Panchnama should Not  be treated as Certificate: CESTAT Sets Aside Penalty under Central Excise Act [Read Order]

In a recent case, the New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) held that the panchnama should not  be treated as a certificate and sets aside penalty under Central Excise Act, 1944.

M/s. Trikoot Iron & Steel Casting Ltd, the appellant challenged the order passed by the Additional Director General (Adjudication), adjudicating two show cause notices. The  order confirmed the demand of central excise duty on appellant under section 11A(10) of the Central Excise Act 19442. Payment of interest under section 11AA of the Central Excise Act and penalty under section 11AC of the Central Excise Act have also been ordered. The order also confirms the demand of central excise duty on the castings articles found short in the factory premises of Trikoot Iron & Steel. The order also directs for confiscation of MT End cutting and MT Miss-roll (TMT), with an option to the appellant to redeem the same on payment of redemption fine.

Appellant is engaged in the manufacture of MS Girders, Rounds, TMT Bars, MS Ingots, Castings. On 04.07.2013 the Directorate General of Central Excise Intelligence  pursuant to an intelligence, conducted simultaneous searches at the factory premises of Trikoot Iron & Steel at Muzaffar Nagar, the office premises of Trikoot Iron & Steel at New Delhi, and the residential premises of Vaibhav Goel, Director of Trikoot Iron & Steel.

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During the search of the residential premises of the Director some loose slips, hard disks and pen-drives were seized. Printouts were also taken from the seized hard disk No. WD5000AZRX. During the course of search of the factory premises on 04.07.2013, the officers found shortage of 450.625 MTTMT Bar, 268.340MT Griders and 140.18 MT Casting Articles, having total value of Rs. 7009000/-. The officers also found excess of 7.710 MT of End Cuttings, 577.615 MT of Mis Roll and 438.805 MT of MS Ingot, having total value of Rs. 29553250/- in the recorded stock, excluding the quantity of work in progress. The goods were seized by the department. Statement of few suppliers were also recorded on various dates, but all of them retracted their statements.

It was not in dispute that the hard disk from which the printouts were subsequently taken was not found installed in the CPU. The Panchnama drawn on 04.07.2013 records that the officers found that Vaibhav Goel had removed a hard disc from his kitchen and had tried to throw it away. The panchnama does not mention that any officer had seen Vaibhav Goel actually remove the hard disc from the CPU. It only records that Vaibhav Goel had removed a hard disc from the kitchen and had tried to throw it away. A

The Panchnama does not record that Vaibhav Goel was seen removing the hard disk from the CPU and indeed it would not have been possible for Vaibhav Goel to remove this hard disk from the CPU in the presence of all the officers and throw it away. There is nothing on the record to link the hard disk to the CPU, nor is there anything to link that the hard disc and the pen drive stored information contained in the computer.

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The printouts, which are the sole basis for holding that the appellant had indulged in clandestine removal, were taken both on 04.07.2013 and on 15.07.2013 by placing the recovered hard disc and pen drive in the CPU.

The adjudicating authority, on its own, examined the oral evidence on the points required to be stated in the certificate. This is not permissible in law. The confirmation of demand is based only on the printouts taken after connecting the hard disk and the pen drive to the computer.

The two member bench of Justice Dilip Gupta, President and Hemambika R. Priya, Member (Technical)

observed that it is not possible to accept the contention advanced by the learned authorized representative appearing for the department that panchnama itself should be treated as a certificate or that the adjudicating authority was justified in itself examining whether the conditions set out in section 36B (4) of the Central Excise Act had been satisfied.

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The CESTAT set aside the  impugned order passed by the adjudicating authority.

To Read the full text of the Order CLICK HERE

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