TMI Blog2023 (10) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... ters belonged to the Appellant's company and the data can be relied upon as evidence to demand duty? - Whether the conditions mentioned in Section 36B has been followed in this case or not, to rely upon the computer printouts as evidence? - HELD THAT:- The entire case has been buit up on the basis of the data retrieved from the pen drive and the subsequent statements recorded from the responsible persons. Thus, authenticity of the data is very essential to substantiate the allegations. The pen drive has been recovered from Shri. Ajat Kr. Behera and hence his statement is very crucial regarding the data available in the pen drive. It is a fact on record that Shri Ajay Kr. Behara has been employed only 4-5 months earlier to the date of recovery of the said data. Hence, the evidentiary value of his statement with respect to the data for the earlier period does not carry any weight. Pen drive is a floating device and unless the computer from which the electronic record was produced is identified, the data recovered from the pen drive cannot be admitted as evidence. In the instant case the data recovered from the pen drive pertains to the period 2005-06, 2006-07 and 2007-08. Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be incumbent on the investigation to make inquiries from the buyers for establishing clandestine removal. In the instant case, the investigation has not brought in any corroborative evidence to substantiate the allegation of clandestine removal - the investigation has failed to establish the alleged clandestine clearance of goods by the Appellants and hence the demands confirmed in the impugned order are not sustainable. Accordingly, question answered in the negative. Whether high consumption of electricity during the years 2005-06 and 2006-07 can be relied upon to allege clandestine manufacture and clearance to demand duty during the relevant period? - HELD THAT:- It is observed from the Project Report of the Appellant that electricity required for production of 1 MT of Silico Manganese is 3800 units. As against this, the Appellant has consumed 7900 and 5564 units per MT during the years 2005-06 and 2006-07 respectively. It is observed that there was widespread variation in consumption of electricity between months. For Example in the month of April 2006, the electricity consumption per month comes to 28000 to 31000 units per MT - the excess electricity consumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 11AC of the said Act on the Company. Penalty of Rs.10,00,000/- imposed on Shri. Sitaram Agarwal, and Rs. 10,00,000/- on Shri. Arun Kumar Kadmawala, both Directors of the Company under Rule 26 of the Central Excise Rules, 2002. Aggrieved against the impugned order, the Appellant Company and both the Directors filed appeals before this Tribunal. 2. Briefly stated facts of the case are that on 23-11-2007, simultaneous search was conducted by the DGCEI Officers at the factory and office premises of the Appellant company. In the course of search at Office, one USB Drive (Pen Drive) was recovered from one of the Computer Table Drawer , which was being used by Shri Ajay Kumar Behera, Computer Operator. The said pen drive contained a Tally package, which was in locked condition with a User Name and Password. The Tally package was opened with the User ID and Password revealed by Shri. Ajay Behera. The Data available in the pen drive were for the period from June 2005 to March 2007. From the data available in the pen drive, Print outs of Sales Registers and Purchase Registers were obtained in the presence of Shri. Ajay Behera and Shri. Ajay Kumar Kadmawala, Director. All the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly received from buyers of Silico Manganese, which the officers considered as un accounted sales and demanded duty on the same. 9. In support of their contention against the confirmation of the demands in the impugned order, the Appellants made the following submissions: (i) Pen drive printouts cannot be relevant piece of material and cannot be admitted into evidence without complying with Section 36B(2)/36B(4). hence, cannot be admitted into evidence and cannot be relied upon as evidence. The Pen drive is not accompanied with Certificate as mandated under section 36B(4) containing the following details: (a) Describing the manner in which the pen drive data (electronic record) was produced (b) the certificate must furnish the particulars of the device involved in the production of that record(the computer with which the pen drive was used for production of electronic record). (ii) In the instant case, the Pen drive was seized from table drawer. Investigation is silent with which computer it was used. Pen drive is a floating device and there was no enquiry as to data contained therein was fed in which computer and whether that computer was owned by the Appellant or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there is no confession of guilt. (vi) Shri Arun Kadmawala, Director in his statement dated 20-10-2008 stated that the sales relating to 2005-06, 2006-07 and 2007-08 which is 2 1/2 year old and he is not in a position to comment upon it. Thus, There is no confession of guilt. (vii) Shri Ajay Kumar Behera, Computer Operator in his statement dated 23-11-2007 stated that he was not the accountant and he only makes entry on the basis of records, papers, information etc. made available to him by Sri Sujit Pruseth, Accountant Director, hence, he has no knowledge of any clandestine activities. He further stated that he joined the company w.e.f. 12-04-2007, hence, cannot say anything prior to that. The period of dispute in this case is 2005-06 to 2007-08 (upto November, 2007). Thus, there is no confession of guilt. (viii) Sri Sujit Pruseth, Accountant on 03-12-2008 in his statement did not accept clandestine purchase, manufacture or sale by the Appellant Company. He stated that he did not provide any information to Sri Ajay Kumar Behera for making entry into pen drive/computer. There is no confession of guilt by him. (ix) Oral Statements cannot be relevant piece of material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down etc. Thus, they contended that the allegation of clandestine clearance cannot be on the basis of excess consumption of electricity. In support of this contention, the Appellants relied on the decision in the case of CCE Vs. R.A. Casting P. Ltd. reported in 2012 (26) STR 262 (All.) which was affirmed by the Hon'ble Supreme Court vide 2011 (269) ELT A108 (SC). (xii) The Appellants submits that the dispute in the instant case relates to the period from 2005-06 to 2007-08 (upto November 2007) and search was conducted on 23-11-2007 while the Show Cause Notice was issued on 08-04-2010 i.e. after expiry of more than 29 months, hence, the demand is barred by normal period of limitation of one year. In the above facts and circumstances of the case, the demand is entirely barred by normal period of limitation. For the same reason, the imposition of penalties under Sections 11AC and Rule 26 are not sustainable. (xiii) In view of the above, the Appellants prayed for setting aside the impugned order and allow their appeals. 10. The Ld. A.R. submits that the data relating to sale and purchase of goods maintained under the Tally Package was de-coded with the user ID as bajaj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises on 23.11.2007 by the officers of D.G.C.E.I. The demand has been raised based on the date retrieved from the pen drive and other computers available in the office as well as various statements recorded from the responsible persons of the Appellant. The abnormally high consumption of electricity for manufacture of Silico Manganses for the years 2005-06 and 2006-07 has also been cited as evidence of manufacture and unaccounted clearance of Silico manganese during the period under dispute. 13. Thus, we observe that the issues to be decided in the present appeals are: (i) Whether evidences available on record substantiate that the data retrieved from the pen drive and other computers belonged to the Appellant's company and the data can be relied upon as evidence to demand duty? (ii) Whether the conditions mentioned in Section 36B has been followed in this case or not, to rely upon the computer printouts as evidence? (iii) Whether the procedure as set out in Section 9D of the Central Excise Act, !944 was followed in this case or not? If not followed, then whether the statements recorded under Section 14 of the Central Excise Act, 1944 can be relied upon to demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pen drive. 14.2. Shri Ajay Kumar Behera, Computer Operator in his statement dated 23-11-2007 stated that he was not the accountant and he only makes entry on the basis of records, papers, information etc. made available to him by Shri Sujit Pruseth, Accountant Director, hence, he has no knowledge of any clandestine activities. He further stated that he joined the company w.e.f. 12-04-2007, hence, cannot say anything prior to that. The period of dispute in this case is 2005-06 to 2007-08 (upto November, 2007). Shri Sujit Pruseth, Accountant on 03-12-2008 in his statement did not accept clandestine purchase, manufacture or sale by the Appellant Company. He stated that he did not provide any information to Sri Ajay Kumar Behera for making entry into pen drive/computer. Shri Sitaram Agarwal, Director in his statement dated 23-11-2007 categorically denied having engaged in clandestine activities and also categorically stated that he is not aware whether the print outs taken out from the Pen drive and Computer relates to the Appellant Company or not. Shri Arun Kadmawala, Director in his statement dated 20-10-2008 stated that the sales relating to 2005-06, 2006-07 and 2007-08 which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in the dispatch section and the device on which the data was being stored was the 8 GB pen drive. The other pen drive was also recovered from the pocket of Shri Sushil Kumar Roy. We observe that the adjudicating authority has wrongly presumed that the computer in which Shri Sushil Kumar Roy was working was the source of all data and the requirement of Section 36B (4) stand satisfied . A pen drive is a floating device. It cannot be assumed that the company s data was not being stored in the company s computer hard-drive but was being stored in a pen drive. In his statement dated 17.07.2014, Shri Sushil Kumar Roy categorically stated that Shri. Gautam Banerjee, the other Associate of the company also makes entry in the computer, but no statement was recorded from him. There is no statement from any Director either of JBIL-III or JBIL-IV accepting the authenticity of the said data. Even on the date of search Shri Gaurav Jajodia, Director of JBIL-III was present whose signature was obtained on the panchnama but his statement was never recorded. 12.5 We observe that JBIL-III and JBIL-IV have vehemently denied ownership of these two pen drives and the authenticity of the data t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the investigating officer. The Central Excise officers attempted to corroborate the contents of the printout with the statements of 30 persons viz. buyers, transporters etc. The appellants requested for cross-examination of 30 persons which was rejected by the Adjudicating authority. The appellants contended that the statements are pre-drafted computer statements and it cannot be voluntary nature. After considering the submissions of the appellant, the Commissioner (Appeals) allowed the cross-examination of 4 persons randomly selected. Three of them stated that they were made to sign the pre-drafted statements on a promise that no action shall be taken against them. 8. For the purpose of proper appreciation of the case, the relevant portion of the findings of the Commissioner (Appeals) is reproduced below : - 4.5 Another contention of the appellant is that department has brought artificial evidence in the form of 30 statements from the buyer parties. The appellant stand is that the statements of the 30 parties are pre-drafted computer statements and involuntary. Four of the buyers (randomly selected) deposed before me. Three of them stated before me that they were mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in the sub-section (2) and other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be the document for the purpose of this Act and the rules made thereunder and can be admissible in proceedings. Sub-section (2) of Section 35B provides the condition referred to in sub-section (1) in respect of the computer printout shall be the following viz. (a) the computer printout 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 of the kind from which the information so contained is derived; (c) throughout the material part of the said period, the computer was operational properly or, if not, then any respect in which it was not operating properly or was out of operation during that part of tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 print-outs did not satisfy the statutory conditions. He has referred to the relevant provisions of Section 36B of the Central Excise Act which deals with admissibility of computer printouts etc. as evidence and says that the statement contained in a computer printout shall be deemed to be a document for the purposes of the Act and the rules made thereunder and shall be admissible as evidence of the contents of its original, if the conditions mentioned in sub-section (2) and other provisions of the Section are satisfied in relation to the statement and the computer in question. Sub-section (2) reads as under : - 2. The conditions referred to in sub-section (1) in respect of the computer printout shall be the following, namely : - (a) the computer printout containing the statement was produced by the computer during the period over which the computer was used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 manufacture and clearance. We find a strong parallel between the instant case and the cited case. Nothing contained in the printouts generated by Sampath Kumar s PC can be admitted into evidence for non-fulfilment of the statutory conditions. It is also noteworthy that the computer printouts pertained to the period February, 1996 to September, 1998 only but the information contained therein was used for a finding of clandestine removal of waste and scrap for earlier period also, which, in any case, was not permissible in law. In the result, we hold that the entire demand of duty on waste and scrap is liable to be set aside. 11. Taking into consideration the overall facts and circumstances of the case, I find that the entire case was made out on the basis of statements of the buyers and the computer printout. Commissioner (Appeals) already held that the evidentiary value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id 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 certificate must deal with the applicable conditions mentioned under Section 65B(2) of the Evidence Act; and (e) The certificate must be signed by a person occupying a responsible official position in relation to the operation of the relevant device. 15. It is further clarified t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set out in Section 9D of the Central Excise Act, !944 was followed in this case or not? If not followed, then whether the statements recorded under Section 14 of the Central Excise Act, 1944 can be relied upon to demand duty ? 15.1. The Appellant contended that Statements recorded during the course of investigation cannot be relevant without testing the same under Section 9D. The provisions of Section 9D of the Act is mandatory and unless the prescriptions of Section 9D are complied, the testimony of witness cannot be treated as relevant piece of material as mandated under Section 9D. In the instant case, we observe that the statements recorded from Shri Sitaram Agarwal, Director, Shri Arun Kadmawala, Director, Sri Sujit Pruseth, Accountant and Sri Ajay Kumar Behera, Computer Operator are all not tested in accordance with Section 9D of the Act, and hence these statements are not relevant piece of material and cannot be admitted as evidence. 15.2. The Appellant relied on the decision of this Tribunal in the case of M/s Jai Balaji Industries Ltd. Vs. CGST reported in 2023- VIL-771-CESTAT-KOL-CE in support of their contention that the statements recorded in this case cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to a proceeding before a Court. 5. A plain reading of sub-section (1) of Section 9D of the Act makes it clear that clauses (a) and (b) of the said sub-section set out the circumstances in which a statement, made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of inquiry or proceeding under the Act, shall be relevant, for the purpose of proving the truth of the facts contained therein. 6. Section 9D of the Act came in from detailed consideration and examination, by the Delhi High Court, in J. K. Cigarettes Ltd. v. CCE, 2009 (242) E.L.T. 189 (Del.) = 2011 (22) S.T.R. 225 (Del.). Para 12 of the said decision clearly holds that by virtue of sub-section (2) of Section 9D, the provisions of sub-section (1) thereof would extend to adjudication proceedings as well. 7. There can, therefore, be no doubt about the legal position that the procedure prescribed in sub-section (1) of Section 9D is required to be scrupulously followed, as much in adjudication proceedings as in criminal proceedings relating to prosecution. 8. As already noticed herein above, sub-section (1) of Section 9D sets out the circumstances in which a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in J K Cigarettes Ltd. (supra) holds that the said challenge could be ventilated in appeal, the petitioner has also invited attention to an unreported short order of the Supreme Court in UOI and Another v. GTC India and Others in SLP (C) No. 21831/1994, dated 3-1-1995 [since reported in 1995 (75) E.L.T. A177 (S.C.)], wherein it was held that the order passed by the adjudicating authority under Section 9D of the Act could be challenged in writ proceedings as well. Therefore, it is clear that the adjudicating authority cannot invoke Section 9D(1)(a) of the Act without passing a reasoned and speaking order in that regard, which is amenable to challenge by the assessee, if aggrieved thereby. 13. If none of the circumstances contemplated by clause (a) of Section 9D(1) exists, clause (b) of Section 9D(1) comes into operation. The said clause prescribes a specific procedure to be followed before the statement can be admitted in evidence. Under this procedure, two steps are required to be followed by the adjudicating authority, under clause (b) of Section 9D(1), viz. (i) the person who made the statement has to first be examined as a witness in the case before the adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, for proving the truth of the contents thereof, he has to first admit the statement in evidence in accordance with clause (b) of Section 9D(1). For this, he has to summon the person who had made the statement, examine him as witness before him in the adjudication proceeding, and arrive at an opinion that, having regard to the circumstances of the case, the statement should be admitted in the interests of justice. 17. In fact, Section 138 of the Indian Evidence Act, 1872, clearly sets out the sequence of evidence, in which evidence-in-chief has to precede cross-examination, and cross-examination has to precede re- examination. 18. It is only, therefore,- (i) after the person whose statement has already been recorded before a Gazetted Central Excise officer is examined as a witness before the adjudicating authority, and (ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for cross- examination, can arise. 19. Clearly, if this procedure, which is statutorily prescribed by plenary parliamentary legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principles of natural justice in the following manner :- (i) In the event that the Revenue intends to rely on any of the statements, recorded under Section 14 of the Act and referred to in the show cause notices issued to Ambika and Jay Ambey, it would be incumbent on the Revenue to apply to Respondent No. 2 to summon the makers of the said statements, so that the Revenue would examine them in chief before the adjudicating authority, i.e., before Respondent No. 2. (ii) A copy of the said record of examination-in-chief, by the Revenue, of the makers of any of the statements on which the Revenue chooses to rely, would have to be made available to the assessee, i.e., to Ambika and Jay Ambey in this case. (iii) Statements recorded during investigation, under Section 14 of the Act, whose makers are not examination-in-chief before the adjudicating authority, i.e., before Respondent No. 2, would have to be eschewed from evidence, and it would not be permissible for Respondent No. 2 to rely on the said evidence while adjudicating the matter. Neither, needless to say, would be open to the Revenue to rely on the said statements to support the case sought to be made out in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of finished goods by the Appellants are substantiated with corroborative evidence? 16.1. Duty has been demanded in the impugned order on account of clandestine clearance of Silico Manganese manufactured by the Appellants. The adjudicating authority has mainly relied upon evidence of the data recovered from the pen drive on the date of search to confirm the demands in the impugned order. We observe that no inquiries were conducted with regard to the alleged clandestine removal on the basis of the aforementioned records recovered. The sales records shows cash receipts of Rs. 7 crores, which the Revenue alleges that sales proceeds of clandestinely cleared silico manganese in cash. However, no verification was done to ascertain this. The Appellants cited many judgments wherein it has been categorically laid down that when the names of the buyers were available in the seized records it would be incumbent on the investigation to make inquiries from the buyers for establishing clandestine removal. 16.2. In the case of Kumar Cotton Mills (P) Ltd. Vs Commissioner of Central Excise, Ahmedabad, reported in 2008(229) ELT 273 (Tri-Ahmd), it has been held that demand of duty cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion CCE Vs. R.A. Casting P. Ltd. reported in 2012 (26) STR 262 (All.) 22. The clandestine manufacture and removal of excisable goods is to be proved by tangible, direct, affirmative and incontrovertible evidences relating to : (i) Receipt of raw material inside the factory premises, and non- accountal thereof in the statutory records; (ii) Utilization of such raw material for clandestine manufacture of finished goods; (iii) Manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing material used, records of security officers, discrepancy in the stock of raw materials and final products; (iv) Clandestine removal of goods with reference to entry of vehicle/truck in the factory premises, loading of goods therein, security gate records, transporters documents, such as L.Rs, statements of lorry drivers, entries at different check posts, forms of the Commercial Tax Department and the receipt by the consignees; (v) Amount received from the consignees, statement of the consignees, receipts of sale proceeds by the consignor and its disposal. In the instant case, no suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standard norms are imported from the report of late Mr. N.K. Batra, Professor of Material and Metallurgical Engineers, IIT Kanpur. 20. We find that the following reports have been referred to either by the appellants or the Revenue laying down the norms for the consumption of electricity for the manufacture of one MT of steel ingots : (i) 555 to 1046 (KWH/T) as per Dr. Batra s report; (ii) 1800 KWH/T as per the report by Joint Plant Committee constituted by the Ministry of Steel, Government of India; (iii) 1427 KWH/T as per the report of NISST, Mandi, Gobindgarh given in June-July, 2006; (iv) 650 units to 820 units/MT as per the Executive Director, All India Induction Furnace Association, New Delhi; (v) 851 units/MT in the case of Nagpal Steel v. CCE, Chandigarh reported in 2000 (125) E.L.T. 1147. 20.1 From the perusal of these reports, we find that wide variations in the consumption of electricity have been reported for the manufacture of one MT of steel ingots. This renders the norm of 1046 units adopted by the Revenue as arbitrary. Why not adopt the norm of 1800 KWH/T or 1427 KWH/T or 650 to 820 units/MT or 851 units/MT as per various reports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 173E till date by the Revenue and notified by it. The electricity consumption varies from one unit to another and from one date to another and even from one heat to another within the same date. There is, therefore, no universal and uniformly acceptable standard of electricity consumption, which can be adopted for determining the excise duty liability that too on the basis of imaginary production assumed by the Revenue with no other supporting record, evidence or document to justify its allegations. 17.4. In view of the discussions and by relying on the decisions cited above, we hold that excess electricity consumption alone cannot be an evidence to substantiate the allegation of clandestine clearance. Accordingly, answer to the question (v) in para 13 supra is negative. 18. (vi) Whether the demands confirmed in the impugned order on clandestine clearance of finished goods is sustainable, without verification at the buyer's end? Also, in the absence of any evidence of procurement of the major raw materials for manufacture of silico Manganese, without invoices, whether demand is sustainable? 18.1. We observe that the allegation of the department is that most o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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