Electronic Evidence without S.36B Certificate, Statements without S.9D Compliance cannot Sustain Clandestine Removal Allegation under Excise: CESTAT [Read Order]
Relying on the judicial mandate for strict adherence to statutory evidentiary procedures, the Tribunal ruled that core evidence lacking the necessary legal backing cannot prove a serious charge.
The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the allegation of clandestine removal of excisable goods cannot be sustained when the core evidence electronic records and witness statements fail to comply with mandatory statutory provisions under the Central Excise Act, 1944.
Rashmi Group of Companies (appellant), a manufacturer of excisable goods, was subjected to search and investigation proceedings by the Directorate General of Central Excise Intelligence (DGCEI). The Revenue Department alleged widespread clandestine manufacture and clearance of goods without payment of duty, amounting to over ₹67 Crores.
GST READY RECKONER: Complete Topic wise Circulars, Instructions & Guidelines Click here
The entire allegation was primarily built upon two types of evidence recovered during the searches at third-party premises: printouts from pen drives/hard disks (electronic records) and inculpatory statements recorded from the company's directors and employees.
The Commissioner confirmed the demand, along with interest and equivalent penalties, holding that the recovered private records sufficiently proved the clandestine activities. Aggrieved by the order, the appellant approached the Tribunal.
The appellant's counsel challenged the very admissibility and reliability of the evidence. They contended that the printouts from electronic media were inadmissible as evidence because the Revenue failed to obtain the mandatory certificate required under Section 36Bof the Central Excise Act, which ensures the authenticity and integrity of electronic records.
The appellants argued that the inculpatory statements of directors and employees could not be relied upon as they were never offered for cross-examination before the Adjudicating Authority, a clear violation of the mandatory procedure laid down in Section 9D of the Act.
The Counsel highlighted that without complying with Section 9D's requirement to examine witnesses and admit their statements as evidence, these statements hold no evidentiary value.
The Bench, comprising Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member), observed that the charge of clandestine removal was a very serious charge that must be established with positive, tangible, and clinching evidence, not mere inferences or assumptions.
The Tribunal noted several crucial failures on the part of the Revenue that the Adjudicating Authority erroneously relied on a subsequently overruled Supreme Court judgment to dispense with the requirement of the Section 36B certificate.
The tribunal observed that by denying the appellant the right to cross-examine the witnesses whose statements formed the foundation of the demand, the Revenue violated the mandatory procedure of Section 9D of the Act.
The Bench concluded that the entire case rested on weak, inadmissible evidence and failed to discharge the heavy burden of proof required to establish clandestine removal.
The bench observed that the Revenue did not bring on record sufficient corroborative evidence, such as unaccounted procurement of raw material, excess electricity consumption, or identification of actual buyers.
The Tribunal held that in the absence of Section 36B compliance for electronic evidence and Section 9D compliance for witness statements, the fundamental legal pillars supporting the allegation collapsed.
The demand confirmed against the appellant was unsustainable. The demand of central excise duty, interest, and penalties was set aside. The appeal of the appellant was allowed.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
