TMI Blog2018 (8) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... erate 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. 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 - the entire computer data which has been relied upon substantiate the duty demand to be highly unreliable for want of procedural irregularities. The 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued at ₹ 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 No. 214/RPR/2014 dated 11.8.2018. In respect of the shortages noticed, a demand of ₹ 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 twopartners, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2013. 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 production. 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 Bill 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 clearance/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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 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.214/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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale 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 30.11.2012 and 01.02.2012 appeared for their cross examination. These two panc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) a microfilm of a document or the reproduction of the image or images embodied in such microfilm (whether enlarged or not); or (b) a 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 conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uter 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 des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 150 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 presumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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