$~83
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision : 29.08.2018
+ CEAC 29/2017
COMMISSIONER OF GOODS AND SERVICE TAX, DELHI
(EAST) ..... Petitioner
Through: Mr. Harpreet Singh, Sr. Standing
Counsel.
versus
ASHUTOSH METAL INDUSTRIES ..... Respondent
Through: Mr. V.S. Negi and Mr. Satish
Chander Kaul, Advocates.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A. K. CHAWLA
HON'BLE MR. JUSTICE 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?
CEAC 29/2017 Page 1 of 12
(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, a show cause notice for
clandestine removal of dutiable goods was issued on 30.08.2007. The
assessee resisted the notice contending that no incriminating material
was discerned. The show cause notice relied upon certain recoveries
made from the premises or the third parties as well as recoveries such
as pen-drive and computer hard drive from the premises of one
Ms.Janki Sharma. Her statement too was recorded. This formed the
basis of the order-in-original of the Commissioner dated 30.03.2009.
The order-in-original sought to analyse the data extracted from the
electronic material recovered from the premises of Ms. Janki Sharma.
3. The relevant part of the discussion of the Adjudicating
Authority is extracted below:-
"38.4 The scrutiny of the printouts as aforementioned,
and duly corroborated by the statement dated 18.11.2005 of
Smt. Janki Sharma, reveal that it contains the details of
transactions of ATM (and SHIVA), which is abbreviated to
mean Ashutosh Metal Industries, and Shri Jatinder Kumar
Aggarwal is the proprietor of M/s.ATM. The papers of ATM
CEAC 29/2017 Page 2 of 12
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 ingots and receipt of payment in cash. The details
mentioned at page no. 123 to 131 are a consolidated
statement which is in respect of parties to whom copper
ingots/rods were sold clandestinely by M/s.ATM. The total
sale of copper ingots/rods was shown for an amount of Rs.
18,22,35,303.30/- at page-131 for a period from 02.03.05 to
06.05.05.
39.1 Similarly another set of printout was also
generated as per page numbered from 1 to 209, relating to
the account of "SHIVA". As stated by Smt. Janki Sharma, the
trarnsactions entered in the "SHIVA" account are created in
respect of Ashutosh Metal Industries in order to keep some of
its transactions related to clandestine removal. The details
given in this account are maintained in an identical manner
like ATM account. It is seen that ATM account are
maintained up to 06.05.05 and thereafter for the subsequent
period the account is maintained in the name of 'SHIVA'. The
CEAC 29/2017 Page 3 of 12
documents show the party-wise transaction details and
consolidated details 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 Rs. 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
as well as in pen drive. Both the Kachhi parchi/chits and pen
drive were given by the Proprietor of M/s. ATM to Smt. Janki
Sharma to create two accounts. Some transactions of
M/s.ATM are entered in 'ATM' account and the remaining
transactions of M/s.ATM are entered in a fictitious account
named "SHIVA". In fact Smt. Janki Sharma was found
entering the data in a computer with the help of attached pen
drive when the officers visited her residence and conducted
searches. The co-relation between some data in the kachhi
Parchies (page from 1 to 56) with some entries in the
printouts generated from computer clearly indicated that the
data contained in kachhi Parchies were actually entered in
computer to create a ledger data base.
CEAC 29/2017 Page 4 of 12
39.3 The payment received on account of clandestine
sale of ingots/rods, as reflected in the account of 'ATM' and
'SHIVA' were actually the transactions of M/s.ATM only as
corroborated by the statement of Smt Janki Sharma and this
indicates 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 LDO for an amount of Rs. 29,97,380/- during the
aforesaid period which was paid in cash. The contents of
page 67 can better be appreciated by looking at the scanned
copy of the relevant page (incorporated in the show cause
notice) reflecting the purchase of LDO.
40.2 Similarly on scrutiny of the seized print out marked
as 'SHIVA' Account from page 1 to 209, the details of page 77
show ledger account of LDO from 12-05-05 to 04-11-05
which reflects the purchase of LDO for an amount of Rs.
59,47,600/- which was also paid in cash."
CEAC 29/2017 Page 5 of 12
4. The assessee appealed to the Customs, Excise and Sales Tax
Appellate Tribunal (hereinafter ,,CESTAT) which was of the opinion
that in the absence of any material seized from the premises by the
Revenue Authorities in the course of search conducted separately, the
duty demanded to the tune of ` 8,30,53,761/- could not be sustained.
The CESTAT noticed that the show cause notice itself showed that the
daily production from the appellants factory 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
appellants 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 house of
Smt. Janki Sharma, no doubt, gives rise to suspicion that
these are details relating to clandestine clearance of the
goods. However, clandestine manufacture and clearance
CEAC 29/2017 Page 6 of 12
alleged against the appellant is a very serious charge which
needs to be proved by Revenue by producing tangible and
reliable evidences. For clandestine clearance of such huge
quantities of finished products, corresponding quantity of
raw-materials ought to have been procured by the appellant.
The finished products allegedly have been cleared to various
customers. In fact, in the computer printouts recovered,
names of several buyers have been indicated. However, we
note that Revenue has failed to undertake proper
investigation even for the procurement of raw materials
without entering in their books, nor carried out any
investigation on the buyers who are alleged to have
purchased these finished goods, in cash without payment of
duty. From the records recovered from the factory, there is
no evidence of any physical 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
manufacture and clearance has not been substantiated by any
CEAC 29/2017 Page 7 of 12
tangible evidences. The only evidence unearthed by Revenue
in the form of computer, from the residence of a third party
cannot be considered as sufficient proof to support such
allegation. This is particularly so since the authenticity of the
evidence has been questioned. The Revenue has failed to
produce any corroborative evidence in the form of purchase
of raw materials, clearance of finished products or even the
capacity to manufacture such a huge quantity of finished
products alleged to ·have been cleared. The evidence, at best,
raises suspicion in the minds but is not sufficient to prove the
charges of clandestine removal.
13. The appellant has placed reliance on the Tribunal
judgment in the case of Essvee Polymers (P) Limited vs.
CCE, Chennai - 2004 (165) ELT 291 (Tri. Chennai.) and
Hon'ble Allahabad High Court decision in the case of
Continental Cement Company vs. UOI- 2014 (309) ELT 411
(All.). We have gone through 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
CEAC 29/2017 Page 8 of 12
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 respondents
firm. It was also submitted that CESTAT opined with respect to the
failure of justice, i.e. not providing opportunity to cross-examine
Ms.Janki Sharma, is of no avail. In this regard, the Revenue relied
upon ,,Surjeet Singh Chandra vs. UOI, 1997 (89) ELT 646. Learned
counsel emphasized that the burden, in the event of adverse material
presented before an Adjudicating Authority, is always upon the party,
who wishes to prove the contrary. It was contended that in the present
case, the respondent/assessee was aware of the nature of the material
gathered and used against it in the form of the confessional statement
of Ms.Janki Sharma as well as computer printouts and electronic
evidence and that it could not dispel the reasonable inference that the
Revenue proved against it.
6. It is evident from the above discussion as well as complete
reading of the orders of the Adjudicating Officer and the CESTAT
that the case built up against the assessee is entirely based on the
evidence procured from third party. The lynchpin of the Revenues
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 Revenues
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
{adf}
CEAC 29/2017 Page 9 of 12
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 and electronic materials.
The Tribunal reproduced the tabular chart which the Revenue had
relied upon. The same is extracted below:
"
S. Accou Period Cum-duty Assessable Central Educatio Total
No nt sale value value on Excise n Cess on Duty
shown in the which duty @ of Excise Recover
printouts duty is 16% Duty @ able
recovered payable (Rs.) 2% (Rs.) (Rs.)
and from the
calculations
from kachhi
parchi (Rs.)
1. ATM 2.3.05 18,22,35,30 15,66,67,2 2,50,66 5,01,335. 2,55,68,
3.30 14 08 089.3
to
06.5.05 754.22
2. SHIVA 07.5.05 35,02,87,88 30,11,41,5 4,81,82 9,63,653. 4,91,46,
9.00 82.70 07 306.3
to
16.9.05 653.23
3. ATM 17.9.05 77,80,242.0 66,88,653. 10,70,18 21,403.7 10,91,58
CEAC 29/2017 Page 10 of 12
to 0 71 4.59 0 8.29
21.9.05
4. ATM 22.9.05 5,16,58,179. 4,44,10,40 71,05,66 1,42,113. 72,47,77
00 1.47 4.25 28 7.53
to
12.11.05
TOTAL 59,19,61,61 50,89,07,8 8,14,25,2 16,28,50 8,30,53,
3.30 51.88 56.29 5.13 761.42
"
7. The inference that the Revenue sought to draw a reference to
"ATM"; the link it sought to make by the statement of Ms.Janki
Sharma. 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 assessees 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 correctly held that the assessees appeal deserved to be
allowed.
CEAC 29/2017 Page 11 of 12
8. For the above reasons, the questions of law framed are
answered against the Revenue and in favour of the assessee. The
appeal is consequently dismissed.
S. RAVINDRA BHAT, J
A. K. CHAWLA, J
AUGUST 29, 2018
nn
CEAC 29/2017 Page 12 of 12
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