Customs Excise & Service Tax Appellate Tribunal( CESTAT ) has held that failure to follow the mandatory procedure prescribed under Section 36B of Central Excise Act, 1944, the electronic evidence cannot be accepted in evidence.
The assessee, M/s.Hi-Tech was accused of indulging in evasion of Central Excise duty by suppression of production of sponge iron and MS ingots/billets and clandestine removal of the same, the officers of Directorate General of Central Excise Intelligence ( DGCEI ) conducted simultaneous search operations at the factory at Salem and Head office at Coimbatore on 15.03.2008. The search operations resulted in recovery of various incriminating documents as well as Central Processing Units ( CPUs ) of computers which were seized under mahazar dt.15.03.2008 drawn at the respective premises. The seized documents prima facie appeared to indicate large scale evasion of Central Excise duty by M/s.Hi-Tech.
Assessee contended that documents which were seized during investigation such as ledger accounts, financial statements, invoices, bank related documents, financial statements were vital in order to allow the assessee to mount a solid defense of his case. Assessee contended that Rule 24A of Central Excise Act provides for is a safeguard provided to an assessee to get the non-relied documents. Assessee contended that it is the right of the assessee to get back the documents, and made it a point that if the department intends to retain the same the assessee has to be intimated of the same. Assessee contended that even after repeated requests by the assessee, the department did not provide the imaged version of the hard disk seized by them and thereafter sent by the department to the Government Examiner of Questioned Documents, Directorate of Forensic Science, Hyderabad ( GEQD ). Assessee argued that there was a clear violation of natural justice in this case.
Revenue contended that all the documents have been supplied to the assessee and that assessee was given enough opportunity for hearing. Revenue argued that the printouts from the hard disks were taken which revealed clandestine production as well as clearance of goods. Revenue further contended that investigation in the nature of searches were conducted with regards to the buyers’ end who have purchased the finished products from the assessee. Their records tallied with the details in the computer printouts. Revenue Contended that the details in the computer printouts corroborated the evidence contained in the hard disk.
Revenue further contended that the assessee had purchased raw materials as they mainly used coal and iron ore as raw materials. The evidence gathered showed that the appellants have procured raw materials which have been used in the manufacture of finished products which were cleared clandestinely.
The two member bench comprising Sulekha Biwi C.S( Member, Judicial ) and Vasa Sheshagiri Rao( Member, Technical ) has held that the department has failed to establish that Section 36B was complied while taking the printouts from the hard disk attains significance. The bench observed that “It is brought out from evidence that the department has seized the hard disk and taken the print outs by themselves. These printouts were filed as ‘Made up file’ with 293 pages. These printouts are the foundation for initiating the investigation. Only after taking the printouts the hard disk has been sent to the DGCEI”. The bench held that on failure to follow the mandatory procedure prescribed under Section 36B of Central Excise Act, 1944, the electronic evidence cannot be accepted in evidence. The impugned order was set aside
The assessee was represented by S. Durairaj. Revenue was represented by Rudra Pratap Singh.
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