TMI Blog2023 (10) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax authorities of persons namely Shri Shankarbhai Mehta, M.D., Shri Vikram Mehta Supervisor, Shri Sachin Shah working in dispatch sections of the accounts department preparing the sales invoices and Shri Pravinchandra Shah. Further statements were recorded by the Central Excise authorities and on conclusion of the statements, a show-cause notice was issued to Appellant. Department has not brought out any independent facts or evidence such as who is the buyers of clandestine removed goods, whether the transactions shown in the Tally Data and Visual Udyog Software data pertaining to actual removal of goods or otherwise and no corroborative evidence produced in support of details mentioned in the said data. In the present matter clandestine removal of a huge quantity of 92,352.04 MT. valued at Rs. 5,10,02,81,112/- in respect of clandestine manufacture and removal of goods involved. However not a single rupee of unaccounted cash was found during the search conducted by the Income-tax. Sub-section (4) of Section 36B requires issue of a certificate in this behalf by a person occupying the responsible official position in relation to the operation of the relevant device or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e removal is a serious allegation and it has to be established by the investigation by affirmative and cogent evidence. CESTAT in the case of SOBER PLASTICS PVT. LTD. VERSUS COMMISSIONER OF C. EX., JAIPUR [ 2001 (10) TMI 420 - CEGAT, NEW DELHI ] has held that demand based on weighment slips, slips recovered from Dharamkanta etc. relied upon for raising demand not verified with reference to transactions is not sustainable. Further, it is settled position of law that proof and evidence of purchase of raw materials and sell of final product clandestinely is necessary in to establish the allegation of suppression of production and clandestine removal of goods and that the allegation are to be proved with affirmative evidences. Since the investigation has failed to adduce evidences to establish suppression of production and clandestine removal of the goods and failed to discharge the onus to prove the allegations, the allegations are not sustainable - the allegation of clandestine removal of 92,352.04 MTs of finished goods is not established. Hence, the impugned demand of central excise duty is liable to be dropped for lack of evidences. The charges of clandestine removal agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged clandestine clearances of the goods along with interest and penalty. The case was adjudicated by the Ld. Commissioner vide impugned order, who confirmed the demand towards Central Excise duty as proposed in the show cause notice on M/s. Rajputana. He imposed equal amount of penalty on the company and penalties of on Shri Shankar Deepchand Mehta Director of the company, Shri Sachin G Shah, Dispatch Clerk, Shri Jayantibhai M Sanghvi, Marketing Executive and Shri Mohammad Rafiq Abdul Aziz Shaikh, Authorized person of M/s. KGN Transport. Aggrieved with the said impugned order, the Appellants are before us. 2. Shri H.G. Dharmadhikari, Learned Counsel with Shri D.A. Bhalerao, Learned Advocate appearing on behalf of the Appellants submits that the central excise department has not carried out any detailed investigation; rather they have utilized the material forwarded by the income tax authorities vide their letter dated 30.11.2016. The department has only recorded the statements of some persons and thereafter, impugned show case notice was issued. Thus, the investigation carried out by the Central Excise Department is limited to the aforesaid points which have not been further ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas the Chartered Engineer has considered the optimum capacity of production on the basis of idle time after visiting to the plant and observing the production to two batches. Without prejudice, even if the installed capacity of 40,000/- MT per annum as mentioned in ER-7 Return which is full year working considering the staggering of five working days per month works out to 60 days per annum the available production capacity works out to 33,000/- MT per annum which is theoretical but considering that as it is the production capacity for the period of three years three months works out to 1,07,250 MT. whereas to support the total quantity of 1,67,093.04 MT there is shortfall of almost 60,000MT therefore, this theoretical calculation also does not support the allegation of clandestine manufacture and supply. Moreover the Gujarat Pollution Control Board has issued the consent to operate the plant is only for 20,000/- MT Per annum. Therefore, there cannot be any excess production as alleged in the impugned order. In support of above arguments, he relied upon the following judgments:- CCE Vs. Jindal Nickel Alloys Ltd. 2020 (371) ELT 661 (Del) Ashutosh Metal Industries Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfair trail. In case, the demand is based on the cancelled invoices drawn from visual udyog excise software on which the name of buyers were appearing. The department has recorded the statements of those buyers under Section 14 of the Central Excise Act, 1994 which revealed that the goods under those invoices were not received by those buyers and on the said date the truck shown in those cancelled invoices has not passed the VAT check post on way of Mumbai and those invoices were shown to have been issued in favour of buyers situated at Mumbai. In addition to the aforesaid evidence, the appellant also adduced the information collected under RTI from Gujarat VAT Check Post Authorities showing the consignment which has passed through the said check post in the said report the aforesaid cancelled invoices as well as invoices stated in para 6.2.3 of the show cause notice has not passed through the VAT Check Post exhibits non-movement/clearance of goods. The original adjudicating authority has not considered the said submission and evidences, hence the impugned order is suffering from the vice of unfair trail and pre- determined state of mind of original adjudicating authority. 2.5 H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods should be liable for confiscation and when the goods do not exist which are liable for duty, question of l confiscation of goods does not arise. Therefore the penalty under Rule 26 of Central Excise Rules, 2002 is not imposable. He placed reliance on the following judgments:- Giriraj Iron steel Company Pvt. Ltd. vs. CCE 2019 (370) ELT 1649 (Tri. All.) Air Carrying Corporation Pvt. Ltd. vs. CCE 2008 (229) ELT 80 (Tri. Mumbai ) 2.7 Learned Counsel for the appellant, post hearing submitted a rejoinder on 21.09.2023 and the same also been considered. 3. On the other hand Shri Prabhat K Rameshwaram, the Learned Commissioner (AR) reiterated the finding of the impugned order. At post hearing learned AR submitted a synopsis dated 01.09.2023 wherein he relied upon the following judgments:- Order No R/SCA No. 18548 of 2021 dtd. 13.01.2022 - Hon'ble High Court of Gujarat 2004 (172) ELT 433 (SC) - CC, Kandla Vs. Essar Oil Ltd 2006 (202) ELT 561 (SC) Ispat Industries Ltd Vs. CC, Mumbai 2005 (184) ELT 263 (Tri-Bang) Gulabchand Silk Mills P Ltd Vs. - CCE, Hyderabad-II 2004 (165) ELT 136 (SC) - CCE, Madras Vs. Systems Components P Ltd 2007 (208 E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is seen that apart from recording the statements of some persons in the present matter no independent investigation has been carried out by the department. We observed that Department has not brought out any independent facts or evidence such as who is the buyers of clandestine removed goods, whether the transactions shown in the Tally Data and Visual Udyog Software data pertaining to actual removal of goods or otherwise and no corroborative evidence produced in support of details mentioned in the said data. In the present matter clandestine removal of a huge quantity of 92,352.04 MT. valued at Rs. 5,10,02,81,112/- in respect of clandestine manufacture and removal of goods involved. However not a single rupee of unaccounted cash was found during the search conducted by the Income-tax. The Hon ble Gujarat High Court in the matter of State of Gujarat v. Novelty Electronics - 2018 (16) G.S.T.L. 87 (Guj.) held that - 14. In the opinion of this Court, the findings recorded by the Income Tax authorities during the course of search, could have been made a starting point for inquiry as regards the discrepancy in the physical stock and that shown in the stock register. However, the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t enquiry was carried out by the Department to ascertain if through the seized documents which included certain invoices and other records, any actual clearance of the excisable goods were effected by the respondents or not. No evidence even regarding the excess purchase of the raw material, consumption of electricity, etc., had also been collected by the Department to substantiate the charge of clandestine removal of the goods. The particulars of the alleged buyers/consignees of the goods given in the seized invoices were not even verified nor their statements were recorded during the investigation. The plea of the respondents that besides the manufacturing activities, they had income from their trading and marriage palaces, business was not considered by the adjudicating authority. Therefore, under these circumstances, in my view, the Commissioner (Appeals) has rightly observed that the charge of clandestine removal of the goods having been based on assumptions and presumptions and on the record, the correctness of which was never accepted by the respondents and not proved by the Department, cannot be sustained. He had rightly set aside the order-in-original vide which the adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other provisions of Section 36B are satisfied in relation to the computer print out as well as in relation to the computer in question. Sub-section (2) of Section 36B is reproduced below :- The conditions referred to in sub-section (1) in respect of a computer print out shall be the following, namely :- (a) the computer print out 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) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the printout of the personal computer of the company s officer, had not fulfilled the statutory condition laid down under Section 36B(2) of the Act and the demand is not sustainable. The relevant portion of the said decision is reproduced below : - 9. On the demand of duty on waste and scrap, again the appellants have made out a strong case on merits. The demand covering the period November, 1993 to September, 1998 is based on certain computer printout relating to the period February, 1996 to September, 1998. These printouts were generated from a personal computer of Shri G. Sampath Kumar, a junior officer of the Company, whose statements were also recorded by the department. Admittedly, whatever facts were stated by Shri Sampath Kumar, in his statements, were based on the entries contained in the computer printouts. The statements of others, recorded in this case, did not disclose any additional fact. Therefore, apparently, what is contained in the computer printout is the only basis of the demand of duty on waste and scrap. The question now arises as to whether these printouts are admissible as evidence, in this case. Ld. Sr. Counsel has pointed out that the computer prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computer printout was regularly supplied by the Company to the personal computer of Shri Sampath Kumar in the ordinary course of activities. Again, it was not shown that, during the relevant period, the computer was operating in the above manner properly. The above provision also casts a burden on that party, who wants to rely on the computer printout, to show that the information contained in the printout had been supplied to the computer in the ordinary course of business of the company. We find that none of these conditions was satisfied by the Revenue in this case. We have considered the Tribunal s decision in International Computer Ribbon Corporation v. CCE, Chennai (supra). In that case, as in the instant case, computer printouts were relied on by the adjudicating authority for recording a finding of clandestine manufacture and clearance of excisable goods. It was found by the Tribunal that the printouts were neither authenticated nor recovered under Mahazar. It was also found that the assessee in that case had disowned the printouts and was not even confronted with what was contained therein. The Tribunal rejected the printouts and the Revenue s finding of clandestine manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 14. 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 ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Upon perusal of the judgment of the Hon ble Supreme Court in the case of Anvar P.V. (supra), we note that the Apex Court has categorically laid down the law that unless the requirement of Section 65B of the Evidence Act is satisfied, such evidence cannot be admitted in any proceeding. We note that the Section 36B of the Central Excise Act is pari materia to Section 65B of the Evidence Act. Consequently, the evidence in the form of computer printouts, etc., recovered during the course of investigation can be admitted as in the present proceedings only subject to the satisfaction of the condition of Section 36B. This refers to the certificate from a responsible person in relation to the operation of the relevant laptop/computer. After perusing the record of the case, we note that in respect of the electronic documents in the form of computer printouts from the computer and other electronic devices have not been accompanied by a certificate as required by Section 36B. In the absence of such certificate, in view of the clear findings in the judgment of the Hon ble Supreme Court (supra), the said electronic documents cannot be relied upon by the Revenue for confirmation of Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not sustainable merely based on the oral statements that too are exculpatory and without corroborative evidence. 4.12 In cases of clandestine manufacture and clearances, certain fundamental criteria have to be established by Revenue which mainly are the following : (i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions; (ii) Evidence in support thereof should be of : (a) raw materials, in excess of that contained as per the statutory records; (b) instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty; (c) discovery of such finished goods outside the factory; (d) instances of sale of such goods to identified parties; (e) receipt of sale proceeds, whether by cheque or by cash, of such goods by the manufacturers or persons authorized by him; (f) use of electricity far in excess of what is necessary for manufacture of goods otherwise manufactured and validly cleared on payment of duty; (g) statements of buyers with some details of illicit manufacture and clearance; (h) proof o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,741 MT. considered then it indicates that total manufacturing quantity during the disputed period was 1,67,093.04 MT which is beyond the production capacity of appellant and which is not possible. In the present matter appellant also produced the Gujarat Pollution Control Board Certificate wherein the consent to operate the plant is only for 20,000 MT. per annum. The adjudicating authority has not given any credence to such evidences. We find that the production capacity of the appellants has not been considered by the revenue. The adjudicating authority conveniently ignored the undisputed installed production capacity of the plant in the factory of the appellant which is the vital fact to be considered to conclude whether alleged production is possible by the appellant. We also take note that in the present matter no statement of any transporters of raw materials or statement of any raw material supplier have been recorded to ascertain the unaccounted, if any, procurement of raw materials to support the alleged clandestine manufacture and removal of the goods. For this reason also the charges of clandestine removal is not established. 4.15 We also observe that in the present m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial, shortages thereof, excess use of electricity excess/shortage of inputs in stock, flow back of funds, purchase of final products by parties alleging receipt and removal of goods etc. is necessary. CESTAT in the case of CCE v. Supreme Fire Works factory [2004 (163) E.L.T. 510 (Tri.) dealt with the allegation of clandestine manufacture and removal and observed that mere suspicion can not take place of proof. Proof and evidences of purchase of raw materials, sale of final goods clandestinely is necessary. The allegations are not sustainable in absence of evidences. CESTAT in case of CCE v. Shree Narottam Udyog (P) Ltd. [2004 (158) E.L.T. 40 (Tri.)] has dealt with the allegation of clandestine manufacture and removal of goods and held that settled law is that the charge of clandestine removal being a serious charge required to be proved beyond doubt on the basis of affirmative evidences. CESTAT in case of Jagatpal Premchand Ltd. v. CCE [2004 (178) E.L.T. 792 (Tri.) held that it is settled law whenever charge of clandestine removal made revenue has to prove assessee procured all raw materials necessary for manufacture of final product. The allegations are not sustainable if no in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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