Unauthenticated Electronic Data And Private Records Cannot Prove Clandestine Removal: CESTAT [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that unauthenticated electronic data and private records in the absence of independent verification cannot by themselves prove the allegations of clandestine removal or justify coercive measures against an assessee.

The ruling was delivered by Bench, reiterating settled legal principles that documentary and electronic evidence must be legally proved by strengthening the evidentiary requirements in an indirect tax proceedings.

The issue emerged from the departmental proceedings initiated on the basis of data unearthed during search operations including electronic data, spreadsheets and some private records of unaccounted production and clearance of goods. The department primarily based its case on such data and alleged clandestine removal and penal consequences under the applicable law of indirect taxes.

The assessee contested the proceedings and argued that the entire case of the department was based solely on unverified electronic data and some loose private records which were unauthenticated and lacked any independent evidence of stock differences, transportation documents, buyer confirmations, or flow back of consideration.

The assessee claimed that electronic data, unless proved in accordance with law and supported by concrete evidence is of no evidentiary value. It was also submitted that private records seized from the premises do not necessarily indicate the actual manufacture or removal of goods and cannot be considered conclusive evidence. Further, it was submitted that the department had failed to establish the necessary links of actual manufacture, clandestine removal and receipt of sale proceeds.

The department on justifying its action asserted that the recovered data clearly demonstrated suppression of production and evasion of duty and that the material was sufficient to initiate and sustain the proceedings against the assessee.

The Tribunal held that “the charge of clandestine removal is a serious one and cannot be sustained on assumptions and presumptions. Unauthenticated electronic records and private papers without supportive evidence are not sufficient to sustain the charge of clandestine removals.” Thus, it made it clear that the burden of proof is on the department to sustain the allegations through cogent and reliable evidence.”

Accordingly, the tribunal set aside the impugned demands and penalties.

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