2019 (12) TMI 280 - CESTAT AHMEDABAD

Clandestine removal - admissible evidence or not - Section 65B of the Indian Evidence Act 1872 and Section 36B of the Central Excise Act,1944 - demands made on the basis of Ledger Account “Pipe Sales” retrieved from Pen Drive seized from residence of Bhavesh/Snehal R. Shah is liable to be set aside as the data stored in the Pen Drive is inadmissible as evidence since the requirements of Section 65B of the Indian Evidence Act 1872 and Section 36B of the Central Excise Act,1944 have not been satisfied - cross-examination of third person.

HELD THAT:- The investigation was initiated by searching the factory premises and office of M/s SSPL and residential premises of Shri Bhavesh/Snehal R. Shah. During search at factory premises of M/s SSPL, no incriminating papers were found nor any discrepancy was observed in raw material/ finished goods stock, their accounting and production/ clearance of finished goods. No document in the form of production record, accounting record or gate register showing unaccounted purchase/ receipt of raw material or unaccounted clearance/sale/ transportation of finished goods was found - Shri Snehal/ Bhavesh Shah in his statement has stated that the Pen Drive ledger pertained to trading done by him of SS Patta, SS Coils and SS Pipes in his personal capacity. The show cause notice and the impugned order has alleged that the persons whose statements have been relied upon has stated that they were doing trading or acting as broker in SS Pipes of M/s SSPL. They have also verified the Pen drive ledger as pertaining to their firm.

The Appellant Unit in its reply to show cause notice had challenged the authenticity/ genuineness of such pen drive data on the ground that the same is inadmissible in evidence as the requirements of Section 65B of the Indian Evidence act and procedure required under Section 36B of the Central Excise Act was not followed - Section 36B of Central Excise Act is parimateria to Section 65 of the Indian Evidence Act. As per Section 36B(1) computer printout is considered as document for the purpose of central excise act and rules and is admissible as evidence subject to condition in Section 36 B (2).

There is no computer on which the data stored in pen drive was produced. There is also no person was identified and examined who has prepared such data. In such case the pen drive data cannot be considered as admissible evidence - the pen drive data cannot be relied upon without following the requirements Section 36B of the Central Excise Act, 1944. As such the demands based upon pen drive in the present case cannot be confirmed against M/s SSPL.

The Appellant during the adjudication proceedings had sought cross examination of persons and officers whose statements were relied upon in show cause notice under Section 9 D of the Central Excise Act. However the same was denied to them. When the demand against M/s SSPL was based upon pen drive and papers seized from residence of third party Shri Bhavesh Shah as well as statements of third party i.e traders/ brokers, in that case it was imperative for the adjudicating authority to allow cross examination of such persons to the Appellant. Since no opportunity to cross examine such persons whose statements has been relied upon was provided to the assessee, the statements given by these persons cannot be considered to uphold the charges of clandestine removal against Appellant Unit - the demands cannot be made on the basis of pen drive data and statements made by third parties.

No inculpatory record/ papers were found at the factory of Appellant Unit which could show that any excess raw material has been received by them or any goods has been cleared clandestinely by them. There is no production record or raw material consumption record showing excess unaccounted production. No statement of production incharge or worker is appearing. Except pointing out the transport register of Suvidha Transport and that too for few transports, there is no other independent evidence of transportation of goods - Pertinently, it was found that statements of few traders/ broker were recorded but none of them has provided even a single name of customer or actual buyer. No finished goods alleged to be clandestinely cleared was seized from any alleged buyer. No transport Bilty or octroi receipts/ records has been brought on record to show that the goods were consigned from Chhatral to Mumbai. Thus there is no primary evidence to allege any clandestine clearance. The statements and third party records which are secondary evidence cannot be relied upon to allege clandestine clearance as the same has no independent evidentiary value.

Further in case of ARYA FIBRES PVT. LTD. [2013 (11) TMI 626 - CESTAT AHMEDABAD], the tribunal while dealing with the reliability of papers found from the evidence of the buyer held that private records seized from the premises of the buyer cannot be sole basis for demand especially when corroborative evidence like purchase of extra raw material, actual removal of clandestine goods, receipt of sale proceeds, etc. not produced.

In the facts of the present case there is no dispute that the documents/records recovered solely from third parties, statements of third parties whose cross examination was not allowed despite it is mandatory under section 9D of CEA, 1944, no incriminating documents recovered from the Appellant SSSPL, no excess/short stock of raw material or finished goods were found; no excess electricity consumption was proved, no evidence of any cash receipt or it’s seizure, no excess raw material consumption was found - thus, the clandestine removal without any evidence as narrated above cannot be established.

The demands made against the Appellant Unit are not sustainable - appeal allowed - decided in favor of appellant.