In a notable ruling, the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) Kolkata quashed an excise duty demand and penalties imposed on one assessee, Ramgarh Sponge Iron Private Limited (RSIPL) and its accounts manager, Om Prakash Singh, observing that the statement of the accounts manager was not voluntarily taken, and that he was tortured into admitting guilt.
The case premise arose from allegations of clandestine clearances of sponge iron without payment of appropriate excise duty, totaling over Rs. 12 crore. The Directorate General of Central Excise Intelligence (DGCEI) conducted a raid on the assessee’s factory premises, suspecting the company of evading excise duty by underreporting production and clearing sponge iron without proper documentation.
During the raid, the authorities seized various electronic devices, including laptops and pen drives, from the office of Om Prakash Singh, the company’s accounts manager. These devices contained records indicating transactions by two other firms, M/s Ganesha Industries and M/s Vinayak Enterprises, which were suspected to be used as fronts for the assessee’s illegal clearances.
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Several statements were recorded during the investigation, including that of Om Prakash Singh, who initially admitted that the assessee-company used these companies to make unrecorded sales. However, the defense later argued that Singh’s statements were made under duress, claiming that he had been tortured and threatened. Singh retracted his statements, stating that they were not given voluntarily, and even filed a police complaint regarding the mistreatment.
During the adjudication process, the tribunal bench of Mr Ashok Jindal and Mr Anpazhakan examined the evidence presented by the DGCEI. The tribunal found that the electronic records seized from Singh’s office were not properly authenticated, as required under Section 36B of the Central Excise Act. The lack of a proper certificate accompanying the computer printouts, as mandated by law, cast doubt on their admissibility as evidence.
Furthermore, the tribunal noted that there was no corroborative evidence to support the allegations of clandestine clearances, such as transportation records or financial transactions linking the assessee to the supposed illicit activities of the two firms.
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The tribunal observed that during the cross-examinations of key individuals, including Om Prakash Singh, Singh and others retracted their earlier statements, asserting that they were coerced into admitting guilt. Additionally, the tribunal pointed out that the investigation failed to establish a clear link between the assessee-company and the two trading firms, M/s Ganesha Industries and M/s Vinayak Enterprises.
In result CESTAT ruled that the excise duty demand and penalties, including those imposed on the company’s director and Singh himself, were unsustainable. The tribunal concluded that the evidence was insufficient and tainted by procedural lapses, leading to the quashing of the demand and penalties.
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