TaxTMI 
TaxTMI 
2026 (10) TMI 303
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....ged in the manufacture of Non-Alloy Steel Ingots ("NAS Ingots") falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985, besides manufacture of allied products such as Runners, Risers, etc. For manufacture of the said products, the appellant used, inter alia, Sponge Iron, Pig Iron and Iron & Steel Scrap as raw materials and availed CENVAT Credit of the Central Excise duty paid on such inputs in accordance with the applicable statutory provisions. 3. The proceedings originated from an investigation undertaken by the Directorate General of Central Excise Intelligence (DGCEI), Jamshedpur, pursuant to intelligence received regarding alleged clandestine manufacture and clearance of finished excisable goods by the appellant without payment of the appropriate Central Excise duty. The investigation also proceeded, inter alia, on allegations that, wherever Central Excise invoices had been issued, certain finished goods had been cleared at values lower than the actual consideration allegedly realised from the customers, with the balance consideration being recovered separately. The Department consequently examined the appellant's production, raw-material ....
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....i Kuleshwar Mahato, Assistant Accountant of M/s. Maihar Alloys Pvt. Ltd.; (b) Statement dated 18.07.2007 and further statement dated 18.02.2008 of Shri Binod Kumar Srivastava, Authorised Signatory of M/s. Maihar Alloys Pvt. Ltd.; (c) Statements dated 07.01.2008, 18.01.2008 and 20.01.2010 of Shri Mukesh Kumar Agarwal, the then Director of M/s. Maihar Alloys Pvt. Ltd.; and (d) Statement dated 18.07.2007 of Shri Ramesh Kumar Agarwal, uncle of Shri Mukesh Kumar Agarwal. 4.1. During the search and investigation, a substantial quantity of documents, including both physical records and printouts retrieved from the computer installed at the office premises of MAPL, were seized. These documents were subsequently relied upon in the proceedings as evidence relating to the appellant's accounted as well as allegedly unaccounted purchases, production and clearances. Amongst the documents relied upon were, inter alia: (i) Pages 01 to 03 of Document No. 01/DGCEI/MAPL(F)/JSR/2007; (ii) Pages 82 to 92 of Document No. 02/DGCEI/MAPL(F)/JSR/2007; (iii) Document Nos. 01, 02, 03, 04, 05 and 06/DGCEI/JRU/MAPL/OFF(J.C)/07; (iv) Document ....
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....others were alleged to contain both accounted and unaccounted transactions. The investigation alleged that the records contained particulars relating to the purchase of raw materials and sale of finished excisable goods during the period 2005-06, and that the data contained therein evidenced transactions which had not found corresponding reflection in the statutory records. 5.2. The Department further relied upon certificates allegedly given by Shri Kuleshwar Mahato, Assistant Accountant of MAPL, who was stated to have certified each of the aforesaid computer printouts as having been taken from the computer installed at the office of MAPL in the presence of the DGCEI officers on 18.07.2007 and as pertaining to MAPL. It was further noticed that Shri Mahato had signed each page and certified the number of pages contained in the respective documents. 5.3. The investigation sought to establish the status and identity of Shri Mahato as an employee of MAPL by referring to the attendance register of the staff of MAPL, seized vide Document No. 13/DGCEI/JRU/MAPL/OFF(J.C)/07, wherein his name appeared and his signatures were stated to have been recorded on a day-to-day basis. The Depar....
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.... purchase particulars appearing in Document No. 26/DGCEI/JRU/MAPL/OFF(J.C)/07, described as a purchase register maintained in the computer under the heading "Shree Ganesh Jee Maharaj". In particular, purchases from M/s. Kewal Metaliks were stated to include quantities of 18.510 MT on 16.05.2005, 24.080 MT on 20.10.2005, 21.760 MT on 12.11.2005, 23.300 MT on 29.12.2005 and 21.180 MT on 31.12.2005. These particulars were compared with pages 465 to 470 of Document No. 23/DGCEI/JRU/MAPL/OFF(J.C)/07, stated to contain the ledger of MAPL in respect of M/s. Kewal Metaliks. 5.8. Similar comparisons were made between the purchase particulars contained in Document No. 26 and the ledger of MAPL relating to SAIL-BSP, Bokaro, appearing at pages 677 to 682 of Document No. 24/DGCEI/JRU/MAPL/OFF(J.C)/07. The Department referred to purchase entries appearing at pages 01, 09, 10 and 12 of Document No. 26 and treated the correspondence as further corroboration that the records stored under "Shree Ganesh Jee Maharaj" pertained to MAPL. The answers of Shri Mukesh Kumar Agarwal to Questions Nos. 16, 18 and 19 of his statement dated 18.01.2008 were also relied upon. 5.9. Document No. 56/DGCEI/JRU/M....
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....ation treated the similarity between the two sets of documents as supporting their authenticity. 6. In the backdrop of the aforesaid documentary and oral material, the Department alleged that MAPL had maintained parallel records of its business operations, containing both accounted and unaccounted purchases, production and sales, and that the unaccounted records represented actual transactions which were deliberately omitted from the statutory records. The investigation further alleged that the Appellant had suppressed the actual quantity of raw materials procured and consumed, the actual production of NAS Ingots and allied products, and the actual quantity of finished goods cleared. 6.1. The Department further alleged that MAPL had not been maintaining its Daily Stock Account (DSA) on the basis of actual production. Rather, according to the investigation, figures were being entered therein on the basis of fabricated, manipulated or imaginary production data so as to conceal the actual manufacture and thereby facilitate clandestine removal of finished excisable goods without payment of duty. 6.2. A separate evidentiary circumstance relied upon by the Department concerned t....
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....lso proceeded on the premise that, in order to execute such a scheme, the appellant had taken precautions to conceal the unaccounted procurement of raw materials, the consequent manufacture of finished goods and the monetary trail arising from the clandestine clearances. 9. Upon completion of the investigation, the Department issued the aforesaid Show Cause Notice dated 29.04.2010, proposing recovery of Rs.6,25,04,654/- as Central Excise duty, inclusive of all applicable cesses, for the period 09.04.2005 to 17.07.2007, by invoking the first proviso to Section 11A(1) of the Central Excise Act, 1944, on the ground of fraud, wilful misstatement, suppression of facts and contravention of the provisions of the Act and Rules with intent to evade payment of duty. Interest and various penalties were also proposed. The notice further proposed appropriation of the Rs.20,00,000/- already deposited by MAPL through the four GAR-7 Challans dated 26.07.2007, 20.08.2007, 20.09.2007 and 20.10.2007, each amounting to Rs.5,00,000/-. 10. The appellant filed its reply to the Show Cause Notice, denying and disputing the allegations in their entirety. It was, inter alia, contended that the methodol....
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....gnificance in view of the circumstances of its recovery, the certifications allegedly made by MAPL's employees, the alleged correspondence between portions thereof and the statutory ledgers and invoices, and the statements of Shri Kuleshwar Mahato and Shri Mukesh Kumar Agarwal. 11.2. The adjudicating authority further rejected the contention of the Appellant that the Department lacked corroborative evidence and held, in substance, that the private records, computer printouts, their comparison with statutory records, alleged clandestine-clearance details, statements/admissions attributed to the Director and employees, alleged undervaluation, electricity-related evidence and the allegedly fictitious or untrue records collectively constituted sufficient corroboration of the alleged evasion. 11.3. The adjudicating authority also relied upon the alleged statements of Shri Mukesh Kumar Agarwal dated 07.01.2008, 18.01.2008 and 20.01.2010, the statement of Shri Binod Kumar Srivastava, Authorised Signatory, dated 18.07.2007 and 18.02.2008, and the statement of Shri Kuleshwar Mahato dated 18.07.2007, and treated the same as corroborating the Department's allegations regarding c....
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....umber from 1 to 20. Data's in this sale register are actually related to the sale details of Ms Ingot of M/s. Maihar Alloy Pvt Ltd. Ramgarh stored in computer in the name of Shree Ganesh Jee Maharaj all pages have been duly signed by me". It is submitted that the above certificate does not indicate "the manner in which it was produced". None of the conditions as laid down in Section 36B(2) was followed. (iii) Document No. 51/DGCEI/JSR/MAPL (JISCO)/2007 - No procedure was followed. Copy of page no 01 to 02 of Document No. 51 are annexed to Show Cause Notice. There is no indication of certificate. (iv) All the other documents as mentioned at para 38 of the Order have been retrieved/print out taken from computer (Para -38 of the Order). It is evident that conditions of Section 36B was not followed while recovery of the alleged computer print out, as under:- i. DOC No. 01/DGCEI/JRU/MAPL/OFF (J.C.) /07 ii. DOC No. 02/DGCEI/JRU/MAPL/OFF (J.C.)/07 iii. DOC No. 03/DGCEI/JRU/MAPL/OFF (J.C.) /07 iv. DOC No. 04/DGCEI/JRU/MAPL/OFF (J.C.)/07 v. DOC No. 05/DGCEI/JRU/MAPL/OFF (J.C.)/07 vi. DOC No. 06/DGCEI/JRU/MAPL/O....
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....ce of goods during the period 2005-06. * Document no. 06 contained the details of finished goods cleared on payment of duty and further consignment cleared on payment of duty realized more amount that what has been shown in the invoices (i.e. under valuation). * Document no. 01, 02 and 56 related to demand of Rs. 3,80,69,309.00 and Rs. 7,61,386.00 ( Annexure -1G) during the period 09.04.05 to 31.03.06. * Shortage of finished goods detected during the Stock Taking on 18.07.07- Shortage of 350.10 (Para -131). RE- THE FOLDER OF SHRI GANESH JEE MAHARAJ IS NOT RELATED TO THE ACCOUNTS OF THE APPELLANT COMPANY (ii) It is submitted that the folder of Shri Ganesh Jee Maharaj is not related to the accounts of the appellant company. The folder of "Shri Ganesh Jee Maharaj" is as under i. Document number 01/DGCEI/JRU/MAPL/OFF (J.C.)/07 ii. Document Number 02/DGCEI/JRU/MAPL/OFF/(JC)/07 iii. Document Number 03/DGCEI/JRU/MAPL/OFF/(JC)/07 iv. Document Number 04/DGCEI/JRU/MAPL/OFF/(JC)/07 v. Document Number 05/DGCEI/JRU/MAPL/OFF/(JC)/07 (iii) That all the above documents are Sales Register Wages (Contr....
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....ter printout, without any indications of the appellant's name. Further, document no. 51recovered form the premises of the dealer M/s JISCO which is also certified by Shri B.K. Shrivastava, the Authorized Signatory, where he stated that these documents had been recovered from the factory premises of the appellant company related to the sale of the appellate company. Further, annexure 4A, Pg 347 of the PB is also computer print without any mentioning of the appellant's company which has been certified by Shri. B.K. Shrivastava that these documents had been recovered form the factory premises of the appellant company related to the sale of the appellate company dated 18.07.2007. (viii) It may be noted that document number 51, page 632 of PB was recovered from the premises of M/s. JISCO who has no relation with the appellant and document No.01 is recovered from the premises of the appellant company are mostly similar. The Adjudicating Authority at Para 132 Pg. 81 of the order, observed that Pg No. 1 to 3 of the Document no. 01 and 02 of document no. 02 contains vehicle number, quantity of raw materials and on comparison with statutory documents, it was found that the a....
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....eptember 2005, was manufacture in August 2005 as corroborated with electricity consumption. The adjudicating authority has totally overlooked that the production of August 2005 was only 14.690 MT, which will be added with 768.280 MT as shown in September 2005. Thus, there is no abnormality or irregularity. The adjudicating authority has failed to appreciate the documents in proper manner. RE: NINE DOCUMENTS AS MENTIONED AT PARA 85, PG . 59 OF ORDER, HAVE NO EVIDENTIARY VALUE (xii) It has been observed that all these documents contained the details of accounted clearances as well as unaccounted clearances. The documents maintaining for unaccounted sales as well as accounted details were stored in Tally software in the computer software under the name Ganesh Jee Maharaj and the computer was installed in the office premises of the appellant company and has certified by Shri Kuleswar Mahato, Assistant Accountant of the appellant. (xiii) It is submitted that the Kuleshwar Mahato had left the company on 09.12.07 as evident from the Provident Fund records. The demand was raised on the basis of the accounted sale between computer folder of the appellant company a....
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....0 M.T. (xix) The other aspect of this matter is that the charge of Clandestine removal is mainly based on the electricity consumption, computer printout and the statement of Shri Mukesh Kumar Agarwal, Shri Kuleshwar Mahto and Shri B.K. Shrivastwa, for the period 09.04.2005 to 17.07.2007. It is significant to note that subsequently another show cause notice dated 01.08.2014 was issued proposing demand of central excise duty of Rs. 15,28,24,1801.00 for the period July 2009 to March 2014 alleging clandestine removal of goods on the basis details of the electricity consumption. By Order-In-Original 22.03.2016 the Commissioner of Central Excise confirmed the demand of duty along with interest and penalty. The matter went up to the Hon'ble High Court of Jharkhand and Ranchi. The Hon'ble/Division bench were pleased to quash and set aside the Order-In-Original dated 22.03.2016 and remanded the for Denovo Adjudication of the Show Cause notice dated 01.08.2014. In Denovo Adjudication by order dated 06.05.2022 bearing number Denovo/C.Ex.Pr. Commr./2022, the Principal Commissioner, CGST and Central Excise Ranchi was pleased to drop the proceedings initiated by SCN dated 01.18.....
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....on the evidentiary foundation of the present proceedings, renders the allegations on electricity null and void. (b) Admissibility of computer-generated documents: The Ld. Counsel submitted that the computer-generated printouts and other electronic records relied upon by the Revenue could not be treated as substantive evidence without due compliance with the statutory requirements prescribed under Section 36B of the Central Excise Act, 1944. According to the appellant, this aspect has not been examined in its proper perspective in the impugned order. (c) Resignation of persons whose statements were relied upon: Further, that Shri Kuleshwar Mahto and Shri Mukesh Kumar Agarwal, whose statements recorded during the investigation have been relied upon against the appellant, had resigned from their respective positions shortly after the proceedings. The appellant's contention is that this circumstance casts a material doubt upon the evidentiary value and reliability of the said statements. (d) Installed furnace capacity vis-à-vis alleged production: The Ld. Counsel also invited attention to letters addressed by M/s MAPL to the jurisdictional departmental....
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.... the data was maintained in a Tally software file under the said name. The Revenue alleges that the said documents actually pertained to the appellant/MAPL and has accordingly relied upon the same in the proceedings. 18.1. However, we find that the mere retrieval of a document from the premises or the computer system of an assessee, without more, cannot by itself be treated as conclusive proof of clandestine clearance or undervaluation by the assessee, particularly where the very nomenclature and internal segregation of the folder i.e., one set exclusively in the name of "Shri Ganesh Jee Maharaj" and a separate, distinct set in the name of the appellant-company itself, has been specifically argued by the appellant as unconnected to its own business. Such allegations of clandestine clearances or undervaluation must therefore be established by cogent and tangible evidence, and cannot rest on inferences drawn from third-party or ambiguously captioned records alone. 18.2. We note that the reliance placed by the adjudicating authority is principally on, (i) the fact that the printouts were retrieved from the appellant's own computer, and (ii) the statement of....
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....proceedings. Documents Alleged to be Linked with MAPL 19. We have considered the findings recorded by the adjudicating authority in the impugned order in relation to the other documents/records. In particular, amongst others, the adjudicating authority has proceeded on the basis of Document No. 01/DGCEI/MAPL(F)/JSR/2004 (pages 1 to 3) and Document No. 51/DGCEI/JSR/MAPL(JISCO)/2007 (pages 1 and 2), culminating in the finding of alleged shortage of goods and the consequent finding of suppression of alleged actual production/under-invoicing. 19.1. In this connection, we note that the documents in question do not bear the name of the appellant-company. The only link sought to be established between these documents and the appellant is the certification and statement of Shri B.K. Srivastava, Authorized Signatory of the appellant, to the effect that the said documents "relate to the sale from the factory of the appellant company." We find it significant that Document No. 51, admittedly recovered not from the appellant's own premises but from the premises of M/s. JISCO, a dealer with whom the appellant has no ownership or organisational nexus, has nevertheless been treated as....
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.... been signed by the witnesses and the authorized signatory of the Appellants company. The documents were also recovered from the premises 'Aparna-2' Plot No. 702/4(B), Rameshwar Patna, Bhubaneshwar, in the presence of Shri. G.D. Agarwal. The seized documents from the Rameshwar Patna office contains details such as payments made to contractors, party ledger, trial balance etc. Computer print outs of these documents were taken in the presence of Shri. Srinivas Padhi who was authorized by the Appellant to witness the retrieval of data from the seized computer. The Appellant contended that Shri. Srinivas Padhi, was a Telephone Operator attended printing of computer print out at DGCEI office. He was not holding any responsible official position in relation to the operation of relevant device or management of relevant activities. Accordingly, it is their contention that the Certificate given by him will not satisfy the requirement as provided under section 36B. We agree with the contention of the Appellant. The documents retrieved must be certified by the person who operates the computer or the person who is responsible in the company and aware of their day today activities. Auth....
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...." 19.3. Having regard to the above two aspects, namely, the absence of independent corroboration establishing that the documents in question pertain to the appellant, and the non-fulfilment of the procedural requirements of Section 36B qua the electronic records relied upon, we do not find the said documents to constitute substantive proof sufficient to sustain the finding of shortage of goods or the consequent allegation of suppression of production recorded by the adjudicating authority. 19.4. Further, in respect of the various other records/documents relied upon in the proceedings, we further reiterate our observation made hereinabove that, insofar as reliance is placed on the computer-retrieved data as such, nothing has been shown to us to establish compliance with the mandatory procedure under Section 36B of the Central Excise Act, 1944 for treating such computer printouts as admissible evidence and for the other documents, no proper investigation has been done so as to justify the charge of clandestine clearance or under-invoicing of the goods in question. 20. In these circumstances, taking the totality of the above factors together, and for the want of compliance wi....
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....e or even cumulatively with the documentary allegations considered above, does not furnish a sufficiently firm foundation for the charges levelled against the assessee in the present matter, without further proof. Installed Furnace Capacity vis-à-vis Alleged Quantum of Production 22. We have also considered the submission of the Ld. Counsel for the appellant regarding the physical production capacity of the furnaces installed at the appellant's factory. It has been brought to our notice that the appellant had, during 2005 and 2006 itself, duly intimated the jurisdictional departmental authorities that its second furnace had become operational, such intimation being contemporaneous and on record, and not an afterthought conceived for the purposes of the present proceedings. 22.1. It is a settled principle that a charge of clandestine manufacture and removal must be tested against the physical capability of the assessee's plant and machinery to produce the quantum of goods alleged to have been clandestinely cleared; where the alleged production, even after reckoning the installed and operational capacity of all furnaces available with the assessee, is shown to....
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....angible evidence such as verification of actual excess production with reference to installed capacity and consumption of raw materials/power, movement of goods through transporters, receipt of corresponding unaccounted consideration through identifiable flow-back of funds, etc., as has also been held by this Tribunal in Arya Fibres Pvt. Ltd. v. Commissioner of Central Excise, Ahmedabad-II [2014 (311) E.L.T. 529 (Tri.-Ahmd.)]. On an examination of the record before us, we find that none of the aforesaid corroborative parameters stand satisfied in the present case. In fact, as observed elsewhere in this order, there is no verification of excess production with reference to the appellant's installed furnace capacity. In the absence of satisfaction of any of these well-recognised parameters, the charge of clandestine manufacture and clearance, as sought to be fastened upon the appellant, cannot be said to have been established. 25. In view of the cumulative findings recorded hereinabove, particularly taking into account the lack of tangible and corroborative evidence for linking the documents/printouts recovered with the appellant, coupled with non-adherence to the procedure pr....