Rashmi Cement Limited Vs Commissioner of Central Tax (CESTAT Kolkata)
Summary: The Kolkata Bench of CESTAT allowed nine appeals involving Rashmi Cement Limited, Rashmi Metaliks Limited and their directors, setting aside a central excise duty demand of ₹67,28,17,794, along with interest and penalties. The dispute related to alleged clandestine manufacture, removal and undervaluation of excisable goods during financial years 2011–12 and 2012–13. The Directorate General of Central Excise Intelligence conducted searches between 17 and 20 January 2013 and relied upon private dispatch registers, handwritten records, electronic documents and statements of employees, directors and other persons. The Department alleged that the companies had cleared cement, sponge iron, billets, wire rods and other products without proper accounting or payment of duty. The Tribunal examined whether this material was sufficient to establish the serious allegation of clandestine removal.
The Department’s case substantially rested on records recovered from premises belonging to third parties, including employees and former employees. These documents purportedly contained details of production, dispatches, quantities, customers and payments. However, the Tribunal found that the authors of the documents had not been established and that the Department had failed to demonstrate their evidentiary reliability. The persons from whose possession the records were recovered had also not been made noticees in the proceedings. Consequently, the Tribunal held that such documents, without proper authentication and supporting evidence, could not independently establish clandestine removal of excisable goods.
The Tribunal separately examined the electronic records recovered from computers, hard disks and pen drives. It emphasised the statutory requirements governing admissibility of computer-generated evidence under Section 36B of the Central Excise Act, 1944. In the absence of the prescribed certificate, the electronic documents could not be treated as admissible evidence to substantiate the Department’s allegations. The Tribunal thus rejected reliance on the electronic records as proof of unaccounted manufacture and removal.
Another significant issue concerned statements recorded during the investigation. The Department relied on statements of directors, employees, former employees and other persons to corroborate its allegations. The Tribunal examined the mandatory procedure under Section 9D of the Central Excise Act, 1944, governing the use of such statements as evidence. It held that statements recorded during investigation, without compliance with the prescribed statutory procedure, could not be considered corroborative evidence against the appellants. The failure to follow Section 9D materially weakened the Department’s case.
The Tribunal also considered whether the investigation had established the necessary factual foundation for clandestine manufacture and clearance. Referring to the evidentiary principles discussed in Arya Fibres Pvt. Ltd., it observed that the Department had not adequately established the charge through reliable corroborative material. A further allegation concerned an alleged shortage of approximately 7,300 metric tonnes of finished goods during stock verification on 19 January 2013. The Tribunal noted that the stock-taking exercise lasted only about five and a half hours and that the shortage had effectively been determined through visual estimation rather than reliable weighment records. Without documentary evidence or weighment slips, the alleged shortage could not sustain the charge of clandestine removal.
In conclusion, CESTAT held that the Revenue had failed to discharge its burden of proving clandestine removal. The combination of unauthenticated third-party records, electronic documents lacking Section 36B certification, statements not tested under Section 9D, insufficient corroborative evidence and unreliable stock estimation rendered the demand unsustainable. Accordingly, the Tribunal set aside the entire excise duty demand of ₹67.28 crore, together with interest, and cancelled the penalties imposed on the appellant companies and individual directors. All nine appeals were allowed.
Cases Discussed
- Arya Fibres Pvt. Ltd. v. Commissioner of Central Excise, Ahmedabad, 2014 (311) E.L.T. 529 (Tri.–Ahmd.) — Clandestine manufacture and clearance must be established through tangible, affirmative and corroborative evidence, not assumptions or presumptions.
- Jai Balaji Industries Limited & Ors. v. Commissioner of CGST & Central Excise, Bolpur, 2023 (8) TMI 989 (CESTAT Kolkata) — Considered regarding clandestine removal, investigation statements and compliance with Section 9D of the Central Excise Act, 1944.
- Hi Tech Abrasives Ltd. v. Commissioner of Central Excise & Customs, Raipur, 2018 (362) E.L.T. 961 (Chhattisgarh High Court) — Section 9D requirements are mandatory before investigation statements can be relied upon as evidence.
- Commissioner of Central Excise & Customs, Bhubaneswar v. Shivam Steel Corporation, 2023 (2) CENTAX 259 (Orissa High Court) — Considered concerning admissibility and reliability of electronic evidence.
- Prinik Steels (P) Ltd. & Ors. v. Commissioner of Central Excise, Customs & Service Tax, Bhubaneswar — Cited concerning electronic records and evidentiary requirements under Section 36B.
- Vasundhara Metaliks (P) Ltd. & Ors. v. Commissioner of Central Excise, Customs & Service Tax, Audit Commissionerate, Bhubaneswar — Considered regarding electronic records and proof of clandestine clearance.
- Narsingh Ispat Limited & Ors. v. Commissioner of CGST & Central Excise, Jamshedpur, 2024 (3) TMI 1037 — Cited in relation to electronic evidence and Section 36B compliance.
- Parijat Paper Mills Ltd. & Ors. v. Commissioner of Central Excise & CGST, Meerut, 2025 (5) TMI 1529 (CESTAT Allahabad) — Considered regarding admissibility of electronic records.
- Popular Paints and Chemicals v. CCE, Raipur, 2018 (8) TMI 473 (CESTAT New Delhi) — Cited concerning evidentiary requirements for computer-generated records.
- Premium Packaging Pvt. Ltd. v. CCE, Kanpur, 2005 (184) E.L.T. 165 (Tri.–Del.) — Considered regarding evidentiary reliance on electronic records.
