals with power to summon persons to give evidence and produce documents in inquiries under the Central Excise Act. Any Central Excise Officer duly empowered by the Central Government in this behalf has the power to sum....
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....nces of the case, the statement should be admitted in evidence, in the interests of justice, except where the person who tendered the statement is dead or cannot be found. In view of the provisions of sub-section (2) of section 9D of the Central Excise Act or sub-section (2) of section 138B of the Customs Act, the provisions of sub-section (1) of these two Acts shall apply to any proceedings under the Central Excise Act or the Customs Act as they apply in relation to proceedings before a Court. What, therefore, follows is that a person who makes a statement during the course of an inquiry has to be first examined as a witness before the adjudicating authority and thereafter the adjudicating authority has to form an opinion whether having regard to the circumstances of the case the statement should be admitted in evidence, in the interests of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is....
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....ced on the statement of the Director of the Company who is said to have admitted clandestine removal of goods. The contention of the appellant before the High Court was that the statement of the Director could be admitted in evidence only in accordance with the provisions of section 9D of the Central Excise Act. After examining the provisions of sub-sections (1) and (2) of section 9D of the Central Excise Act, and after placing reliance on the judgment of the Punjab and Haryana High Court in Ambika International, the Chhattisgarh High Court held: "9.3 A conjoint reading of the provisions therefore reveals that a statement made and signed by a person before the Investigation Officer during the course of any inquiry or proceedings under the Act shall be relevant for the purposes of proving the truth of the facts which it contains in case other than those covered in clause (a), only when the person who made the statement is examined as witness in the case before the court (in the present case, Adjudicating Authority) and the court (Adjudicating Authority) forms an opinion that having regard to the circumstances of the case, the statement should be admitted in the evidence, in....
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.... as Customs, Excise and Service Tax Appellate Tribunal committed illegality in placing reliance upon the statement of Director Narayan Prasad Tekriwal which was recorded during investigation when his examination before the adjudicating authority in the proceedings instituted upon show cause notice was not recorded nor formation of an opinion that it requires to be admitted in the interest of justice. In taking this view, we find support from the decision in the case of Ambica International v. UOI rendered by the High Court of Punjab and Haryana." (emphasis supplied) 28. It, therefore, transpires from the aforesaid decisions that both section 9D(1)(b) of the Central Excise Act and section 138B(1)(b) of the Customs Act contemplate that when the provisions of clause (a) of these two sections are not applicable, then the statements made under section 14 of the Central Excise Act or under section 108 of the Customs Act during the course of an inquiry under the Acts shall be relevant for the purpose of proving the truth of the facts contained in them only when such persons are examined as witnesses before the adjudicating authority and the adjudicating authority forms a....
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....s. The stock taking conducted did not show any excess / short nor any demand was made on account of any deficiency noticed during the stock taking. Therefore, the allegation about removal of the goods clandestinely cannot be arrived at based on assumptions and presumptions. 15. The Chhattisgarh High Court in Hi Tech Abrasives versus Commissioner of C. Excise & Customs, Raipur [2018 (362) E.L.T. 961 (Chhattisgarh)], has held as under : "12.2 .............What, amongst other things, could be relevant consideration of clandestine removal, was discussed as 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 pr....
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....ctor of the correct central excise duty from the noticee upon whom or upon which allegation of clandestine removal of the finished product is levelled. The electricity consumption report like Dr. N.K. Batra report can hardly be treated as a substantive evidence. Time and again, the decisions have been given by the Tribunals but the respondents-departments are turning deaf-ear to. In this case, they are also turning deaf-ear to their own circular dated 26-6-2014 (Annexure-3 to the memo of this writ). In this case, the respondents are relying upon Dr. N.K. Batra's report, also upon the allegation that much less salary has been paid to the employee and the unit is running in losses. All these are nothing but the possibilities, for clandestine removal, but, for proving the clandestine removal, the substantive piece of evidence is must. Few such evidences have been referred by this Court. The list of these evidences is not exhaustive. The department should have collected the proof of amount received from the consignees, statement of consignees, receipts of sale proceeds by the consignor and its disposal" [Emphasis supplied] 16. The Hon'ble Allahabad High Court in th....