Case Law Details
Shri A K Prasad Vs Shri S. K. Bansal (CESTAT Delhi)
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.
Thus, it has been clearly laid down by the Supreme Court that the computer printout can be admitted in evidence only if the same are produced in accordance with the provisions of Section 65B (2) of the Evidence Act. A certificate is also required to accompany the said of computer printouts as prescribed under section 65B(4) of Evidence Act. It has been clearly laid down in para 15 of this judgment that all the safeguards as prescribed in Section 65B (2) & (4), to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tempering, alteration, transposition, excision etc without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. We may add here that the provisions of Section 65B of Indian Evidence Act and Section 36B of Central Excise Act are pari materia.
It is evident from the appeal that the investigation officers while seizing has failed to take safeguards as mandated under section 36B of Central Excise Act. Further the cloning process of the hard-disks and retrieval of the data is admissible for want of cross examination of, Sh. Vipul Saxena, who has done cloning of the data from the computer system. We ,therefore, hold that the computer printouts cannot held to admissible evidence in terms of Section 36B (2) & (4) of the Central Excise Act in the case at hand.
It is an admitted position that the computer printouts were produced in the Office of M/s Omnicorp, N.Delhi behind the back of the appellants. The appellants were never associated with the retrieval of the computer printouts. This Tribunal in the case of Modern Laboratories Vs CCE Indore reported in 2017 (358) ELT 1179 (Tri) has held that when computer printouts were taken in the absence of appellants and when panchas were not allowed for cross- examination the data retrieved from the CD is not an admissible evidence. We hold that the law laid down in this judgement is fully applicable to the facts of the present case and thus the same is to be discarded as a piece of evidence.
Clandestine removal of excisable goods can’t be upheld merely on assumptions & presumption
It has been held in these cases that the charges of clandestine removal of excisable goods can’t be upheld merely on assumptions and presumptions but has to be proved with positive evidence such as purchase of excess raw materials, consumption of excess electricity, employment of extra labour, seizure of cash, transportation of clandestinely removed goods etc. It has been held that onus of proof of bringing clinching evidence is on the Revenue. It has been held that the clandestine manufacturing and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidence relating to:-
(i) Receipt of raw materials inside the factory premises, and non- accountal thereof in the statutory records;
(ii) Utilization of such raw materials for clandestine manufacture of finished goods;
(iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products;
(iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporter’s documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignee;
(v.) Amount received by the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal.
FULL TEXT OF THE CESTAT JUDGMENT
1. M/s Popular Paints &Chemical (hereinafter to as the appellants), situated at Raipur, Chhatisgarh, are engaged in the manufacture of paints and varnishes and also availing SSI exemption under notification No.8/2003-CE dated 01.03.2003 (as amended).
2. The Central Excise Officer of Indore Commissionerate searched the factory premises of M/s Radiant Containers (P) Ltd. on 08.10.2012, who is engaged in the manufacture of plastic containers (buckets) for various paint manufactures. One of the buyers was the appellant. It was alleged that this party had cleared huge quantities of these plastic containers, clandestinely, to a numbers of buyers including the appellants. In follow up action enquiries were initiated against the appellants by the officers of Raipur Central Excise Commissionerate.
3. The factory and office premises (separately located) of the appellants were searched on 19/20-10-2012 and, apart from other records/papers, three computers were seized from the factory premises and six computers and one laptop and two hard disc drives were seized from the office premises. Another computer was handed over to the central excise officers by the appellants themselves on 20.10.2012, after completion of the search/panchnama proceedings.
4. During the search of the factory premises stock-taking was also carried out and some discrepancies were noticed in respect of raw materials as well as finished goods. The finished goods found in excess valued at Rs.30,82,565/- were seized and separate proceedings were initiated vide show cause notice dated 08.04.2013. This SCN dated 08.04.2013 was adjudicated by the Deputy Commissioner of Central Excise Raipur, who confirmed the confiscation of the seized goods but the same was set aside in Appeal by the Commissioners (Appeal) vide O-I-O 214/RPR/2014 dated 11.8.2018. In respect of the shortages noticed, a demand of Rs. 1,95,227/- has been raised and is included in the present show cause notice.
5. The seized computers were cloned and print outs were taken therefrom. The data in the computers allegedly revealed sales details of two companies by the name of (i) M/s SMB & Co. (ii) SMB PPC & Co. During the course of investigations the Central Excise Officers also recorded the statements of two-partners, Shri Hussain Zafar and Shri Mansoor Zafar, as also those of four of the appellant’s ’ sales executives. The department also made enquiries from some suppliers of raw materials as well as some buyers of the finished goods. Investigations, prima facie revealed that the appellants had indulged in clandestine clearances of huge quantities of the products during the years 2010-11 to 2012-13. It was alleged that unaccounted sales for the year 2010-11 were kept in the computers records in the name of a fictitious company M/s SMB & , whereas unaccounted sales for the year 2011-12 & 2012-13 were recorded in the name of another fictitious company M/s SMB PPC & Co. After taking into consideration the unaccounted sale which exceeded Rs.4 Crore each year, the Revenue was of the view that the appellants were not eligible for the benefit of SSI exemption from 2010-11 to 2013-14.
6. During the adjudication proceedings, the appellants requested for cross examination of eleven persons, whose evidence/statements were against of the appellants. The adjudicating authority allowed the cross examination of these persons but eventually only six appeared for cross examination.
7. After considering the submission made by the appellant. The adjudicating authority confirmed, the excise duty demanded of Rs.3,09,51,938/- and imposed equal amount of penalty along with interest on the confirmed duty amount. He has also imposed penalties of Rs.30 Lacs each on both the partners. Hence these appeals.
8. We have heard Sh. A.K. Prasad, Ld. Advocate on behalf of the Appellants and Sh. S.K. Bansal, Ld. AR on behalf of the Department.
9. The Ld. Advocate has advanced the following submissions:-
i. Bulk of the data relied upon the department have been retrieved from the computers seized from the factory and office premises of the appellants. There has been grave irregularity in the process of seizure of the 9+1 computers. As for example, the two panchas, namely Shri Bhaskar Bagh and Sh. Mohammad Shahid who had purportedly witnessed the search and seizure of the computers at the factory, categorically stated during their cross examination on 01.2016 that they were not present throughout the search proceedings and were only called later to simply sign the panchnamas. Further, both these witnesses were not independent, being employees of the appellants. The panchas who purportedly witnessed the seizure of computers/documents at the office premises of the appellants, also denied having witnessed the proceedings. In fact, one of the witnesses in this case too, was an employee of the appellants. Hence these panchnamas cannot be accepted as evidence.
ii. Further, the panchas who reportedly witnessed the cloning of date from the seized computer (RUD-7. 1 and 7.2), did not appear for cross examination.
iii. The data retrieval and taking printouts from the seized computers was done behind the back of the appellants and without the presence of any panchas. Hence these print-outs cannot be relied upon.
iv. The panchnama drawn at the factory premises on 19/10.10.2012, clearly shows that the seized computers were not sealed with paper seal or, otherwise, to prevent any tampering. Computers seized from the office premises were however, paper sealed. The cross examination of departmental officers supports this view.
v. The computer data or the print-outs retrieved from the seized computers cannot be admitted as evidence as the mandatory provisions of Section 36B of the Central Excise Act, 1944, had not been followed. As such all data retrieved from these computers have to be ignored.
vi. In reply to the show cause notice, the appellants had given the list of 254 of their customers/buyers. The department, however contacted only 6 such buyers. Out of these six, four denied having made any unaccounted purchased from any of the fictitious firm, M/s SMB & Co. and M/s SMB PPC & Co. or the appellants. Only two buyers, M/s Saluja Paints & Ply (Prop. Narinder Singh Saluja) & M/s Sumeet Hardware (Prop. Shri Sumit Jain), spoke of having made unaccounted purchases from appellants. The appellants had sought their cross examination which was allowed by the adjudicating authority. But they did not turn up. Since these two persons were neither examined by the adjudicating authority as per requirement of Section 9D, nor were their testimony tested on the crucible of cross-examination, their evidence/statements cannot be relied upon. In the result, none of the buyers of the appellants confirmed supply of goods without Further, the sales to Saluja Paints were allegedly made in 2010 whereas Shri Narinder 6inQJ}Sal6ja’s}statDJVnt }was}recorPeP}nearly}D }Vears}later}in}20G4.
vii. The department has also relied upon data retrieved from the seized computers showing values/quantities of sales affected by 7 sales executives of the appellants during the year 2010-11 and 2011-12. Four out of these seven sales executives were questioned by the department but not one of them confirmed the sales/quantity shown in the print outs. Thus, these print-outs were also inadmissible, not only because of non-compliance of the provisions of Section 36B of the Central Excise Act, 1944 and, but also because the entries therein were not corroborated by any of the sales executives.
viii. In para 9.8 of the SCN, on the basis of some papers recovered from the office premises of the appellants on 19/20.10.2012, it has been alleged that during 2011-12 the appellant affected sales amounting to Rs. 12,31,70,653/- just by 4 of the sales executives. If one takes into account the sales by other sales executives also the sale value would have been much more. However, for the year 2011-12 the department itself has taken the clearance value as Rs. 11,60,17,271/-. This shows that the said data is incorrect.
ix. In para 11.1 and 11.2 of the SCN it has been mentioned that hard copies of Sales Ledgers of some buyers were seized from the office premises. It may be observed that the panchnama for seizure of records and computers from the office premises does not mentioned recovery of any Sales Ledgers. These are nothing but computer printouts whose source is doubtful. Shri Hussain Zafar, one of the Partners of the appellant firm denied existence of such ledgers in his statement dated 09.02.2013.
x. Para 14 of the SCN talks of recovery of production reports from the office. The panchnama drawn at the office does not mention this. Further, there is no record of, or comparison with, actual production on those dates, to come to any conclusion about unaccounted
xi. No enquiries were conducted by the department regarding supply of basic raw materials. The appellants had provided a list of 46 suppliers of raw materials. None of them were contracted to verify supply of any unaccounted raw materials.
xii. The department is also relying on the register recovered from the appellants office premises which had entries under the heading ЇBill Blocked‖. The department has alleged that there are entries under two heads, namely “PPC B.No.” and SMB B.No.” and that the entries under head “PPC B .No., relate to accounted clearance of the appellants and entries under the head “SMB B No.’ relate to clandestine learance/sale. This register was being maintained by one Shri.Rajesh Rawat employee of the appellants who had since left employment. The department managed to trace him and also recorded his statement. Shri Rajesh Rawat denied having recorded the entries in the said register. Since there was a contradiction between the Partner’s statement and that of Shri Rawat, the department should have got forensic examination done to ascertain whether Shri Rawat was telling the truth or not. But this was not done.Shri Rawat was the best person to explain the entries/codes in the said register. Further, some of the names recorded in the said register are also the ones who had been contacted by the department to verify cases of removal without bills and each of them had denied the same. Hence, this register also does not help the case of the department.
xiii. From the said seized register (RUD-30), an extract of which has also been reproduced in para 15.1 of the show cause notice, clandestine clearances during October 2012 (i.e. during 2012-13) were recorded in the name SMB &Co. This is inconsistent with the main contention of the department, in para 8 (iii) of the show cause notice, that unaccounted/clandestine clearances for the year 2010-11 were all in the name of a fictitious company M/s SMB & Co. and clandestine clearances for the year 2011-12 and 2012-13 were recorded in the name of another fictitious company, M/s SMB PPC & co.
xiv. To prove clandestine clearance only statements or print outs taken from computers is not enough. It is now established that to prove clandestine clearance the department should produce clinching evidence regarding the following: –
a. The department failed to establish procurement of unaccounted raw materials.
b. No investigation conducted as to consumption of excess electricity, or employment of extra labors.
c. No investigation conducted as to whether the appellants had installed capacity for manufacturing additional quantities of finished goods.
d. No investigation conducted about involvement of huge cash for procurement of unaccounted raw materials. Similarly, no investigation conducted to find whether the appellants had received huge cash of about 24 crore during the disputed period from the buyers of finished Further neither any trail of unaccounted cash was found nor any unaccounted cash was seized.
e. No investigation conducted with the transporters to find out whether the appellants received unaccounted raw materials or cleared finished goods without invoices.
f. Though, the names of the alleged buyers were available but investigations were conducted only from six buyers.
xv. That in respect of raw materials, packing material and finished goods allegedly found in excess at the time of stock taking in the factory on 19/20.10.2012, a separate Show Cause Notice dated 08.04.2013. The matter went upto Commissioner(Appeals) who vide Order-in-Appeal No.21 4/RPR- 1/2014 dated 10.09.2014 set the Order-in-Original. The Order-in-Appeal was never challenged.
9.1. The Ld. Advocate handed over a compilation of case law on various issues the purport of some of the relevant judgments will be taken into account at appropriate place of this order. The Ld. Advocate, therefore pleaded for setting aside the Order-in-Original and allowing the appeals.
10. The Ld. AR, advanced the following submissions:-
i. That there are sufficient evidences on record to prove clandestine removal of paints and varnishes.
ii. That the computer printouts retrieved from the computers seized from the factory and office of the appellants clearly establish clandestine removal on the part of the appellants.
iii. That there is no dispute that the computer from which the printouts were taken belonged to the appellants.
iv. That since the computer print outs were retrieved from the computer owned by the appellants the said computer print outs are in accordance with the provisions of Section 36B of the Central Excise Act.
v. That merely because there are certain deficiencies in the preparation of the panchnamas that itself is not sufficient to negate the evidentiary value of the computer printouts and other records seized from the premises of the appellants.
vi. That out of six buyers who were examined during investigations two confirmed entries in the computer printouts, thus corroborating the authenticity of the same.
vii. That the authenticity of the computer printouts and other records seized from the premises of the appellants is also supported by oral evidence.
viii. That the law laid down in the case of Copier Force India Ltd. Vs. CCE Chennai reported in 2008 (231) ELT 224 (T) is appropriately applicable to the facts of the case.
ix. That in any event of the clandestine manufacturing and clearance can’t be proved with mathematical precesion as held by the Supreme Court in the case of Collector of Customs Vs. D.Bhoormal reported in 1983 (13) ELT 1546 (SC) and in several other judgements.
x. That various case laws relied upon by the Ld. Advocate are not applicable to the facts of the present case.
The Ld. AR pleaded for upholding of the Order-in-Original.
11. We have carefully considered the rival submissions. The basic issue which is to be decided is as to whether the appellants indulged in clandestine clearance of paints and varnishes during the period, 2010-11 to 2013-14 or not. The main evidence which has been relied upon by the Revenue are the computer printouts retrieved from the computers, which were seized from the factory as well as office premises of the appellants on 19/20-10.2012 and also the one computer which was handed over to the investigating officer by the appellants themselves on 10.2012 after following the due process of law, in accordance with per Central Excise Act and Rules. According to the findings of the adjudicating authority the appellants had created two fictitious accounts in the names of (i) M/s SMB & Co. and (ii) SMB PPC&Co. which pertains to the clandestine clearances on their part. The unaccounted sales for the year 2010-11 were alleged to have shown in the name of M/s SMB & Co. whereas the unaccounted sale for the year 2011- 12 and 2012-13 were shown in the name of M/s SMB PPC & Co.
12. We find there are serious irregularities in preparing panchnamas both at the factory premises of the appellants as well as their office on different dates. These irregularities are clearly emerging from the cross examination of the two investigating officers namely Sh. B.C. Aggarwal and Sh. Subodh Tiwari. Thereafter, the cross examination of six panchas was also allowed, out of which three panchas appeared for cross examination and other three panchas who did not appear for cross examination. It is evident from the cross examination of the panchas that two of the three panchas were the employees of the appellants and were illiterate persons. Further, they never witnessed the search operations and were only asked to put their signatures at the time of the conclusion of the search operations. The third pancha stated that he resided in the neighbourhood of the office premises of the appellants and was asked to put his signatures on the panchnama on the morning of 20.10.2012. None of the pancha witness in panchnamas dated 11.2012 and 01.02.2012 appeared for their cross examination. These two panchnamas pertained to opening sealed computers by the computer expert Sh. Vipul Saxena, who was working as Sr.Digital Evidence Analyst of M/s Omnicorp, N.Delhi when he undertook cloning of the data into CDS. Even Sh. Vipul Saxena also didn’t appeared for cross examination, though he was summoned twice by the adjudicating authority. That after cloning of the data the same was taken to the office of M/s Omnicorp, N.Delhi which retrieved the data in the form of computer printouts and which were relied upon for demanding the duty as per Show Cause Notice.
13. We find apart from the irregularities in the panchnama proceedings there are also inherent contradictions in the manner in which the seized computers were sealed and de-sealed. The computer which was handed over by the appellants to the investigating officer on 20.10.2012 was never sealed. We, therefore find that the entire computer data which has been relied upon substantiate the duty demand to be highly unreliable for want of procedural irregularities. Though the adjudicating authority permitted the cross examination of Sh. Vipul Saxena, Sr. Digital Evidence Analyst of M/s Omnicorp, Delhi but he failed to attend the cross examination. Once the department had relied upon the data retrieved by Sh. Vipul Saxena, it were mandatory upon the Department to have ensured his presence for cross examination. His cross examination was also essential, as retrieval of data and taking of printouts from the cloned data was done, by them stated to be at the back of the appellants and any panchas in as much as such retrieval was effected by M/s Omnicorpat their office in Delhi. This gives a fetal blow to the whole case made by the Department based on the computer printouts obtained from the various computers seized by the Revenue.
14. We hold that computer printouts cannot be held to be an admissible evidence unless the conditions as laid in the provisions of Section 36B of the Central Excise Act are fully complied with. A perusal of section 36B would indicate that the Act has prescribed very stringent conditions for computer printouts to be a piece of admissible evidence. The Ld. Counsel for the appellants has invited our attention particular to provisions of Section 36B(2) and (4) of the Central Excise Act. For the better appreciation of facts, it is relevant to cite Section 36B of Central Excise Act is as below: –
36B. Admissibility of microfilms, facsimile copies of documents and computer print outs as documents and as evidence
(1) Notwithstanding anything contained in any other law for the time being in force,
(a) microfilm of a document or the reproduction of the image or images embodied in such microfilm (whether enlarged or not); or
(b) facsimile copy of a document; or
(c) a statement contained in a document and included in a printed material produced by a
computer (hereinafter referred to as a computer printout”), if the conditions mentioned in sub- section (2) and the other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be also a document for the purposes of this Act and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.
(2) The conditions referred to in sub-section (1) in respect of a computer printout shall be the following, namely:
(a) the computer printout containing the statement was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;
(b) during the said period, there was regular supplied to the computer in the ordinary course of the said activities, information of the kind contained in the statement or of the kind from which the information so contained is derived;
(c) throughout the material part of the said period, the computer was operating properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of period was not such as to affect the production of the document or the accuracy of the contents; and
(d) the information contained in the statement reproduces or is derived from information supplied to the computer in the ordinary course of the said activities.
(3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether
(a) by a combination of computers operating over that period; or
(b) by different computers operating in succession over that period; or
by different combinations of computers operating in succession over that period; or
(c) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly.
(4) In any proceedings under this Act and the rules made thereunder where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say,-
(a) identifying the document containing the statement and describing the manner in which it was produced;
(b) giving such particulars of any device involved in the production of that document as may be appropriate for the purpose of showing that the document was produced by a computer;
(c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.
(5) For the purposes of this section,
(a) information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment;
(b) whether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities;
(c) a document shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment.
Explanation. For the purposes of this section,
(a) “computer” means any device that receives, stores and processes data, applying stipulated processes to the information and supplying results of these processes; and
(b) any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process.”
14.1. In our considered view the computer printouts in the facts at hand do not fulfill the mandatory provisions of Section 36B-(2) & (4) of the Central Excise Act, in so far as there are serious irregularities about the manner of sealing of the computers as pointed out hereinabove and one computer not sealed at all. The provisions of Section 36B(4) have also not been fully complied with. The Ld. Counsel has strongly relied upon the law laid down on the admissibility of electronics records by the Supreme Court in the case of Anwar P.V. Vs. P.K. Basheer reported in MANU/S/0834/2014 wherein in paragraphs 13 to 17 it has been held as under:-
“13. Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure prescribed under Section 65B.Section 65B deals with the admissibility of the electronic record. The purpose of these provisions 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 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
(iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity.
15. Under Section 65B(4) of the Evidence Act, if it is desired to give a statement in any proceedings pertaining to an electronic record, it is permissible provided the following conditions are satisfied:
(a) There must be a certificate which identifies the electronic record containing the statement;
(b) The certificate must describe the manner in which the electronic record was produced;
(c) The certificate must furnish the particulars of the device involved in the production of that record;
(d) The certificate must deal with the applicable conditions mentioned under Section 65B(2) of the Evidence Act; and
(e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device.
16. It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, Compact Disc (CD), Video Compact Disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice.
17. Only if the electronic record is duly produced in terms of section 65B of the Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to Section 45A – opinion of examiner of electronic evidence.
18. 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.”
15.2. Thus, it has been clearly laid down by the Supreme Court that the computer printout can be admitted in evidence only if the same are produced in accordance with the provisions of Section 65B (2) of the Evidence Act. A certificate is also required to accompany the said of computer printouts as prescribed under section 65B(4) of Evidence Act. It has been clearly laid down in para 15 of this judgment that all the safeguards as prescribed in Section 65B (2) & (4), to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tempering, alteration, transposition, excision etc without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. We may add here that the provisions of Section 65B of Indian Evidence Act and Section 36B of Central Excise Act are pari materia.
15.3 It is evident from the appeal that the investigation officers while seizing has failed to take safeguards as mandated under section 36B of Central Excise Act. Further the cloning process of the hard-disks and retrieval of the data is admissible for want of cross examination of, Sh. Vipul Saxena, who has done cloning of the data from the computer system. We ,therefore, hold that the computer printouts cannot held to admissible evidence in terms of Section 36B (2) & (4) of the Central Excise Act in the case at hand.
15.4. It is an admitted position that the computer printouts were produced in the Office of M/s Omnicorp, N.Delhi behind the back of the appellants. The appellants were never associated with the retrieval of the computer printouts. This Tribunal in the case of Modern Laboratories Vs CCE Indore reported in 2017 (358) ELT 1179 (Tri) has held that when computer printouts were taken in the absence of appellants and when panchas were not allowed for cross- examination the data retrieved from the CD is not an admissible evidence. We hold that the law laid down in this judgement is fully applicable to the facts of the present case and thus the same is to be discarded as a piece of evidence.
15.5. That similar law has been laid down by the Gujarat High Court and this Tribunal in the following cases.
(i) Ambica Organics V/S CCE Surat 2016 (334) ELT 97 (T) which has been upheld by the Gujarat High Court as reported in 2016 (334) ELT A 67 ()
(ii) Premier Instruments & Controls Ltd V/S CCE Coimbatore – 2005 (183) ELT 65 (T)
(iii) JayshreeVypasa Ltd. Vs. CCE Rajkote-2015(327) ELT 380 (T)
(iv) AgarvanshiAluminium Ltd Vs CCE NhavaSheva- 2014 (2909) ELT 83 (T)
(v)Final Order No A/ 705 18-12/2018- Ex (DB) dated 07.03.2018 in the case of Trela Footwear & Others Vs CCE Agra
In all these judgements it has been held in clear terms that if the data retrieved from the computer is not in accordance with the provisions of Section 36B (2) & (4), the same cannot be held to be an admissible evidence.
15.6. The Ld. AR heavily relied upon the case of Copier Force India Ltd. Vs. CE Chennai [2008 (231) ELT 224 (T)]. We have carefully gone through this judgement. The facts of this judgment are clearly distinguishable from the facts of the present case. In this case computer prints were duly corroborated with bank statements, statements of Directors and employee of the company, statements of the buyer and some of them endorsed the same during cross examination which clearly proved clandestine removal of photocopiers. Hence the reliance placed by Ld. AR on this issue, is of not much help to the Revenue.
16. We find that the computer printouts are not corroborated by any independent evidence establishing clandestine removal of paints and varnishes, as would be evident from the following: –
(i) That four sales executives of the appellants, who were regularly taking orders from the buyers were questioned and also confronted with the computer printouts but none of them confirmed sales/quantity shown in the computer printouts.
(ii) That four statements of Sh. Hussain Zaffar Partner was recorded. He was confronted with the computer printouts but he denied any knowledge of any printouts.
(iii) That the Department during the course of investigation contacted only six of the appellants customers. Out of these six, four denied having made any unaccounted purchases from any of the two fictitious firms. Only two buyers namely Sh. Narender SinghSaluja, proprietor of M/s Saluja Paints & Ply and Sh.Sumit Jain, proprietor of M/s Sumit Hardware accepted to having made unaccounted purchases from the appellants. The aforementioned two buyers were summoned for cross examination twice but they did not turn up. The Ld. Counsel has relied upon the law laid down by the Madras High Court in the case of M/s Karan Traders Vs. Joint Commissioner of Central Excise [2016 (339) ELT 249 (Mad)] and some other judgments. The Madras High Court in the para no.8 & 9 of their judgment has held in unequivocal terms that if a witness when summoned for cross examination does not turn up the statement recorded from him required to be eschewed by the adjudicating authority. It has come on record that during the disputed period the appellant had sold paints and varnishes to 254 customers but enquiries were made only from 6 customers.
iv. That no evidence has been brought on record that the appellants during the disputed period had received proportionate quantities of unaccounted raw materials.
v. That no evidence has been brought on record that the appellants had requisite capacity to manufacture extra quantity of paints and varnishes worth more than 24 crores.
vi. That no evidence had been brought on record that the appellants had consumed extra electricity, employed excess labour and dealt in cash transactions to enable them to indulge in clandestine manufacturing and clearance of paints and varnishes.
vii. That no enquiries were conducted either from the suppliers of raw materials except for a little quality and from the transporter to prove receipt of unaccounted raw material in clandestine manner.
viii. That the Department relied upon one register from the office premises of the appellants which had entries ―Bill Blocked‖. This register was maintained by a former employee, Shri Rajesh Rawat. However, Shri Rajesh Rawat in his statement dated 18.09.2014 denied having maintained the said register. However, Shri Hussain Zaffar partner of the appellants in his statement dated 01.07.2014 has stated that the said register was in the hand-writing of Shri Rajesh Rawat and maintained in respect of ―Bills Blocked‖for verification of goods. No further course of action has been taken by the department to confront the two, in the adjudicating process. Thus, the benefit accrues only to appellant in such a situation. In any event, nothing has been brought on record to prove that the entries in the said Register relate to clandestine removal of the finished goods.
ix. That the department on the date of search on 19/20.10.2012 has seized stock of finished goods valued at Rs. 15,77,732/- apart from raw material and packing material of Rs. 12,38,173/- &Rs. 2,66,660/- respectively.A separate show cause notice dated 08.04.2013 was issued to the appellants proposing confiscation of the seized goods. It was alleged that the finished goods were not accounted for with the intention to keep the turnover below 150 lakhs by suppressing the production and clearance value of their finished goods with an ulterior motive to evade payment of duty. Though the adjudicating had taken an adverse view but on appeal the Commissioner (Appeals) vide Order-in-Appeal dated 10.09.2014 has set aside the Order-in-Original and rendered the findings that there was nothing on record which could establish that the appellants had crossed SSI exemption limit of Rs150 lakhs on 18.10.2012. It has been contended by the Ld. Advocate that the Department did not challenge this Order-in-Appeal which has thus attained finality. The Ld. AR has not contradicted this averment of the Ld. Advocate. Once the Revenue has accepted the findings of Commissioner (Appeal) that the appellant has not crossed the SSI exemption limit, the entire case falls that on this ground alone
17. Our above findings are fortified by the following case laws:
Sakeen Alloys (P) Ltd Vs CCE, Ahmedabad ± 2013(296) ELT 392 (T) which which was firstly upheld by the Gujrat High Court [2014 (308) ELT 655 (Guj)] and subsequently by the Supreme Court [2015 (319) ELT A117 (SC)]
(i) RA Casting (P) Ld Vs CCE [2009 (237)ELT 674 (T)] This judgment was firstly upheld by the Allahabad High Court [2011 (269) ELT 337 (AII)] and thereafter by the Supreme Court [2011 (269) ELT A 108].
(ii) Continental Cement Company vs U.O.I [2014 (309) ELT (AII)]
(iii) Triveni Engineering & Industries Ltd Vs CCE ± [2016 (334) ELT 595 (AII)]
It has been held in these cases that the charges of clandestine removal of excisable goods can’t be upheld merely on assumptions and presumptions but has to be proved with positive evidence such as purchase of excess raw materials, consumption of excess electricity, employment of extra labour, seizure of cash, transportation of clandestinely removed goods etc. It has been held that onus of proof of bringing clinching evidence is on the Revenue. It has been held that the clandestine manufacturing and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidence relating to:-
(i) Receipt of raw materials inside the factory premises, and non- accountal thereof in the statutory records;
(ii) Utilization of such raw materials for clandestine manufacture of finished goods;
(iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products;
(iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporter’s documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignee;
(v.) Amount received by the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal.
18. We are of the view that the principles laid down in all the above judgments are fully applicable to the facts of the present case. We therefore hold that in view of our above findings the duty demand confirmed by the adjudicating authority cannot be sustained except to the extent of Rs. 1,95,227/-. We find that the Ld Counsel has not contested the duty liability of Rs. 1,95,227/- on shortage of the stock of finished goods found on 19/20.10.2012. Hence the said duty demand is confirmed alongwith equal amount of penalty under Section 1 1AC of the Act. The appellants are also required to pay interest at applicable rates prevalent during the material period upon the said duty amount of Rs. 1,95,227/-. We therefore set aside the impunged order except to the above extent of confirmation of duty demand of Rs. 1,95,227/-., confirmation of interest thereon and penalty of equal amount. The penalty is imposed upon the appellants except to the extent of Rs. 1,95,227 is also set aside. The penalty imposed upon the two partners is also set aside. All the three appeals are disposed of in the above manner.
(Pronounced in open court on…06.08.2018……)
