2018 (9) TMI 496 – DELHI HIGH COURT – TMI – Clandestine Removal – demand based on documents and information recovered from third party / ex-employee – cross examination – Whether the Customs, Excise and Service Tax Appellate Tribunal was right in rejecting and not taking into consideration computer printouts and holding them as inadmissible for failure to meet the conditions specified in Section 36B of the Central Excise Act? – Whether the decision of the Customs, Excise and Service Tax Appellate Tribunal is contrary to facts and perverse? – Whether the Customs, Excise and Service Tax Appellate Tribunal was right in excluding statement of Janki Sharma and computer printout and in holding that there was no evidence to show clandestine removal?
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Held that:- It is evident that the case built up against the assessee is entirely based on the evidence procured from third party. The lynchpin of the Revenue’s case is the statement of Ms. Janki Sharma. Concededly, there was nothing recove
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sed. – CEAC 29/2017 Dated:- 29-8-2018 – MR. S. RAVINDRA BHAT AND MR. A. K. CHAWLA JJ. Petitioner Through: Mr. Harpreet Singh, Sr. Standing Counsel. Respondent Through: Mr. V.S. Negi and Mr. Satish Chander Kaul, Advocates. MR. S. RAVINDRA BHAT (ORAL) The questions of law framed in this case read as follows:- (1) Whether the Customs, Excise and Service Tax Appellate Tribunal was right in rejecting and not taking into consideration computer printouts and holding them as inadmissible for failure to meet the conditions specified in Section 36B of the Central Excise Act? (2) Whether the decision of the Customs, Excise and Service Tax Appellate Tribunal is contrary to facts and perverse? (3) Whether the Customs, Excise and Service Tax Appellate Tribunal was right in excluding statement of Janki Sharma and computer printout and in holding that there was no evidence to show clandestine removal? 2. Pursuant to search and seizure proceedings carried out in the premises of the respondent/assessee
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inder Kumar Aggarwal is the proprietor of M/s. ATM. The papers of ATM are page numbered from 1 to 165. Shri Manish Sethi, however, retracted his statement vide his letter no. Nil dated 02.02.06 received through post on 07.02.06. In response to the aforesaid letter, DGCEI vide letter F.No. DZU/INV/169/2005/474 dated 15.02.06 had advised him to co-operate in the investigation. I find that the retraction was sent after almost 3 months of it being recorded and appears to be more in the nature of an after thought and it appears to have been done with a motive to mislead the investigation. 39. The documents of M/s. ATM show the party-wise details of transaction and a consolidated details of sale and purchase made by M/s. ATM. The scrutiny of the seized printouts and the particulars mentioned therein from page no: 1 to 122 and from page no. 132 to 165 reveal that they were showing the party-wise ledger account of payment details, purchase of copper scrap, purchase account, sale of copper ingo
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tails of both sale and purchase by M/s. ATM. On scrutiny of the printouts marked as SHIVA , the description mentioned from page 1 to 135 and from page no. 151 to 209 was party-wise ledger account of payment details, purchase of copper scrap, purchase account, sale of copper ingots/rods and receipt of payment in cash. The details mentioned at page no.136 to 150 were in respect of parties to whom copper ingots/rods were sold clandestinely and the total sale of copper ingots/rods was worth ₹ 35,02,87,889/- as shown at page no.150 for the period from 07.05.05 to 16.09.05. 39.2 From scrutiny of the documents in the made up file page numbered 1 to 56 showing 9th transaction details of clandestine removal of copper ingots/rods, purchase of scrap and payments & receipt on account of clandestinely removed goods from M/s ATM, it is seen that these details were written by hand on small chits/kachhi parchi by Smt. Janki Sharma, who entered such transaction in a computer generated ledger
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that a huge quantity of unaccounted ingots were manufactured and cleared clandestinely. The details of quantity reflected/written on the kachhi parchi can be seen from the sample kachhi parchies as evidence recovered during search from Smt. Janki Sharma. However, while entering these data in the computer, only relevant information such as receipt & payment details were entered and hence the printouts of ledger did not show the quantity. 40. Further, a huge quantity of unaccounted production and subsequent clearance thereof is corroborated from the evidence of higher consumption of LDO used in furnace which was purchased unaccounted; however some surreptitious purchases were recorded in computer data base as seen from the printouts recovered. 40.1 On scrutiny of the seized print outs marked as ATM account from page 1 to 165 and the details mentioned therein at page no. 67 of the above ATM account in respect of LDO from 01.03.05 to 05.05.05, it was observed that the noticee purchased
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ctory was 5 tonnes and that it runs in a single shift and works for about 10-15 days in a month. It was concluded that the calculations regarding production in the appellant s factory deduced by the Revenue Authorities in the order-in-original in the form of a chart, which was the basis of the duty liability, was entirely fanciful. The CESTAT thereafter elaborately analysed both the digital material and the evidence as well as the statement of Ms. Janki Sharma. The CESTAT thereafter pointed out the improbabilities in the conclusions arrived at by the Adjudicating Authority and observed as follows:- 11. It is settled law that documents recovered from a third party can be used against the manufacturer to prove clandestine removal only when these are supported with corroborative evidences. The Revenue has alleged that huge quantity of finished products have been manufactured and cleared clandestinely without payment of Central Excise duty. The computer printout of data recovered from the
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ysical receipt of raw materials used in production of such a huge quantity of finished goods. In fact on the date of search, no discrepancy was recorded in respect of stock of raw materials and finished goods vis-a-vis that recorded in statutory records. The Revenue has also not bothered to investigate about the transportation of raw materials as well as finished products. The total quantum of alleged clandestine. production and clearance also show an over estimation, keeping in view the production capacity estimated by the Commissioner himself in the impugned order. 12. It is true that the evidence which is required to be produced in quasi judicial proceedings should be such that the charges get established on the basis of preponderance of probability. The standard of evidences need not be as high as in criminal proceedings, where the charges are required to be established beyond reasonable doubts. But in the present case, we are of the view that the allegation of clandestine manufact
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the above case laws which support the arguments of the appellant. 14. In view of the discussions in above paragraphs, we find that the evidences produced by the Revenue for sustaining the duty demand has not been corroborated by detailed investigation. The allegation of clandestine manufacture and clearance cannot be sustained on the basis of such flimsy evidences. Accordingly, the impugned order is set-aside and the appeal is allowed. Miscellaneous application also disposed of. 5. Learned counsel for the Revenue urged that the Tribunal erred in interfering with the finding of fact that in the absence of any concurrent material connecting the assessee with the recoveries made, duty liability could not be imposed. It is submitted that the statement of Ms. Janki Sharma clearly implicated the assessee and in fact she had deposed that she left the job of one K.C. Electricals, one of the partners of which company was also a partner in the respondent s firm. It was also submitted that CESTAT
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enue s case is the statement of Ms. Janki Sharma. Concededly, there was nothing recovered from the premises of assessee connecting it with her-either as an employee or as a consultant. It is not even Revenue s claim that during the course of adjudication, it asked any query from the assessee for directing her to furnish the bank statement etc. to find out possible connection with respect to any payments made or other financial connection with Ms. Janki Sharma. In these circumstances, the word of Ms. Janki Sharma against the respondent/assessee was entirely hearsay one. In such event, the Revenue could have yet proceeded to establish its case provided some link with its allegations of clandestine removal and excess production had been there. The only material it was able to muster was in the form of electronic evidence. The printouts apparently also mentioned the names and details of the purchaser(s) however, no further inquiry was made into the details which existed on these printouts
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harma. As observed earlier, there was no scrap of paper or evidence linking the assessee with any allegations levelled against it vis-à-vis excess production and clandestine removal. On the other hand, the CESTAT noticed that the assessee s installed capacity was the production of five ton of copper ingots. Apparently, the assessee was able to function only half the month i.e. for about 15 days. Given this established and known capacity, the mere circumstance that the assessee had procured diesel equivalent to ₹ 29,00,000/- without any further calculation could not have led the Adjudicating Authority to conclude that clandestine removal to the extent of ₹ 8,30,53,761/- was made. The value of the goods, in that event was ₹ 50,89,07,851.88. The Court is of the opinion that the sheer probability of the allegations and sketchy nature of the material relied upon by the Revenue to base its liability could not therefore have been sustained. The CESTAT in our opinion c
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