Narsingh Ispat Limited Vs Commissioner of CGST and Central Excise (CESTAT Kolkata)
Summary: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, allowed the appeals of Narsingh Ispat Limited and its director Hemant Goyal against an order confirming central excise duty of ₹19,94,41,968, interest and an equivalent penalty for alleged clandestine removal of 47,658 MT of pig iron during 1 April 2014 to 26 September 2015. A separate penalty of ₹2 crore had been imposed on the director under Rule 26 of the Central Excise Rules, 2002.
The investigation relied principally on data extracted from pen drives, computer printouts and statements obtained during searches on 26 September 2015. The assessee challenged the admissibility of electronic records under Section 36B of the Central Excise Act, 1944 and the use of statements without following Section 9D. It also disputed the absence of independent evidence of additional production, raw material procurement, transportation and sale proceeds.
The Tribunal held that the author of the computer entries had not been identified and the certificate required by Section 36B(4) had not been obtained. Accordingly, the computer sheets could not be used to establish clandestine clearances. It followed Shivam Steel Corporation and Super Smelters Ltd. on the mandatory safeguards for computer-generated evidence.
On witness statements, the Tribunal found that the adjudicating authority had not followed Section 9D. Relying on G-Tech Industries, it held that statements recorded under Section 14 could not be admitted as evidence of clandestine removals without the prescribed examination and admission procedure.
The Tribunal also found no tangible corroboration of unaccounted raw materials, excess electricity use, transportation, clandestine buyers or flow-back of funds. Applying Continental Cement Company and Jai Balaji Industries, it held that the serious allegation of clandestine manufacture and removal could not rest on presumptions or uncorroborated private records.
Consequently, the duty demand, interest and penalties against the company were set aside. As the underlying allegation was unproved and the director’s involvement or benefit was not established, the ₹2 crore Rule 26 penalty on Hemant Goyal was also set aside. Both appeals were allowed with consequential relief, if any, in accordance with law.
Cases Discussed
- Shivam Steel Corporation Vs Commissioner of Central Excise & Customs, BBSR-II [2016 (339) E.L.T. 310 (Tri.-Kolkata)] — Section 36B compliance for electronic records.
- Super Smelters Ltd. Vs Commissioner of Customs, Central Excise & Service Tax, Durgapur [2020 (371) E.L.T. 751 (Tri.-Kolkata)] — Computer printouts without Section 36B safeguards cannot establish clandestine removal.
- G-Tech Industries Vs Union of India [2016 (339) E.L.T. 209 (P&H)] — Mandatory Section 9D examination and admission of statements.
- Continental Cement Company Vs Union of India [2014 (309) E.L.T. 411 (All.)] — Independent corroboration needed for clandestine removal.
- Jai Balaji Industries Vs Commissioner of Customs, Central Excise & Service Tax, Durgapur [2021 (378) E.L.T. 674 (Tri.-Kolkata)] — Positive evidence required to establish clandestine clearance.
FULL TEXT OF THE CESTAT KOLKATA ORDER
There are two appeals filed by the Appellants against the impugned Order-in-Original dated 28.12.2018 passed by Ld. Commissioner, Jamshedpur Commissionerate. Excise Appeal No. 76044 of 2023 has been filed by the appellant M/s. Narsingh Ispat Ltd. and Excise Appeal No. 76046 of 2023 has been filed by Shri Hemant Goyal, Director of the Appellant-company. By the impugned Order, the Ld. Commissioner has confirmed Central Excise Duty demand of Rs.19,94,41,968/- (including Cesses) along with interest and equal amount of duty as penalty, on the ground that the Appellant has clandestinely removed 47658 M.T. of Pig Iron without payment of duty. The Ld. Commissioner has further imposed penalty of Rs.2,00,00,000/- on Shri Hemant Goyal, Director under Rule 26 of the Central Excise Rules, 2002.
1.1 Aggrieved against the confirmation of the above said demands both the appellants filed separate appeals. As the impugned order confirming the above said demand of duty and penalty is common, both the appeals are taken up together for decision by a common order.
2. The facts of the case are that the Appellant is engaged in the manufacture of “Pig Iron” falling under Chapter 72, at their factory located in Jamshedpur. The Appellant is also engaged in the trading of Iron & Steel materials etc., from their corporate/registered office situated at 26, Ramlal Mukherjee Lane, Salkia, Howrah, West Bengal which is registered under the Central Excise Act, 1944 as a “dealer”.
2.1. On 26.09.2015, the officers of the DGCEI, Jamshedpur, conducted searches at five places including the factory, office, Registered Office premises, Office of M/s Puneet Ispat Ltd., Jamshedpur and the residence of Shri Vikash Singh, Staff of M/s Narsingh Ispat Ltd. During the course of search at their Corporate/Registered Office at Howrah and at the residence of Shri Vikash Singh, the officers seized various incriminating documents such as private records, pen drives and laptops, SMS messages in the mobile phones etc.
2.2 On 26.09.2015, a joint physical verification of the stock of Finished Goods and raw materials were also taken on eye estimation basis. A shortage of Pig Iron of 80.870 M.T. was noticed. Investigation was also conducted at the end of three buyers namely, M/s. Sukh Sagar Metals P. Ltd., M/s. Pratik Steel Castings P. Ltd., and M/s. Gulmohar Delux P. Ltd. Various statements were also recorded.
2.3. On the basis of the data recovered from the pen-drive, printouts and oral statements recorded, a Show Cause Notice dated 11.10.2017 was issued to the appellant by the Additional Director General, DGCEI. In the said Show Cause Notice, it was alleged that the Appellant had clandestinely manufactured and cleared 47658 M.T. of finished goods having estimated value of Rs.160,94,85,402/, without payment of central excise duty of Rs.19,94,41,968/-(including E.Cess/SHE Cess) during the period from 01.04.2014 to 26.09.2015. The said Notice was adjudicated by the Ld. Commissioner vide the impugned order, confirming the duty, interest and penalties as mentioned in paragraph 1 of this Order (supra).
3. In their appeal, the appellant raised the following points:
(i) In the instant case, the entire demand has been raised on the basis of computer printouts purportedly seized from the Registered/Corporate Office of the appellant. The computer printouts relied upon in the instant case are “extraneous materials”, do not belong to the appellants. They were never seized from the control and possession of the appellants but seized from some “unknown person”, which is evident from Panchanama dated 26.09.2015. The pen drive and daily production Report, lab report, removal report etc., do not relate to the Appellant-Company and hence they are all extraneous materials which cannot be used against them as evidence.
(ii) The printout taken from the pen drive relied upon in support of the charge, does not satisfy the requirements of Section 36B of the Central Excise Act, 1944 and no certificate as mandated thereunder is accompanied with it. The appellant submits that the ‘pen drives’ are floating devices and hence cannot be related to any particular computer. Electronic evidences cannot be used as evidence unless it is accompanied by certificate as mandated under Section 36B(4) which is missing in the instant case and the burden is squarely on the Department. Accordingly, they contended that they are irrelevant materials and cannot be admitted into evidence.
(iii) In support of this claim, the Appellant relied on the following decisions:-
i. CCE Vs. Shivam Steel Corporation [(2023) 2 Centax 259 (Ori.)]
ii. Shivam Steel Corporation Vs Commr. of C.Ex. & Cus., BBSR-II [2016 (339) E.L.T. 310 (Tri-Kolkata)]
iii. Super Smelters Ltd. Vs. Commr. of Cus., C.Ex. and S.Tax, Durgapur [2020 (371) E.L.T. 751 (Tri.-Kolkata)]
iv. Jai Balaji Industries Ltd., Vs. CCE [2023- VIL-771-CESTAT-KOL-CE]
v. Prinik Steels Pvt. Ltd. Vs. CCE [(2023) 12 TMI 299-CESTAT-Kolkata]
(iv) The oral statement of witnesses were not tested in accordance with Section 9D of the Central excise Act i.e. examination in chief of the witnesses by the adjudicating authority and allowing cross examination of them. In the instant case, in terms of Clause (b) of Sub- Section (2) of Section 9D such statements which are not tested by examination of its maker and without admitting the same by the adjudicating authority it cannot be entered into evidence and such materials are irrelevant materials and no reliance can be placed on them.
(v) In support of their contention on non- observation of the provisions of Section 9D, the Appellant relies on the following judgments: –
i. Ambica International Vs. Union of India [2016-TIOL- 1238-HC-P&H-CX]
ii. G-Tech Industries Vs. Union of India [2016 (339) E.L.T. 209 (P&H)]
iii. Hi-Tech Abrasives Pvt. Ltd. Vs. CCE – Hon’ble Chhattisgarh High Court [2018 (362) E.L.T. 961 (Chh.)]
iv. Jay Balaji Industries Ltd., Vs. CCE [2023-VIL-771- CESTAT-KOL-CE.]
v. Prinik Steels Pvt. Ltd. Vs. CCE [(2023) 12 TMI 299- CESTAT-Kolkata]
(vi) The maker of the Daily Production Report and Lab Reports i.e. Sri Manoj Kumar/Sri Manoj Sharma is not identified and examined to ascertain the truth. In the instant case, in support of the charge of unaccounted production of Pig Iron, reliance is placed on the MBF Report whose maker one Sri Manoj Kumar alias Manoj Sharma has neither been identified nor examined. Hence, no reliance can be placed on the said Report.
(vii) The appellant submits that the charge of clandestine removal is quasi criminal in nature and is a serious charge and therefore, has to be proved with tangible, affirmative, cogent and unimpeachable evidences based on independent enquiry which are completely lacking in the instant case. There is no evidence of production of 47658 M.T. of the impugned goods and clandestine clearance of the same. In the course of search and seizure operations, no incriminating materials i.e. challans, invoices, lorry receipt, gate gases etc. was seized. For transportation of 47658 MT of impugned goods, at least 5295 nos. of lorries (9 MT each) would be required but there is not a single evidence for the same. There is no evidence of acceptance of buyers having purchased the said goods without payment of duty. Out of several buyers, 3 buyers examined who did not accept the charge. There is no evidence of flow of back of huge funds of Rs.160.94 Cr.
(viii) There is no evidence of purchase of raw material. For manufacture of 47658 MT finished goods as alleged, at least 104848 M.T of raw materials (Iron Ore/Sinter/Pellete) and 23829 MT of Coke would be required. But, in the instant case there is not a single evidence of out of account purchase of single tonne of the said raw materials (Iron Ore/Sinter/Pellet, Coke) and Fluxes (Dolomite, Lime Stone, Quartz) was found available. There is no evidence of extra use of labour and extra payment of wages out of account; There is no evidence of any extra use of electricity etc. There is no acceptance of sellers of raw materials. No enquiries were conducted with the raw material suppliers. There is no evidence of transportation of raw material. The appellants also placed reliance on the decision in the case of M/s. Continental Cement Company Vs. Union of India [2014 (309) E.L.T. 411 (All.)] in support of their claim that the Revenue is required to prove their charge of clandestine removal by means of tangible and sufficient evidence.
(ix) In view of the above contentions, the appellant submits that to substantiate the main charge of clandestine removal of huge 47658 MT of finished goods, there is absolutely no tangible, cogent, corroborative evidence on record. No demand can be raised on the basis of “private records” without any tangible, cogent and affirmative evidence based on independent enquiry. Accordingly, they prayed for setting aside the demands confirmed in the impugned order.
(x) The appellant also submits that the dispute in the instant case relates to the period from 01.04.2014 to 24.09.2015 and search was conducted on 26.09.2015 while the Show Cause Notice was issued on 01.10.2017; hence, the major part of the demand in the instant case was barred by normal period of limitation of one year.
4. The Ld. Authorized Representative appearing on behalf of the Revenue reiterated the findings in the impugned order. Regarding reliability of the data recovered in the form of computer printouts from the pen drives, he stated that the pen drives were taken from the appellant’s factory and Registered office. The owner of the data and his statement has been recorded certifying the data, which satisfies the requirement for Section 36B to admit those computer print-outs as evidence for demanding duty. To comply with the provisions of Section 9D of the Central Excise Act, 1944, cross examination was allowed at the time of personal hearing by the adjudicating authority. Hence, the conditions required under Section 9D has been followed and the statements can be relied upon to confirm the demands. Accordingly, he prayed for rejecting the appeals filed by the Appellants.
5. Heard both sides and perused the appeal records.
6. We observe that the in the impugned Order, the Ld. Commissioner has confirmed Central Excise Duty of Rs.19,94,41,968/- (including Cesses) along with interest and penalty on the ground that the Appellant has clandestinely removed 47658 M.T. of Pig Iron without payment of duty. Further, penalty of Rs.2,00,00,000/- was also imposed on Shri Hemant Goyal, Director of the Appellant-company under Rule 26 of the Central Excise Rules, 2002.
6.1. We observe that the demands in this case have been worked out based on the details available in the computer print-out recovered from the premises of the Appellants office and premises associated with them and the statements recorded from the concerned persons. In their submissions, the Appellant questioned the evidentiary value of the computer print-outs. They stated that the computerized documents relied upon by the department are not admissible evidences, since the mandate provided under Section 36B of the Central Excise Act, 1944 was not followed. The statements cannot be relied upon since the provisions of Section 9D of the Central Excise Act, 1944 are not followed. They also stated that clandestine removal cannot be confirmed on the basis of statements alone. There must be positive evidences like admission of clandestine removal, purchase and consumption of unaccounted raw materials, discrepancy between recorded stock and physical stock, seizure of any goods en route, consumption of excess electricity, actual clandestine removal of finished goods without payment of duty, mode of removal, evidence of transporters and buyers of the clandestinely removed goods and flow back of funds pertaining to clandestine removals. They stated that the demands confirmed in the impugned order without any of the above mentioned evidences are not sustainable.
7. Thus, we observe that the issues to be decided in this appeal are as under:
(i) Whether the computer printouts taken from the pen drives recovered during the search can be relied upon as evidence to demand duty?
(ii) Whether the conditions mentioned in Section 36B has been followed in this case or not, to rely upon the computer printouts as evidence?
(iii) Whether the procedure as set out in Section 9D of the Central Excise Act, 1944 was followed in this case or not? If not followed, then whether the statements recorded under Section 14 of the Central Excise Act, 1944 can be relied upon to demand duty?
(iv) Whether the demands confirmed in the impugned order on clandestine clearance of finished goods is sustainable in the absence of any evidence of procurement of the major raw materials or sale of the finished goods clandestinely?
(v)Whether penalty is imposable on the Appellant companies and it’s Director, on the basis of the evidences available on record?
7.1 (i) Whether the computer printouts taken from the pen drives recovered during the search can be relied upon as evidence to demand duty?
(ii) Whether the conditions mentioned in Section 36B has been followed in this case or not, to rely upon the computer printouts as evidence?
7.2 We observe that the demand of duty in this case has been worked out on the basis of the details available in the pen drives and the computer sheets printed from those pen drives. In their submissions, the Appellant questioned the evidentiary value of the computerized documents relied upon by the department to allege clandestine clearance, since the mandate provided under section 36B of the Central Excise Act, 1944 was not followed. Hence, it is required to examine the mandate to be followed as provided in Section 36B, to rely upon these computerized sheets in the departmental proceedings.
7.3. The Appellant cited the provisions of Section 36B of the Central Excise Act, 1944 and contended that to rely upon the computer sheets recovered the department must follow the mandate prescribed in Section 36B. Without following the requirements prescribed under the said section, the computer sheets recovered cannot be relied upon. For the sake of ready reference the relevant part of Section 36B of the Act prescribing the conditions for admitting the computer print-outs as evidence, is reproduced below: –
“Section 36B. Admissibility of micro films, facsimile copies of documents and computer printouts as documents and as evidence.
(1) ———————————————————– ———————-
(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 regularly 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 that 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 reproduced or is derived from information supplied to the computer in the ordinary course of the said activities.
.
.
.
(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.”
7.4. From the above, it can be seen that the procedure prescribed in Section 36B must be followed to rely on the computer sheets as evidence. It is observed that the department has not followed the procedure prescribed in Section 36B. The author of the entries made in the computer has not been identified. The certificate as prescribed under Section 36B(4) has not been obtained. Hence, we hold that the computer sheets recovered from the pen drives cannot be relied upon to arrive at clandestine clearance.
7.5. We observe that this view has been held by the Tribunal in the case of: –
i. Shivam Steel Corporation Vs Commr. of C.Ex. & Cus., BBSR-II [2016 (339) E.L.T. 310 (Tri-Kolkata)]
ii. Super Smelters Ltd. Vs Commr. of Cus., C.Ex. and S.Tax, Durgapur [2020 (371) E.L.T. 751 (Tri.-Kolkata)]
7.6. The relevant paragraph in the case of M/s. Super Smelters Ltd. (supra) is reproduced below: –
“22. Further, we find that an similar issue has come up for consideration of this Tribunal in case of Bihar Foundary and Casting Limited v. Commissioner of Central Excise and Service Tax, Ranchi, Appeal Nos. 75819 and 75822 of 2015. The Tribunal vide its Final Order Nos. 75994-75995 of 2013 ha held that in view of non-compliance of mandatory requirement of 36B of the Act case the clandestine removal cannot be made applicable merely based on the printouts taken from the laptop, computer obtained during the search. And the appeals were allowed by setting aside the order passed by the Adjudicating Authority. The ratio of this case is squarely applicable in toto to this case on hand also thus the demand is not sustainable and liable to be set aside.”
7.7. We observe that the decision is squarely applicable in this case. As the department has not followed the mandate under section 36B, the data recovered from the print outs available in the computer sheets cannot be relied upon to work out the duty liability on the allegation of clandestine removal. Accordingly, the answer to the question numbers (i) and (ii) raised at paragraph 7 (supra) are in the negative.
8. (iii) Whether the procedure as set out in Section 9D of the Central Excise Act, 1944 was followed in this case or not? If not followed, then whether the statements recorded under Section 14 of the Central Excise Act, 1944 can be relied upon to demand duty?
8.1. The Appellant submits that the statement recorded by a Gazetted officer is relevant in an adjudication proceeding only if the procedure prescribed under Section 9D of the Central Excise Act is followed. For the sake of ready reference the said Section is reproduced below:
“9D. Relevancy of statements under certain circumstances. – (1) A statement made and signed by a person before any Central Excise Officer of a gazetted rank during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains, –
(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the Court considers unreasonable; or
(b) when the person who made the statement is examined as a witness in the case before the Court and the Court is of opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interests of justice.
(2) The provision of sub-section (1) shall, so far as may be, apply in relation to any proceeding under this Act, other than a proceeding before a Court, as they apply in relation to a proceeding before a Court.”
8.2. The Appellant submits that in terms of Section 9D(2), the person who made the statement is to be examined as a witness by the adjudicating authority before relying on his statement. Since, the adjudicating authority has not followed the procedure prescribed under Section 9D, he contended that the statements cannot be relied upon to confirm the demands. In support his claim, the Appellant relied upon the following decisions:
i. Ambica International Vs. Union of India [2016-TIOL- 1238-HC-P&H-CX]
ii. G-Tech Industries Vs. Union of India [2016 (339) E.L.T. 209 (P&H)]
8.3. We observe that the decisions cited by the appellant support their argument. The relevant paragraphs of the decision in the case of M/s. G-Tech Industries (supra) are reproduced below: –
“13. If none of the circumstances contemplated by clause (a) of Section 9D(1) exists, clause (b) of Section 9D(1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D(1), viz.
(i) the person who made the statement has to first be examined as a witness in the case before the adjudicating authority, 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.”
8.4. We observe that the adjudicating authority has not followed the procedure prescribed under Section 9D, accordingly, we hold that the statements cannot be relied upon to confirm the demands. Thus, the answer to question number (iii) raised at paragraph 7 (supra) is in the negative.
9. (iv) Whether the demands confirmed in the impugned order on clandestine clearance of finished goods is sustainable in the absence of any evidence of procurement of the major raw materials or sale of the finished goods clandestinely?
9.1. Regarding the allegations of clandestine removal, the Appellant submits that there must be positive evidences like admission of clandestine removal, purchase and consumption of unaccounted raw materials, discrepancy between recorded stock and physical stock, seizure of any goods en route, consumption of excess electricity, actual clandestine removal of finished goods without payment of duty, mode of removal, evidence of transporters and buyers of the clandestinely removed goods and flow back of funds pertaining to clandestine removals. They stated that the demands confirmed in the impugned order without any of the above mentioned evidences is not sustainable.
9.2. In support of the above contention the Appellant cited the following decision in the case of M/s. Continental Cement Company Vs. Union of India [2014 (309) E.L.T. 411 (All.)]. The relevant paragraph of the said decision is reproduced 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 production details.
(ii) To find out whether the excess raw materials have been purchased.
(iii) To find out the dispatch particulars from the regular transporters.
(iv) To find out the realization of sale proceeds.
(v) To find out finished product receipt details from regular dealers/buyers.
(vi) To find out the excess power consumptions.
13. Thus, to prove the allegation of clandestine sale, further corroborative evidence is also required. For this purpose no investigation was conducted by the Department.
14. In the instant case, no investigation was made by the Department, even the consumption of electricity was not examined by the Department who adopted the short cut method by raising the demand and levied the penalties. The statement of so called buyers, namely M/s. Singhal Cement Agency, M/s. Praveen Cement Agency; and M/s. Taj Traders are based on memory alone and their statements were not supported by any documentary evidence/proof. The mischievous role of Shri Anil Kumar erstwhile Director with the assistance of Accountant Sri Vasts cannot be ruled out.
15. In view of the above, we are of the opinion that when there is no extra consumption of electricity, purchase of raw materials and transportation payment, then manufacturing of extra goods is not possible. No purchase of raw material out side the books have been proved.
16. In the light of the above discussions and considering the totality of the case, we are satisfied that no case is made out for extra so called clandestine sale of the Portland Cement to the said parties. We are satisfied that the first appellate authority has rightly deleted the addition and cancel the penalties. Hence we hereby set aside the impugned order passed by the Tribunal and restore the order passed by the first appellate authority, along with the reasons mentioned herein.
17. In the result, all the appeals filed by the appellants are hereby allowed.”
9.3. The Appellant also cited the decision of M/s. Jai Balaji Industries Vs. Commissioner of Cus., C.Ex. & S.T., Durgapur [2021 (378) E.L.T. 674 (Tri- Kolkata)]. The relevant portion of the decision is reproduced below: –
“9. We find that the charge of clandestine clearance cannot stand as the department has not been able to provide clinching evidence in support of the same. Clandestine clearane is a serious charge and has to be proved with positive evidence which is lacking in this case. The judgeents cited by the appellants on this issue, in their favour, support their case. It may be noted that not even one buyer of the clandestinely cleared goods has been identified by the department.
10. At best, therefore, this is simply a case of shortages detected during stock-taking. The next issue to be determined is whether the shortages detected were real or only notional. The appellants have doubted the manner of stock taking itself as it was not done in the presence of any panchas and no panchanama was drawn. There is no mention as to how the weighments of the products were done, individually or by loading on trucks, etc.”
9.4. We observe that there is no evidence of clandestine removal, purchase and consumption of unaccounted raw materials, discrepancy between recorded stock and physical stock, seizure of any goods, consumption of excess electricity, actual clandestine removal of finished goods without payment of duty, mode of removal, evidence of transporters and buyers of the clandestinely removed goods and flow back of funds pertaining to clandestine removals have been brought on record in this case. Without having any such tangible evidence, clandestine manufacture and clearance of goods cannot be sustained on the basis of mere assumptions and presumptions. Accordingly, we hold that the demand confirmed in the impugned order is not sustainable. Thus, the answer to question no.(iv) at paragraph 7 (supra) is in the negative.
10. (v) Whether penalty is imposable on the Appellant company and it’s Director, on the basis of the evidences available on record?
10.1. Regarding the Penalty of Rs.2,00,00,000/- imposed on the Director Shri. Hemant Goyal, we observe that the demand of clandestine clearance has been held as not sustainable. In his statement, the Director has clearly stated that the documents / computer print-outs recovered by the officers were not related to the appellant-company. It has been submitted that he has retracted his statement dated 26.09.2015 and the statement given by him was not given voluntarily but taken under coercion. Accordingly, it is submitted that the depositions made during investigation in his statement cannot be relied upon; thus, the penalty levied on him is not sustainable.
10.2 From the above discussion, we find that the allegation of clandestine removal against the appellant-company is not sustainable. Accordingly, the role of Director of the appellant-company in the alleged clandestine clearance is not established. We also observe that no benefit of the alleged illegal activities have accrued to the Director. Therefore, we hold that the penalty imposed on the Director of the appellant under Rule 26 of the Central Excise Rules, 2002 is not sustainable and the same is set aside. Thus, the answer to question no. (v) at paragraph 7 (supra) is in the negative.
11. In view of the above discussion, we answer the questions raised at paragraph 7 of this Order as under: –
(i) The computer print-outs taken from the pen drives recovered during the search cannot be relied upon as evidence to demand duty.
(ii) As the conditions mentioned in Section 36B has not been followed in this case, the computer printouts cannot be relied upon as evidence, to demand duty.
(iii) The statements recorded under Section 14 of the Central Excise Act, 1944 cannot be relied upon to demand duty, since the procedure as set out in Section 9D of the said Act has not been followed.
(iv) The demands confirmed in the impugned order on clandestine clearance of finished goods are not sustainable in the absence of any evidence of procurement of the major raw materials such as Iron Ore and Coal, without invoices.
(v) Penalty not imposable on the Appellant- company and it’s Director, on the basis of the evidences available on record.
12. Thus, we hold that the demand of duty confirmed in the impugned order is not sustainable. The demand of interest and penalty imposed on the Appellants are also not sustainable. In view of the above discussion, we set aside the impugned order and allow the appeals filed by the Appellants, with consequential relief, if any, as per law.
(Order pronounced in the open court on 21.03.2024)
