TMI Blog2019 (8) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... mprehensible and, therefore, cannot be accepted as admissible piece of evidence. Moreover, the Panchnama proceedings have been challenged on the ground of that the Panch-witnesses were not present at the time of the resumption of the evidence. Also, during the cross-examination the Accountant has categorically stated that he has already retracted his earlier statements and he has never stated that the said document pertains to production and clandestine removal of the goods from the appellant factory. The learned Commissioner not only denied the cross- examination of officers who has conducted the raid, but also of other persons whose cross-examination was sought by the appellant. We have also seen that the contents of cross-examination were not at all considered by the learned Commissioner while adjudicating the case. We have also seen from the record that the statements were relied upon by the adjudicating authority without conducting examination in chief of the matter which is the basic requirement of provision of Section 9D. The charges of clandestine removal of the goods cannot be upheld merely on assumptions and presumptions, but has to be proved with positive evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 659 of 2019, 50660 of 2019, 50661 of 2019, 50662 of 2019, 50663 of 2019, 50664 of 2019, 50665 of 2019, 50666 of 2019, 50667 of 2019, 50723 of 2019, 50527 of 2019, 50771 of 2019 Smart Steels, Haryana Rolling Mill, Euro Pratik Ispat Private Limited, Pragati Ingots Power Private Limited, Shri Jai Baba Steel Private Limited, Balaji Loha Limited, Pilania Steels Private Limited, Maa Santoshi Industries, Bhagwati Power Steel Limited, J S Forge Private Limited, Maheshwari Steels, Sandeep Agarwal, Bhagwan Das Agarwal, Shri Santosh Agarwal, M/s Jai Balaji Industrial Limited, Crest Steel Power Private Limited, M/s Hariom Ingots Power Private Limited (The main appellant) Versus Pr. Commissioner of Central Tax Per Bijay Kumar: 1. These appeals are filed by M/s. Hari Om Ingots and Powers Pvt. Ltd.(hereinafter referred to as the main appellant/company ) and other appellants against Order-in-Original No. RPR/EXCUS/000/COM/087/2018 dated 10.12.2018 wherein the learned Commissioner has confirmed the demand of ₹ 13,62,40,831/- under Section 11A(4) of the Central Excise Act,1944(hereinafter referred to as the Act ) alongwith Interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiries and investigations were started by the Department after a gap of 4 years and the data which was burned into one CD, was opened by the officers on 19.02.2016. According to the panchnama dated 19.02.2016, surprisingly, two CD(s) were recovered in which the Tally Data for the years 2009-10 2010-11 was found to contain dispatch and purchase record for the year 2011-12 2012-13 in Excel format. Accordingly various statements, from Director of the main appellant, their Accountant, seller of the Raw Material, purchaser of the furnished goods, were also recorded by the department. On the basis of the loose documents recovered from the aforesaid Car and on the basis of the Computer Data, the department concluded that the appellant has cleared the goods valued at ₹ 70,52,63,430/- during the stipulated period 2011-12 clandestinely, and thus evaded Central Excise duty to the tune of ₹ 7,26,42,133/-. Similarly, it was concluded by the department that the appellant has cleared goods valued at ₹ 51,45,52,577/- without payment of Central Excise duty during the disputed period (2012-13) and evaded the Central Excise duty to the tune of ₹ 6,35,98,698/-. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied, without giving any specific reasons. The appellant also submitted an additional defence replies dated 27.08.2018. The learned Commissioner by the impugned order confirmed the demand of Central Excise duty alongwith Interest and penalty against all the appellants as per impugned order. Individual penalties were imposed against Shri Sandeep Agrawal, Shri Santosh Agrawal, Shri Bhagwan Das Agrawal were imposed under Rule 26 of the Rules, 2002. Penalty on various raw material suppliers and purchaser of the goods was also imposed along with duty demanded by the learned Commissioner under the provisions of the Act and the Rules. 6. Shri Anurag Mishra, learned Counsel of the appellants submitted that the entire search and seizure operation was made in the appellants factory in violation to Section 100 of CrPC read with Section 18 of the Act. He submitted that one of the witnesses, namely Shri K.Shrinu, was panch witness both at the search proceedings in factory premises as well as on the residential premises on the same day and almost on the same time. The learned Counsel has submitted that the residential premises of the Director and the factory premises of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed excel files of 2011-12 and 2012-13 . However, in Panchnama dated 07.08.2012 dispatch and sale related excel files of 2011-12 and 2012-13 are not mentioned to have been recovered. c) Finding in the impugned order Para-19. 6 to 19.6.3 of the OIO at Page No. 53 to 54 herein, no Computer Expert/Forensic Expert were present during extraction of the data, which is required under Section 36B. d) Absence of any Digital Forensic Examination Report which was explained by the department as not having been prepared in their letter dated 05.02.2018 e) Absence of any certificate of authorization to support the fact that printouts were produced by the computer during the period over which the computer was used regularly to store or process information. f) Absence of any certificate of authorization to support the fact that printouts were produced by the computer over that period by the person having lawful control over the use of the computer. g) Absence of signature by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts as prescribed under Section 65B(4) of Evidence Act. It has been clearly laid down in para 15 of this judgement 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 material. 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. 10. As regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -XXIII; RUD-IX vis-i-vis RUD-XXX; RUD-X vis-i-vis RUD-XXXI; RUD-XXVIII, XXIX, LV, LVI vis-i-vis RUD-VII and RUD-VIII. Details prepared by the department, portrayed as being digital copies of loose sheets cannot were contradictory to each other. 11. He further submitted that the resumption of the loose sheets and third party documents were in absence of pancha witnesses who were not present on the spot and were simply made to sign in their affidavits, and on this score there are various rulings which clearly held that the demand of duty solely based on the loose sheets and third party documents is not sustainable. He heavily relied upon the judgement of C.C .Ex. Vs. Laxmi Engineer Works reported in 2001 (134) E.L.T. 811 (Trib.Del) wherein it is held that mere recovery of certain loose slips from the premises of the appellant would not prove that the goods were clandestinely removed from the factory. The said judgement of the Tribunal was approved by the Hon ble Punjab Hariyana High Court as reported in 2001 (254) E.L.T. 205 (P H). He submitted that private records are not reliable and thus not admissible in evidence as there is no tangible evidence to conclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Prag Pentachem Pvt. Ltd. reported at 2018 (360) E.L.T. 1025 (T) 13. Regarding shortage of the goods the appellant submitted that the physical verification was done on the basis of average weighment and eyes estimation and actually there was no shortage at the time of stock verification of the goods. He relied upon the following judgements; (i) CCE Lucknow Vs. Sigma Castings reported in 2012 (282) E.L.T 414 (Trib. Delhi), (ii) AAR Kay Industries Vs. CCE Chandigarh Reported in 2004 (165) E.L.T. 412 (Trib. - Del.), (iii) Micro Forge (I) Pvt. Ltd. Vs. CCE Rajkot 2004 (169) E.L.T. 251 (Tri. - Mumbai):- (iv) CCE Indore v. Kapil Steel Ltd. Vs. 2006 (204) E.L.T. 411 (Tri. - Del.), (v) D.P. Steels Industries Vs. CCE Jaipur-1995 (78) E.L.T. 492 (Tribunal), (vi) CCE Lucknow Vs. Kundan Casting (P) Ltd.-2008 (227) E.L.T. 465 (Tri. - Del.), (vii) RHL Profiles Vs. CCE Kanpur reported in 2013 (290) ELT 247 (Tri. - Del.), 14. Ld. Advocate further submitted that the learned Commissioner has not permitted the cross examination of 9 witnesses a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Counsel further submitted that in the entire case no evidence has been brought on the record as to how and to whom the goods were cleared without payment of central excise duty. The Show Cause Notices were issued to 3 of the noticees M/s.Subhi Steels, M/s.Maheshwari Steels and M/s. K. G. Ispat Pvt. Ltd. alleging that they were managing illicit purchase from the appellant. No documentary evidence except of the oral statements was recorded from them. The learned Counsel has submitted that in the show cause notice demand of central excise duty has been made on approximately value of ₹ 121 Crores without any evidence with regard to whom such a huge quantity of goods were cleared. No evidence in regard to production of the said goods, clearance, transportation, receipt of payment in cash had been adduced by the department. The entire demands were based on illicit documents and illogical conclusions of the department. These demand were based on mere assumptions and presumptions and could not be sustained in absence of evidence. He submitted that penalty against the appellant from Sl. No.5 to 21 is not sustainable and liable thus to be set aside. 17. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , allegation of manipulation of data is not maintainable. He submitted that if there were only one CD on the date of the resumption then why the appellant has not objected when 2 CD(s) were opened on 19.02.2016. 19. Learned Authorised Representative further submitted that the loose sheets were recovered from the Car of the accountant of the company and during his statement the said accountant has categorically admitted that the loose sheets are in the form of trial balance and of other account details which were made Annexures to the Show Cause Notice and related to the sale and purchase of clandestinely removed goods from the appellant factory. He further submitted that Director of the company has also accepted the fact that the said documents pertains to the appellant company and, therefore, should have been accepted as an evidence for clandestinely removal of the goods from the appellant factory. He further submitted that the statement of the transporters and raw material suppliers clearly established that the appellant company was engaged in the manufacture and clandestine removal of the goods. He stated that if the said loose documents were not related to the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant and, therefore, we are left with no option; but agree to the contention of the appellant that the search and seizure proceedings were made beyond the normal working hours of the appellants factory. From the cross-examination of panch witnesses, it is evident that the pancha witnesses were not present at the time of search and seizure operation and their signatures were obtained without explaining then the content of the panchnama. We have also considered the judgement cited by the learned advocate and hold that search and seizure proceedings are made in violation of Section 100 of Cr PC read with Section 18 of the Act, for the aforesaid reasons. 23. We have also perused the panchnama dated 07.08.2012 which clearly states that Tally Data of 2009-10 to 2011-12 and ERP Data of sale and purchase was burned into two writable CDs of which one was given to the main appellant and other copy was retained by the officers for further investigation. We have also seen Annexure-A to the panchnama dated 07.08.2012, which contained the details of documents resumed but there is no mention of any CD(s) where the data was burnt. We agree with the contention of the learned Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. C.C.EX. 2014 (299) E.L.T. 83 (Trib) 24. We have also considered the judgement of M/s. Popular Paints Chemicals Vs. C.C.Ex. Cus., Raipur, wherein this Tribunal vide Final Order No.52716-52718/2018 dated 06.08.2018 under similar facts and circumstances has set aside the demand based on such unauthenticated data. In view of the above we hold that charges of clandestine removal based on such unauthenticated data is not sustainable and hence are set aside. 25. It is evident from the panchnama dated 07.08.2012 that the shortage was detected on the basis of eye estimation and also on average weight without physical weighment. The department failed to gather any of documents from the factory of the appellant and also from the residential premises of the Director of the appellant. Further the loose documents which were recovered from the car of the accountant were not put to test for ascertaining to the authorship of these documents. Moreover, these documents could not be corrected with the corroborative evidence. The investigating authority failed to elucidate the system adopted for the preparation of the relied upon documents which were allegedly base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court reported at [2011 (269) E.L.T. 337 (All) and thereafter By the Supreme Court reported at [2011 (269) ELT A-108] (iii) M/s. ONTINENTAL CEMENT COMPANY VS. U.O.I. 2014 (309) E.L.T. 411(All) (iv) M/s.TRIVENI ENGINEERING INDUSTRIES LTD. VS. C.C.Ex. 2016 (334) E.L.T. 595 (All) 26. Relying on these judgments, we hold that the charges of clandestine removal of the goods cannot 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 also 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 receipts of raw materials inside the factory premises, and non-accountal thereof in the statutory records, utilization of such raw materials for clandestinely manufacture of finished goods. manufactured of finished goods with refere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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