Clandestine Removal Charge Fails: CESTAT Drops ₹97.9 Lakh Excise Demand over Non-Compliance with S.9D and S. 36B [Read Order]
The Tribunal held that excise duty cannot be demanded based on loose sheets, pen-drive data, and untested statements when the mandatory procedures are not followed.
![Clandestine Removal Charge Fails: CESTAT Drops ₹97.9 Lakh Excise Demand over Non-Compliance with S.9D and S. 36B [Read Order]](https://images.taxscan.in/h-upload/2025/12/12/2111695-clandestine-removal-charge-fails-cestat-drops-excise-demand-over-non-compliance.webp "Clandestine Removal Charge Fails: CESTAT Drops ₹97.9 Lakh Excise Demand over Non-Compliance with S.9D and S. 36B [Read Order]")
The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that THE clandestine removal charge could not be sustained and the demand of ₹97.9 lakh was required to be set aside since the statutory requirements governing the admissibility of statements and electronic records, including the procedure under Section 9D and the certification prescribed under Section 36B...
The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that THE clandestine removal charge could not be sustained and the demand of ₹97.9 lakh was required to be set aside since the statutory requirements governing the admissibility of statements and electronic records, including the procedure under Section 9D and the certification prescribed under Section 36B of the Central Excise Act, 1944, were not followed.
The Appellant, M/s Vikromatic Steels Pvt. Ltd. was engaged in the manufacture of M.S. Ingots, TMT Bars and Flats under Chapter 72 of the Central Excise Tariff Act, 1985. The case arose from a search carried out by DGCEI, Jamshedpur at the appellant’s premises, during which officers claimed to have recovered loose sheets and computer printouts said to originate from a pen drive belonging to the cashier. Statements of various personnel, including that of Director Jai Prakash Choudhary, were recorded during the investigation.
A Show Cause Notice alleged clandestine removal of goods without invoices and without payment of duty, proposing recovery of ₹97,97,194 with interest under Section 11A of the Central Excise Act, 1944 and penalty under Section 11AC. The Additional Commissioner confirmed the demand along with penalties on both the company and the Director, and the Commissioner (Appeals) upheld the order, prompting the present appeals.
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The appellant, represented by Arnab Chakraborty and Abhijit Biswas, contended that the entire demand was unsustainable as it relied exclusively on loose sheets, computer-generated wage registers and statements recorded during the investigation, none of which met the statutory standard for admissibility.
It was argued that the electronic records were inadmissible because the mandatory certification required under Section 36B of the Central Excise Act, 1944 was not produced. The statements, which formed the backbone of the Department’s case, were equally inadmissible in the absence of compliance with Section 9D, which requires that the makers of the statements be examined before the adjudicating authority.
The respondent, represented by A. Mukherjee, argued that the loose sheets, pen-drive data and statements under Section 14 of the Central Excise Act established the existence of parallel accounts.
The Bench comprising R. Muralidhar, Judicial Member, and K. Anpazhakan, Technical Member, held that the demand could not be sustained in view of foundational lapses in the evidentiary process. The Tribunal noted that the statements relied upon by the Department were inadmissible as Section 9D of the Central Excise Act, 1944 mandates that the persons whose statements are relied upon must be examined before the adjudicating authority, a requirement that was never fulfilled.
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The Tribunal observed that the computer printouts and electronic data allegedly obtained from the pen drive lacked the certification required under Section 36B, rendering them legally non-existent for evidentiary purposes.
Since there was no corroborating evidence demonstrating the allegation of clandestine removal, hence, the case was built entirely on loose papers and unverified computer printouts, which cannot, by themselves, establish clandestine production or clearance.
Finding that the burden of proof lay on the Revenue and had not been discharged, the Tribunal set aside the demand of ₹97,97,194 along with interest and penalties on the appellant and the Director, allowing both appeals.
The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that THE clandestine removal charge could not be sustained and the demand of ₹97.9 lakh was required to be set aside since the statutory requirements governing the admissibility of statements and electronic records, including the procedure under Section 9D and the certification prescribed under Section 36B of the Central Excise Act, 1944, were not followed.
The Appellant, M/s Vikromatic Steels Pvt. Ltd. was engaged in the manufacture of M.S. Ingots, TMT Bars and Flats under Chapter 72 of the Central Excise Tariff Act, 1985. The case arose from a search carried out by DGCEI, Jamshedpur at the appellant’s premises, during which officers claimed to have recovered loose sheets and computer printouts said to originate from a pen drive belonging to the cashier. Statements of various personnel, including that of Director Jai Prakash Choudhary, were recorded during the investigation.
A Show Cause Notice alleged clandestine removal of goods without invoices and without payment of duty, proposing recovery of ₹97,97,194 with interest under Section 11A of the Central Excise Act, 1944 and penalty under Section 11AC. The Additional Commissioner confirmed the demand along with penalties on both the company and the Director, and the Commissioner (Appeals) upheld the order, prompting the present appeals.
The appellant, represented by Arnab Chakraborty and Abhijit Biswas, contended that the entire demand was unsustainable as it relied exclusively on loose sheets, computer-generated wage registers and statements recorded during the investigation, none of which met the statutory standard for admissibility.
It was argued that the electronic records were inadmissible because the mandatory certification required under Section 36B of the Central Excise Act, 1944 was not produced. The statements, which formed the backbone of the Department’s case, were equally inadmissible in the absence of compliance with Section 9D, which requires that the makers of the statements be examined before the adjudicating authority.
The respondent, represented by A. Mukherjee, argued that the loose sheets, pen-drive data and statements under Section 14 of the Central Excise Act established the existence of parallel accounts.
The Bench comprising R. Muralidhar, Judicial Member, and K. Anpazhakan, Technical Member, held that the demand could not be sustained in view of foundational lapses in the evidentiary process. The Tribunal noted that the statements relied upon by the Department were inadmissible as Section 9D of the Central Excise Act, 1944 mandates that the persons whose statements are relied upon must be examined before the adjudicating authority, a requirement that was never fulfilled.
The Tribunal observed that the computer printouts and electronic data allegedly obtained from the pen drive lacked the certification required under Section 36B, rendering them legally non-existent for evidentiary purposes.
Since there was no corroborating evidence demonstrating the allegation of clandestine removal, hence, the case was built entirely on loose papers and unverified computer printouts, which cannot, by themselves, establish clandestine production or clearance.
Finding that the burden of proof lay on the Revenue and had not been discharged, the Tribunal set aside the demand of ₹97,97,194 along with interest and penalties on the appellant and the Director, allowing both appeals.
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