Dept Relied Only on Third-Party Material to Allege Clandestine Sponge Iron Clearance: CESTAT Quashes Excise Duty Demand [Read Order]
Reliance was placed on Precedents, reiterating that Statements Recorded behind the back of an Assessee Cannot be Used without Proper Admission into Evidence
The Kolkata Bench of the Customs, Excise & Service Tax Appellate Tribunal set aside an excise duty demand alleging clandestine clearance of sponge iron, holding that the proceedings were entirely built on third-party material, untested statements and uncertified electronic records without any corroborative evidence.
The Tribunal observed that the Department neither conducted a search at the assessee’s premises nor identified any stock discrepancy, vehicle movement or cash trail to support the allegation of removal of 1,733.02 MT of sponge iron without payment of duty.
The appeal was filed by Amiya Steel Pvt. Ltd., along with its Director Arindam Mondal and Accountant Pradip Goswamy, challenging the confirmation of duty, interest and penalties based solely on documents and hard-drive data seized from the premises of Shri Parashnath Re-Rolling Mills Ltd.
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It was argued that the Revenue did not follow the required process outlined in Section 9D of the Central Excise Act and instead relied on multiple submissions made by a third-party employee during a two-year period. The appellants stressed that even though cross-examination was explicitly requested, the adjudicating authority never allowed it.
The Bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) noted that the last of the statements relied on by the Department was recorded two years after the original search, and earlier statements did not contain any accusation linking the appellant to clandestine supply. The Tribunal determined that the statements had little persuasive value since the Section 9D procedure was not followed and the persons who furnished those statements were not questioned by the adjudicating authority.
Reliance was placed on precedents including G-Tech Industries, Geetham Steels, and Ramgarh Sponge Iron, reiterating that statements recorded behind the back of an assessee cannot be used without proper admission into evidence.
Additionally, the Tribunal determined that Section 36B of the Central Excise Act was violated by the Revenue's reliance on computer printouts taken from the third-party premises. The records taken from external hard drives were not validated nor supported by any declaration regarding the operational integrity of the system, as required under law. Referring to judicial precedents such as Ambica Organics, Premier Instruments and Anvar P.V., the Bench decided that electronic evidence without Section 36B compliance cannot be accepted as admissible material for proving excise liability.
The order further stated that the Department failed to establish any corroboration such as transport records, driver statements, stock variation, excess raw-material acquisition or receipts from alleged buyers. The Tribunal observed that the claim of over 90 truckloads of clandestine removals could not be sustained without a single piece of supporting evidence. As a serious offense, clandestine removal must be proven by concrete, independent, and corroborating evidence rather than relying solely on conjecture.
The Tribunal struck aside the duty, interest, and penalty against the company, ruling that the demand was made based on assumptions without following the regulations. Consequently, the penalties imposed against the Director and the Accountant were completely annulled.
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