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TMI Blog2023 (10) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... ine removal of manufactured goods and penalty was also imposed on all the appellants. 1.2 The brief facts of the case are that M/s Rajputana Stainless Ltd. are engaged in the manufacture of Stainless Steel Billets, Bright Bars, Rounds, Flats etc. and registered with the central excise department. A search was conducted on 02.12.2015 by the Directorate of Income Tax (Investigation) at the office, factory premises and residence of Director and various key persons of the Appellant and certain incriminating documents/ records were withdrawn for further investigation by the Income Tax Department. Evidences of unaccounted sales were found in data files of 'Tally Software and Visual Udyog Software. Further, certain loose papers and diaries were found and seized which contained the quantitative details of all materials entering and leaving the factory premises. The Income Tax Authorities shared the information and unaccounted sales, purchase and production in the form of soft copies of data of Tally & Visual Software, the scanned copies of the loose papers and diaries seized by the Income Tax Department at various premises and photocopies of the Panchnama and statements recorded by the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is settled law that the income tax investigation cannot be solely relied for alleged evasion of Excise Duty. He placed reliance on the following decisions:- * Ravi Foods Pvt. Ltd. Vs. CCE - 2011 (266) ELT 399 (Tri. Bang.) * CCE Vs. Zoloto Industries - 2013 (249) ELT 455 (Tri. Del) 2.1 He further submits that in the impugned order which is based on the demand as calculated in the Annexure A to the show cause notice, on the 92,352.04 MT. quantity alleged to have been removed without payment of duty. Whereas, the Appellant has recorded its production in statutory records in from of RG-1 for the disputed period which is 74,741MT. In order to sustain the demand of duty on the alleged quantity of final goods manufactured and cleared clandestinely, it is essential whether the Appellant has capacity to produce the total quantity of recorded production on which duty is paid plus the quantity of allegedly clandestine removal. The appellant does not have the capacity to manufactured aforesaid quantity of 1,67,093.04 MT (92,352.04MT + 74741 MT.). In support of this, he produced the certificate of Chartered Engineer. 2.2 He argued that it is impossible to manufacture alleged quantity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods of 1 MT. Therefore, to produce the 92,352.04 alleged clandestine manufacture and clearance of the goods the requirement of additional raw material is to the tune of 1,01,587 MT. whereas, traded raw material quantity in cash is only to the tune of 36MT. Therefore, there is not an iota of evidence qua the additional procurement of raw material adduced by the department. There is not a single evidence with respect to additional power consumption or additional consumption of manpower adduced in the show cause notice. Without establishing the essential ingredients by the revenue, the impugned demand of clandestine manufacture and clearance of finished goods is untenable. He placed reliance on the following judgments:- * Continental Cement Company vs. Union of India- 2014(309) ELT 411 (All.) * Sunrise Foods Products vs. CCE - 2017 (357) ELT 599 (Tri. Del) * Rajputana Steel Castings Pvt. Ltd. vs. CCE - 2017 (346) ELT 491 (Tri. Ahmd.) 2.4 He further submits that the department has issued the impugned show cause notice which is not satisfying the essential ingredients of fair investigation and impugned order has failed to consider the valid evidence in form of VAT Check Post r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and subsequently unloaded on account of cancellation of orders from buyers. They also submitted the VAT Form 402 when the goods are going out of the Gujarat State. The cross - examination of Mr. Dhwanil Shah establish that he has not destroyed any invoices after dispatch of goods. Thus the aforesaid cross examination clearly established that there was no clandestine manufacture or clearance of goods, moreover the information collected under the RTI from VAT Check Post established that all the goods which are cleared and accounted are appearing in the records of VAT Check post during the period of April 2012 to June 2015. All these materials has been submitted before the adjudicating authority but were not considered by him. Therefore impugned order is not sustainable. He placed reliance on the following judgments: * CCE Vs. Adinath Dyeing & Finishing Mills Ltd. - 2017(357) ELT 845 (Tri. Chen) * Ganpati Rolling Pvt. Ltd. Vs. CCE - 2015(315)ELT 91 (Tri.- Del) * Resham Petrotech Ltd. Vs. CCE - Final Order dated 14.08.2019 passed in Appeal No. E/1421/2011 2.6 As regard the personal penalty imposed under Rule 26 of Central Excise Rules on co-appellants he submits that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. CCE, Calicut * 2017 (347) ELT 413 (Bom) - Sharad Ramdas Sangle Vs. CCE, Aurangabad * 2011 (269) ELT 485 (AP) - Shalini Steel Pvt Ltd Vs. CCE, Hyderabad * 2018 (360) ELT 255 (AP) - Manidhari Stainless Wire P Ltd Vs. Union of India * 2010 (255) ELT 68 (HP) - CCE, Vs. International Cylinders P Ltd The above submission in the form of synopsis has been taken on record and considered carefully. 4. We have carefully considered the submissions made at length by both sides and perused the records. On perusal of the show cause notice, we find that the entire case started with the information received by the Central Excise authorities from the Income Tax Department regarding the unaccounted sales, purchase and production of goods in form of soft copies of the data of Tally and Visual Udyog Software, the scan copies of the lose papers and diaries seized by the income tax department and photocopies of the Panchnama and the statements recorded by the Income 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. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, also do not merit acceptance." 4.1 Without conducting the independent enquiry, the demand of Central Excise duty only on the basis of document/information/data provided by the Income-tax authorities by the Revenue legally not sustainable. The documents relied upon loses its evidentiary value in absence of any independent enquiry. As duty is payable on manufacture of the goods, Revenue have not come up with any positive evidence to show that the appellant has manufactured excisable goods and cleared without payment of duty. No evidence even regarding the excess purchase of the raw material, consumption of electricity, etc., had been adduced 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 Tally and Visual Udyog Software data were not even verified by the department nor were their statements relied upon. In the absence of such evidence duty cannot be demanded from the appellant. 4.2 We find that the CESTAT in the case of Commissioner of Central Excise, Jalandhar Vs. Harcharan & Brothers 2004 (168) E.L.T. 454 (Tri. - Del.) supra held as under : - "4. I have heard both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.E., Chandigarh v. Bindra Tent Service - 2010 (17) S.T.R. 470 (Tri.- Del.).The Tribunal in the case of Ravi Foods Pvt. Ltd. v. C.C.E., Hyderabad - 2011 (266) E.L.T. 399 (Tri.-Bang.) has held that admission by assessee to Income Tax department as regards undisclosed/suppressed sales turnover cannot be held to be on account of clandestine removal of their final products, in the absence of any other corroborative evidence. Similarly, in the case of C.C.E., Ludhiana v. Mayfair Resorts - 2011 (22) S.T.R. 263 (P&H), Zoloto Industries [2013 (294) E.L.T. 455 (Tri.-Del.)]; and Vardhman Chemtech Ltd. v. CCE, Chandigarh [2013 (298) E.L.T. 546 (Tri.-Del.)].it was held so. 4.4 We also noticed that in the present matter it is on the records that demand is based on the data files of Tally & Visual Udyog Software which was seized during the search by the Income Tax officers from the Hard Disc and Pen Drive seized from the residence of Shri Dhwanil P Shah contained the backup of Tally Data and Visual Udyog data maintained in computer at the factory premises of the appellant and the said data were shared by the Income tax authorities with Revenue. The Revenue heavily relied upon these Hard Disc an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or retrieved data will not in absence of strict compliance of Section 36B(2) of the Central Excise Act 1944 and prima facie such demand is not sustainable. 4.6 Further, 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 the management of the relevant activity (whichever is appropriate) shall be evidence in any matter stated in the certificate and for the purpose of the sub-section, which shall be sufficient for a matter to be stated to the best of the knowledge and the belief of the persons stating it. In the present case, firstly the Central Excise department has not taken the data from the computer, moreover revenue has not stated that how the income tax officers took the print out of data stored in the computer and hard disc. It is on records that the officers had not obtained any certificate as required under Section 36B of the said Act. It is also noted that none of the conditions under Section 36B(2) of the Act, 1944 was observed. In such situation, it is difficult to accept the printout as an evidence to support the clandestine removal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 of the kind from which the information so contained is derived; (c) throughout the material part of the said period, the computer was in operation 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." Ld. Sr. Counsel has argued that the above conditions were not fulfilled in respect of the computer printout taken from the personal computer of Shri Sampath Kumar. It appears from the statement of Shri Sampath Kumar and the averments in the memorandum of appeal that it is an admitted fact that Shri Sampath Kumar was the perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 65B of the Evidence Act, 1872 (Pari materia to Section 36B of the Act,), observed as under : "13. Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure prescribed under Section 65B. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the Section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub-section (2) are satisfied, without further proof or production of the original. The very admissibility of such a document, i.e., electronic record which is called as computer output, depends on the satisfaction of the four conditions under Section 65B(2). Following are the specified conditions under Section 65B(2) of the Evidence Act : (i) The electron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole trial based on proof of electronic records can lead to travesty of justice. 16. Only if the electronic record is duly produced in terms of Section 65B of the Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to Section 45A - opinion of examiner of electronic evidence. 17. The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65B of the Evidence Act are not complied with, as the law now stands in India. 18. It is relevant to note that Section 69 of the Police and Criminal Evidence Act, 1984 (PACE) dealing with evidence on computer records in the United Kingdom was repealed by Section 60 of the Youth Justice and Criminal Evidence Act, 1999. Computer evidence hence must follow the common law rule, where a presumption exists that the computer producing the evidential output was recording properly at the material time. The presumption can be rebutted if evidence to the contrary is adduced. In the United States of America, under Federal Rule of Evidence, reliability of records normally go to the weight of evidence and not to admissibility." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery to other valuable articles or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income tax-Act, 1922 (11 of 1922), or under this Act." 4.10 We find that the above provision explicitly indicates that the evidentiary value of the statement recorded under Section 132 of the Income-tax Act is restricted and limited to the provisions of the income-tax and the same cannot be used or relied upon for any other purpose. 4.11 We also observed that in the present matter during the cross - examination, Shri Shankar Mehta, Shari Sachin Shah and Shri Dhwanil Shah and transporter clarified that no clearances has been effected from the appellant's factory without excise invoices and without payment of central excise duty. We also find that mere statements is not sufficient to establish charge of clandestine manufacture and removal of goods. The goods were clandestinely manufactured and cleared from the factory by the Appellant is a serious charges, which must be pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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." 4.14 We have seen in this case that the appellants have contended that Production Capacity of Factory does not support the case of the Revenue for clandestine manufacture. As the Chartered Engineer Certificate to the said effect has been produced before us by the appellant wherein the Chartered Engineer has certified the production capacity of appellant considering the 25 days working in a month total monthly production can be achieved from 1800 MT. to 2100 MT. depending upon the raw material quantity. If the allegation of revenue related to the clandestine manufacture and removal of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the allegation of suppression of production and clandestine 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 Plastic Pvt. Ltd. v. CCE [2002 (139) E.L.T. 562 (T)] 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. Tribunal in case of Emmtex Synthetics Ltd. v. CCE [2003 (151) E.L.T. 170 (Tri.) has held that the charge of clandestine removal has to be established by the revenue by adducing tangible, convincing and cogent evidences, CESTAT in the case of Esvee Polymers (P) Ltd. v. CCE [2004 (165) E.L.T. 291 (Tri.)] dealt with a case of alleged clandestine production and clandestine removal. The case was based on some private slips. The CESTAT observed that ..... 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