1. Brief facts of the case are that the Appellant No. 1 is inter alia engaged in the manufacture of MS Billets (CETH 72), D.I. Pipes (CETH 73) and
Pig Iron (Ch. 72); officers of DGCEI, New Delhi searched the premises of M/s Shree Parasnath Re-Rolling Mills Ltd, Durgapur (M/s SPRML);
some data relating to unaccounted transactions, in external Hard Drives, were recovered from their secret office at Shantiban Park, Durgapur. Print
outs of the contents of the hard discs were taken in the presence of authorized signatory of M/s SPRML and independent witnesses; Shri Deabashish
Sasmal, CFO of M/s SPRML accepted that the data contained actual receipts and dispatches by M/s SPRML; however it was written in code
language such as 2002 for 2012; 1,000 for one Lakh etc.; the data included the details of transactions of M/s SPRML with M/s Jai Balaji Industries
Ltd(Unit-III), the appellant, for the period 01-02-2012 to 25-12-2012; it appeared that appellant No. 1 cleared 13683.05 MT of M.S. Billets during the
above period to M/s SPRML. The data prepared in respect of the appellant was shown to Shri Sankarshan Mohapatra, General Manager (Taxation)
and his statement was recorded on 12-01-2017. On the conclusion of investigation, Commissioner of Central Excise and Service Tax issued a Show
Cause Notice dated 27-02-2017 was issued, to M/s Jai Balaji Industries Ltd(Unit-III), seeking to recover Central Excise duty of Rs 6,29,50,545 under
Section 11A(4) of Central Excise, Act, 1944 from them along with interest under Section 11AA ibid; impose penalty under Rule 25(1) of Central
Excise Rules, 2002 read with Section 11AC of Central Excise, Act, 1944 on M/s Jai Balaji Industries Ltd(Unit-III) and seeking to impose penalty
under Rule 26(1) of Central Excise Rules,2002 read with Section 11AC of Central Excise, Act, 1944 on Shri Aditya Jajodia, Managing Director and
Shri Sankarshan Mohapatra, General Manager (Taxation). Commissioner of Central Tax and GST, vide Order-in-Original No.26/COMMR/BOL/17-
18 dated 16.01.18, confirmed the demand of Rs 6,29,50,545, as above, along with applicable interest; imposed equal penalty on M/s Jai Balaji
Industries Ltd(Unit-III) and penalty of Rs 20,00,000 each on Shri Aditya Jajodia, Managing Director and Shri Sankarshan Mohapatra, General
Manager (Taxation). Hence, these appeals No E/76211 to E/76213/2018 are filed.
2. Shri K.K. Anand, Learned Advocate for the appellants, submits that in response to the letter dated 05-08-15, by respondents, Appellant No 1
submitted, vide letter dated 22-08-15, all the records showing transactions made between Appellant No. 1 to M/s. SPRML during 01- 02-2012 to 27-
12-2012 (Annexure-H to SCN). The appellant, vide interim reply dated Nov. 2, 2017, requested for supply of the following documents like Copy of
Panchnama under which the external hard disks were seized; copy of Panchnama / record of proceedings under which print outs were taken from the
said hard disks; copy of Panchnama drawn for stock taking of raw materials at the premises of M/s. SPRML; copies of other statements by officers
of M/s SPRML; copy of any SCN issued to M/s. SPRML consequent to the searches on 27-12-2012 and copies of all documents/records seized from
M/s. SPRML relating to the receipt and purchase of raw materials from the notice No. 1 (like delivery challans, gate passes, GRs of transporters,
material received, registered or the like, transport vehicle numbers etc. They also requested for cross examination of the panch-witnesses present
during the recovery of two external hard drives at secret office of M/s SPRML; Shri Debasis Sasmal, CFO and Shri Anil Kumar Jain, Director of
M/s. SPRML; the Commissioner did not accede to any of the above requests holding that the request was made after eight months after issuance of
the show cause notice ; the Appellant No. 1 had no alternative but to file final reply dated 28- 11-2017; impugned Order has been passed in blatant
violation of the principles of natural justice; Commissioner should not have confirmed the duty demand merely on the basis of untested oral evidence
without bringing on record the documentary evidence showing unaccounted clearances by the Appellant No.1; Commissioner should not have relied
upon these statements unless he examined these witnesses under Section 9D of the Central Excise Act, 1944; he relies on the following judgments
wherein it was held that the procedure contained in Section 9D has to be construed strictly.
(i). High Tech Abrasives Ltd Vs CCE, Raipur 2018 (362) ELT 961 (Chhattisgarh).
(ii). G. Tech Industries Vs UOI 2016 (339) ELT 209 (P&H)
(iii). CCE, Delhi-1 Vs Kuber Tobacco India Ltd 2016 (338) EL 113 (Tri. -Del).
(iv). Andaman Timber Industries Vs. CCE, Kolkata-II 2015 (324) ELT 641(SC)
(Hon'ble Supreme Court has clearly laid down that no reliance can be placed on the statement of a witness unless he is made available
for cross examination).
2.1. Learned Advocate for the appellants submits that as per show cause notice, during the course of search of one secret premises of Ms SPRML
on 27- 12-2012 two external hard drives were seized and the printouts taken therefromshowed the actual transactions and the genuineness of this tally
data regarding sales, purchase etc of various raw materials like Ingot, M S Billet, Sponge Iron, Pig Iron, Scrap etc was accepted by Shri
DebasisSasmal and by Sh. Anil Kumar Jain, Director, M/s. SPRML; however, strangely and intriguingly this purported tally data printouts have not
been relied upon in the present show cause notice; SCN relies upon only on Annexure-H; Appellant’s request to provide all the records retrieved
from the two hard drives and other relevant documents, was not acceded; commissioner has incorrectly held (in para 4.5) that Shri DebasisSasmal
and Shri Anil Kumar Jain in their statements had accepted having received unaccounted raw material i.e. MS Billets to the extent of 13683.05 MT
from the Appellant No. 1; a perusal of their statements would reveal that at no stage they accepted the above fact; Commissioner has confirmed the
duty demand even in the absence any reliable documentary evidence as even the very purported data was not before the Commissioner.
3. Shri S. Mohapatraalso, in his statement on 11-01-2017, denied having any relationship with any records seized from the premises of SPRML on 27-
12-2012; on being shown documents seized from the secret office of M/s. SPRML, he clearlystatedthat he was concerned with the documents of his
unit and did not have any idea about the documents shown to him; the Commissioner has thrown to wind all the principles of quasi-judicial
proceedings; he confirmed the duty demand without ascertaining whether adjudication proceedings against M/s. SPRML were complete; this issue
was raised in reply to the show cause notice but there is no finding. Moreover, he himself has accepted in his Order (at para 4.7) that there was no
direct evidence of clandestine removal by the Appellant; entire duty demand has been arrived at in the show cause notice on the basis of hard
drives/electronic records seized from the premises of SPRML on 27-12- 2012; the pen drives were not seized from the premises of Appellant No. 1;
the same could not be relied upon straightway against Appellant No. 1 unless the provisions of Section 36(B) of the Central Excise Act, 1944 were
satisfied and complied with and a certificate is issued under Section 36 B (4); computer printout was not a primary evidence, since it carried no
signature and was prone to manipulation and therefore, Section 36 B allows printouts to be used as evidence, with strict conditions; the conditions, inter
alia, provide that the printout should be produced by a computer/hard disc during the period over which the computer was used regularly to store or
process information for the purpose of any activity regularly carried on over that period by the person who was in lawful control over the use of the
compute/hard disk; further, the computer on which the data was fed was not under the control of the Appellant no 1; therefore, primary condition itself
is not satisfied and therefore, no reliance can be placed on computer printouts; he relies on the following judgments:-
(i). Anvar P.V. Vs P.K. Basheer 2017 (352) ELT 416(SC)
(ii). Ambica Organics Vs. CCE &C Surat-I 2016(334) ELT 97 (Tri.-Ahmd) (upheld by the Gujrat High Court 2016 (334) ELT A67
(iii). Popular Paints & Chemicals, Final Order No. A /52718/2018-EX (DB) dated 06-08-2018.
4.Learned Advocate for the appellants submits that Appellant No. 1 would have required corresponding huge quantity of raw materials like Iron ore,
Lam Coke, Steam Coal, Manganese, scrap etc; there is not even a single evidence that the Appellant No. 1 had received huge quantity of raw
materials worth Rs. 50 crores during the short period, in order to manufacture huge quantity of 13683.05 MT of MS Billets; there is not even an iota of
evidence that the Appellant No.1 dealt with cash of such high magnitude in a short period of eleven months; Annexure-H contains the details of the
alleged clandestine clearances vehicles numbers have been mentioned under the column vehicle; no inquiry was conducted either from the
transporters or the drivers of the said vehicles; Jai Balaji group were also having Unit-II and Unit-IV which are situated in Durgapur only
manufacturing MS Billets; no evidence, whatsoever, has been brought on record that the said quantity of 13683.05 MT of MS Billets was
manufactured by Unit-III (Appellant No.1). He submits that moreover, it was specifically brought to the notice of the Commissioner that they have
already been issued show cause notice, No. 115/INT/DGCEI/HQ/2014/ 8042 dated 23-04- 2015, demanding duty based upon computer printouts
retrieved from the Pen Drives allegedly recovered from the possession of Shri Sushil Kumar Roy, Associate Commercial of Appellant No. 1 on 17-
07-2014; as per Annexure-3 of the SCN, duty is demanded on alleged clearances of MS Billets without bills during the period 2010-11 to 2014- 15 (up
to 09-04-2014); the period of duty demand in the instant case, February 2012 to December 2012, is included in the show cause notice dated 23-04-
2015; interestingly, the said SCN doesn’t mention any single case of unaccounted clearance to M/s. SPRML during the impugned period; the said
SCN is pending for Adjudication.
5. Learned Advocate submits that even otherwise it is a well settled law that in order to prove the allegation of clandestine removal the department
must bring on record cogent, positive and concrete evidence to prove the said allegation; such allegation cannot be sustained on the basis of
assumptions, presumptions and conjectures; in the instant case, while alleging clandestine removal of 13683.05 MT of MS Billets, no evidence has
been brought on record to show unaccounted purchase of various raw materials; in order to manufacture evidences relied upon for confirming demand
is third party documents. He submits that Commissioner has relied upon the following judgments.
(i). Systems and Components Pvt Ltd - 2004 (165) ELT 136(SC).
(ii). Siemens Ltd Vs CCE, Calcutta - 1994 (70) ELT305.
(iii). Columbia Electronics Ltd Vs CCE, Indore - 2002 (143) ELT 635 (Tri-Del)
(iv). Collector of Customs Vs D. Bhoormul - 1983 (13) ELT 1546(SC).
(v). Gulabchand Silk Mills Vs CCE 2005 (184) ELT263.
(vi). CCE Vs Rishabh Velveleen Pvt Ltd 2006 (201) ELT 437 (CESTAT).
6. Learned Advocate submits that these judgments are being consistently relied upon by the department which are wholly inapplicable to the facts of
the present case; Tribunal, Higher Courts and the Supreme Court have consistently held that these judgments are not applicable to the case of alleged
clandestine removal of goods; he places reliance on law laid down by the Delhi High Court in the case of CCE, Delhi Vs. Vishnu & Co Pvt Ltd.2016
(332) ELT 793 (Del) and R.A. Castings (P) Ltd (supra).
7. Learned Advocate for the appellants further submits that the demand was confirmed on the basis of third party records that too electronic records
which are even not admissible as evidence against the Appellant No. 1; onus of proof of alleged clandestine removal is always on the Department;
allegation of clandestine removal cannot be sustained by insufficient/inconclusive evidence. He relied upon the following.
(i). Sakeen Alloys Pvt Ltd Vs CCE, Ahmedabad 2013 (296) ELT 392 (Tri.-Ahd) and 2014 (308) ELT 655(Guj) and 2015 (319) E.L.T. A117 (S.C.)
(ii). CCE & ST Vs Vishwa Traders P Ltd 2013 (287) ELT 243 (Guj) and 2014 (303) ELT A24 (SC.)
(iii). R.A. Castings Pvt Ltd Vs CCE, Meerut reported at 2009 (237) ELT 674 (Tri.- Delhi) and 2011 (269) ELT 337 (All) and 2011 (269) ELT A-108
(SC).
(iv). British Biological (Unit-II) Vs. CCE, Bangalore 2011 (266) ELT 217(Tri.-Ban) and 2012 (286) ELTA 151 (SC)
(v). Continental Cement Company Vs UOI 2014 (309) ELT 411(All)
(vi). Triveni Engineering & Industries Ltd Vs CCE Allahabad 2016 (334) ELT 595(All)
8. Learned Advocate submits that if the department was of the view that the Appellant No. 1 had supplied MS billets to M/s. SPRML, it was
incumbent and necessary for the department to have made M/s. SPRML party to the show cause notice more specially when the case started from
the end of M/s. SPRML. He relied upon Kumari Shobha Rani Karanwal Vs State of Uttar Pradesh and others (1994) 4 SCC 294 and CC (ICD),
New Delhi Vs. Brightwell Enterprises reported at 2016(331)ELT 463 (Tri-Del).
9. Learned Advocate submits that since the duty demand itself is not sustainable there is no justification to sustain the penalty; there is absolutely no
justification for imposing penalty on Appellant No. 2 just because he is one of the Directors of the Appellant No. 1; no evidence has been brought on
record in support of the findings that the Appellant no. 2 played instrumental role in the alleged clandestine activity by Appellant no. 1; penalty against
him merits to be quashed in toto; similarly no penalty can be sustained against Appellant No. 3 as his detailed statement was recorded during the
course of investigation wherein he has stoutly denied the authenticity of the records seized by the DGGSTI from the premises of M/s. SPRML; he
gave satisfactory reply to each and every question put to him; moreover, Appellant no. 3 is merely an employee of Appellant no. 1 and the provisions
of Section 26(1) are not applicable in his case.
10. Learned Authorised Representative appearing for the revenue reiterates the findings of commissioner.
11. Heard both sides and perused the records of the case. Brief issues concerning this case are as follows:-
(i) Whether in the facts and circumstances of the case the evidence in the form of print out taken from the computer of a third party would constitute
enough evidence to allege clandestine removal by the appellants? Whether the appellants can be proceeded against independently without involving the
company from whom the alleged evidences were obtained?
(ii) Whether the electronic evidence relied upon in the instant case is correctly obtained so as to have evidentiary value and stand judicial scrutiny?
(iii). whether the evidences collected by the investigation are enough to substantiate the allegation of clandestine removal by the appellants?
(iv). Whether different show cause notices covering the same period and invoking the extended period can be issued to the appellants?
(v). whether the imposition of penalties on the appellants is justified?
12. The genesis of the case is in the search conducted by officers of DGCEI Headquarters, New Delhi in all the premises of M/s. SPRML on
27.12.2012. It is alleged in the show cause notice that evidence in the form of external hard discs were recovered from the secret office of M/s.
SPRML, situated at Shantiban Park, Sanjeev Sarani, Durgapur. The incriminating records included the transaction in sale and purchase of dutiable
finished goods by M/s. SPRML during the period 01.02.2012 to 25.12.2012; The hard drives were initially checked and subsequently seized by the
officers; print outs were taken in the presence of Shri Debasish Sasmal, CFO of M/s. SPRML and independent witnesses; In his statement Shri
Debasish Sasmal accepted that the noting therein were in code language i.e. 2002 was a code for 2012 and 100 was the code for 10,000 (numbers
were written dividing the actual figures by 100); They were dealing in cash for these unaccounted transactions; M/s. SPRML have purchased
13,683.00 MT of MS billets from the appellant. On the basis of this information received from DGCEI, the officers of the Commissionerate have
asked the appellant to furnish documents related to clearances of their finished goods, i.e MS billets for the period 01.02.2012 to 25.12.2012. The
appellants submitted the same vide letter dated 12.08.2015. On scrutiny of the invoices submitted it appeared that none of them tallied with the entries
recovered from the premises of M/s. SPRML. Therefore, it was concluded that the appellants have not issued any Central Excise invoices for these
clearances and have clandestinely and deliberately removed the same without accounting and without payment of applicable duty; the list of such
clearances were placed in Annexure-H to the show cause notice.
13. The sum and substance of the submissions submitted by the learned Counsel for the appellants is that the principles of natural justice have been
grossly violated in the case as seized documents were not provided; cross-examination was not allowed; they were denied right to represent
themselves in a personal hearing after they got documents relied upon or otherwise; the department is relying upon third party information which is not
a reliable evidence; department has not undertaken any worthwhile investigation other than taking the print out from the Hard drives alleged to have
been found in the secret premises of M/s. SPRML; revenue have not adduced any evidence regarding procurement of raw material, consumption of
electricity/fuel, deployment of labour, transportation, financial transactions etc. to prove the charge of clandestine removal; department has slapped the
demand on Unit-III without any investigation or evidence; penalty was levied on the Managing Director even without recording his statement.
14. We seek to examine the contentions of the appellant vis-Ã -vis the show cause notice and the adjudication order. We find that learned
Commissioner finds that all the relied upon documents were given to the appellants and other documents not being relied upon need not be provided;
during the personal hearing on 22.11.2017, the appellants were given time till 30.11.2017 to make submissions mentioning that no further personal
hearing will be given; Right to cross-examination is not absolute right and in view of the facts of the case and also the scheme adopted by notices he
disallowed cross-examination; the incriminating records were accepted by the CFO of M/s. SPRML and Shri Anil Kr. Jain, Director of M/s. SPRML.
On-going through the records of the case we find that the learned Commissioner has seriously erred in his findings as far as supply of documents is
concerned. It is not for the Commissioner to decide which of the documents are necessary and which ones are not required for making a submission
by the appellants. It is the right of the appellants to have access to the records on the basis of which the case was made against them by the
department. Personal hearing is also an important step in the process of departmental adjudication and therefore denial of the same particularly after
submitting the reply by the appellants is bad in law. It is not open for the learned Commissioner to make an averment that in the hearing which took
place on 22.11.2017, it was informed that no further personal hearing shall be given. We find that the process of adjudication is dynamic and there
cannot be any fixed and stereotyped process. Though the right to cross-examination is held to be not an absolute right, one has to understand that in
the peculiar facts of the instant case, wherein the case is made against the appellant on the basis of records seized from some other company and
alleged to have been accepted by the officers of that particular company, cross-examination was a reasonable request by the appellants in this
particular case. If it was the case of denial of cross examination of Shri Sankarsan Mohapatra, Authorized Representative of the appellant, alone one
could have appreciated that there was no need of cross-examination of their own officers. The same cannot be the case with the personnel or officers
of some other company whose statements are relied upon by the department in the instant case. In view of the same, we find that principles of natural
justice have been violated in this case and for that reason the case needs to go back to Commissioner for reconsideration. However, we find that need
for such a remand back to the adjudicating authority, for violation of principles of natural justice, can be decided after appreciation of the facts and
merits of the case.
15. We find that though the learned Commissioner accepts the need to decide whether it would be prudent enough to hold the appellants responsible
for such unlawful transactions with M/s. SPRML in the absence of any direct evidence or admittance by the noticee, he proceeds to find that admitted
facts need not be proved in view of Systems & Components Pvt Ltd. [2004 (165) ELT 136(SC)] and that in case of clandestine removal evidence can
be gathered from the circumstances in view of Siemens Ltd. Vs. CCE, Kolkata [1994 (70) E.L.T. 305]. He finds that in clandestine activity persons
try their best not to leave evidence; department is not required to prove its case Excise Appeal Nos.76211, 76212, 76213 of 2018 13 with mathematical
precision but it is enough if it is established with a reasonable degree of probability. He relies upon the following cases:-
(i) Systems and Components Pvt Ltd. [2004 (165) ELT 136 (SC)]
(ii) Siemens Ltd. Vs. CCE, Calcutta [1994 70) ELT 305]
(iii) Columbia Electronics Ltd. Vs. CCE, Indore [2002 (143) ELT 635 (Tri.-Del.)]
(iv) Collector of Customs Vs. D. Bhoormul [1983 (13) ELT 1546 (SC)]
(v) Gulabchand Silk Mills Vs. CCE [2005 (184) ELT 263]
(vi) CCE Vs. Rishabh VelveleenPvt.Ltd. [2006 (201) ELT 437 (CESTAT)]
16. It is seen that the learned Commissioner, as discussed above, has certainly adopted some principles enunciated on the basis of the case law cited
therein by him. We find that learned commissioner, relying on Systems and Components Pvt Ltd (Supra), finds that what is admitted need not be
proved. On going through the records, in the instant case, we find that there is no acceptance by the appellant. What the learned Commissioner is
referring to could at best be the acceptance by the CFO and Managing Director of M/s. SPRML. We find that Shri Sankarsan Mohapatra, authorised
representative of the appellants, in his statement, has not accepted any allegation with regard to the appellant. We find that the questions No.15, 25,
26, 32, 33 and the answers given by Shri Mohapatra are as below:-
Q.No.15. Have you not made any sale of MS billet to M/s. SPRML from your units during the period from February 2012 to December
2012.
Ans. Yes. We have sold some quantity of MS billet to MS M/s. SPRML during the above period for which the statement of sales produced for
your record. We have no sale of MS billets to M/s. SPRML from our unit -II during the period February 2012 to December 2012.
Q.No.25. Please see the details and the documents so submitted by your unit regarding sales your finished goods to M/s. SPRML during the
period 01.02.2012 to 27.12.2012. Do you want to quote your remarks in addition to these submissions?
Ans. We had only sold the goods as mentioned in our excise invoices which are already submitted to the department.
Q.26. Please state about the details about the pattern of sales made to SPRML during the period 01.02.2012 to 27.12.2012. Please submit a
copy of the supply order or mention the name(s) and address of the concerned person of M/s. SPRML with whom you have negotiated from
whom you had received the order for dispatch of your finished goods.
Ans. We sold MS billet to SPRML during the period February 2012 to December 2012. However, we have supplied the goods on the basis of
delivery order may be verbal.
Q.No.32. All these documents had been seized by DGCEI, New Delhi on spot under proper authentications of the key persons of M/s.
SPRML and their statements as well as Director’s establish the fact that the transaction shown in these documents are genuine.
Accordingly, it is proved that you have supplied your finished goods to M/s. SPRML, without cover of Central Excise invoices and
assessment/payment of appropriate Central Excise duty. Please comment.
Ans. I have seen the documents seized by DGCEI from M/s. SPRML, for which I am submitting the details of sales to the above party during
the asking period for your verification. I am only concerned about what my books of accounts is saying.
Q.No.33. But as per records seized by DGCEI and accepted by SPRML the goods supplied by you without payment of duty and without
issuance of Central Excise invoice, being not recorded in your books of accounts, how your payment shall be based on your books of
accounts please explain.
Ans. Since the documents seized from SPRML, I have no idea. I am concerned what saying my documents and records.
17. From the above it can be seen that Shri Mohapatra in his statement on 12.01.2017, neither confirmed the documents recovered from M/s. SPRML
nor accepted any wrongdoing on the part of the appellant. This being the case, it is not correct on the part of the adjudicating authority that the
appellants have accepted their liability and that what has been accepted need not be proved. In spite of the above statement, the show cause notice
proceeds to allege that Shri Mohapatra emphasized against the quantum of authorised sales made under invoice to M/s. SPRML completely and
deliberately bypassing/overlooking the hard fact of clearance of huge quantity of unaccounted sales made in clandestine manner without issuing any
Central Excise invoice, as conclusively detected by the DGCEI and proved from the documents so retrieved. We find, from the show cause notice,
that the allegation itself was that
‘in the specific question set out before him as to how he would disprove the facts of such clandestine clearance of their finished goods side
by side their authorised clearance, whereas both of which have candidly confessed by M/s SPRML. Shri Mahapatra miserably failed to
disprove the same whereby it led to the natural conclusion of conscious and organized modus operandi to evade legitimate Govt revenue in
the guise of transaction that they have pretended to project themselves in clearing only authorised clearance of goods with M/s SPRML.
18. Though the above lines are a little difficult to comprehend, it can be made out that the Notice means to say that Shri Mahapatra could not disprove
the allegation; it was accepted by Shri Debasis Samal and Shri Anil Jain of M/s SPRML and that in spite of the same Shri Mohapatra maintained that
they have not cleared any goods other than those shown in authorised clearances. We find that the above is only an allegation and the department has
not adduced any evidence whatsoever to establish the case of clandestine removal against the appellants. It was incumbent upon the department, who
are alleging, to prove the same with evidence. The reliability of such an evidence becomes weak as the same comes from a third party. It has been
alleged that the appellants have clandestinely removed 13,683.05 MT of MS Billets without payment of duty. The appellants submit that they would
have required huge quantity of raw materials like iron ore, lam coke, steam coal, manganese and scrap. No evidence has been gathered to show the
illegal and clandestine procurement of the said raw materials. We find that there is force in the argument of the appellant. In addition to the above, the
Department did not produce evidence of consumption of electricity, deployment of labour and production of such billets. We find that without any
investigation conducted in that direction, thereto without taking stock of raw materials and finished goods immediately after evidence was found at the
end of M/s SPRML, allegation of clandestine removal cannot be sustained. It is also seen that statement of Shri Aditya Jajodia, Managing Director
was not even recorded and it is surprising to see that while alleging clandestine removal of that magnitude responsible senior person like the Managing
Director was not even questioned. Only Sh. Mohapatra who is an authorised signatory of the appellants has been questioned who did not accept any
misconduct on their part. The allegation is only based on the data set to have been recovered from the secret office of M/s SPRML and no other
evidence has been put forth. We find that as averred by the learned Counsel for the appellants, reliance cannot be placed only on the evidence
available with the Third Party as held in CCE, Delhi Vs Vishnu & Co. Pvt. Ltd. 2016 (332) ELT 793 (Delhi)
19. Moreover, cross examination of the Punch witness in whose presence the external hard drives were recovered and printouts taken, Sh. Debasis
Sasmal, CFO of M/s SPRML and Sh. Anil Kumar Jain, Director of M/s SPRML was requested. The request for cross examination was not allowed.
In the instant case, cross examination was required as no evidence recovered at the end of the appellant was made available and no one from the
appellant have agreed to the contents thereof. The appellants also contended that commissioner has not examined the witnesses under the provisions
of Section 9D of Central Excise Act, 1944. We find that in any other case, the same would not have constituted any grave infraction; looking in to the
facts of the case, where entire evidence is based on the records of third party and statements of the officers of such third party and where cross-
examination was denied, the same assumes importance. Further, the appellants have alleged that while obtaining the electronic record at M/s SPRML,
department did not adhere to the provisions of 36(B) of the Central Excise Act, 1944 and a certificate as required under Section 36B(4) is not issued.
We find that neither the SCN nor the adjudication order have dealt with the facts relating to this issue and from the records of the case, it cannot be
made out whether the same were followed. The learned commissioner did not controvert the allegations in the adjudication order. Therefore, we find
that reliance on the records thus seized from M/s SPRML alone, do not help the case of department, unless the same are corroborated by other
evidence.
20. We find that the Show cause Notice and the adjudication order rely heavily on the records recovered at M/s SPRML and the statements of Shri
Debasis Samal and Shri Anil Kumar Jain of M/s SPRML. It is now a settled principle that clandestine removal is a charge and has to be proved with
all other concerned activities.We find that the coordinate Bench of the Tribunal, in the matter of Nova Petrochemicals v. CCE, Ahmedabad-II, in its
Final Order Nos. A/11207-11219/2013, dated 26-9-2013, held as under (in Para 40) :
“After having very carefully considered the law laid down by this Tribunal in the matter of clandestine manufacture and clearance, and
the submissions made before us, it is clear that the law is well settled that, in cases of clandestine manufacture and clearances, certain
fundamental criteria have to be established by Revenues which mainly are the following :
(i) There should be tangible evidence of clandestine manufacture and clearance and not merely inferences or unwarranted assumptions;
(ii) Evidence in support thereof should be of:
(a) Raw materials, in excess of that contained as per the statutory records;
(b) Instances of actual removal of unaccounted finished goods (not inferential or assumed) from the factory without payment of duty.
(c) Discovery of such finished goods outside the factory
(d) Instances of sales of such goods to identified parties.
(e) Receipt of sale proceeds, whether by cheque o by cash, of such goods by the manufacturers or persons authorized by him;
(f) Use of electricity for in excess of what is necessary for manufacture of goods otherwise manufactured and validity cleared on payment of
duty
(g) Statements of buyers with some details of illicit manufacture and clearance;
(h) Proof of actual transportation of goods, cleared without payment of duty
(i) Links between the documents recovered during the search and activities being carried on in the factory of production; etc.
21. We agree to the proposition of the learned Commissioner that the department is not required to prove clandestine removal by mathematical
precision. However, the instant case, we find that not even single evidence has been brought on record to show clandestine removal, conclusively
establishing at least in a sample transaction. We find that the Annexure-H contains alleged receipts by M/s SPRML date wise from the appellants.
The Annexure contains Truck Nos. We do not find any investigation regarding the transportation at least, of which some evidence, in the form of
Truck numbers, was available with the department. We also find that no stock verification has been conducted at the appellant’s premises to see
if there were any discrepancies in the stock of raw material, finished products etc. The allegation is about clandestine removal of a huge quantity of
13,683.05 MT valued at Rs.52.00 Crores. To prove evasion of such magnitude, the department should have established the purchase of raw material,
consumption of electricity, deployment of labour, arrangement of transportation, receipt at the customers’ end and financial transactions. Receipt
of money in respect of not even a single transaction in the hands of the appellants has been proved with evidence. We find, in fact, that the
department has not at all attempted to investigate in that direction to prove the alleged clandestine removal. The show cause notice and the impugned
order rely upon the only fact that DGCEI have recovered the documents from the secret premises of M/s. SPRML and that the officers of M/s.
SPRML have accepted it. We find that this is not just enough. Investigation cannot be done in a short-cut manner. Having conducted no investigation
whatsoever, department cannot confirm the demand only on the basis of documents seized from some other person, more so the contents of which
were never accepted by the appellants and cross examination was not allowed. If allegations can be made just on evidence obtained from third parties,
there would be no dearth of such cases. We find that leaving alone proof with a mathematical precision, in the instant case, evidence made available is
not even enough even for a Gross approximation. The appellant has relied upon a number of cases wherein it was settled that in order to prove the
allegations of clandestine removal the department must bring on record cogent, positive and concrete evidence to prove the said allegation, the said
allegation cannot be sustained on the basis of assumptions and conjectures. We find, in view of the above, that the investigation and consequentially
the allegation of clandestine removal, lacks credence and suffers from incurable lacunae.
22. It is seen that the appellants claimed that they are registered with Central Excise and have units (ii), (iii) and (iv). However, the SCN has been
issued to unit no. (iii). It is not made clear in the SCN or in the Adjudication order as to why the said demand was slapped against the unit no. (iii). No
reasons, whatsoever, have been given. It is seen from the records that Annexure- H which was prepared giving month-wise, date-wise quantity, rate,
value of the alleged clandestine clearances along with the Truck numbers. It is repeated to be “statement of clearance and payment received from
M/s SPRML for unaccounted sales of MS Billets by M/s Jai Balaji Industries Ltd, Banskopa, P.O. Raj bandh, Durgapur during the period 01.02.2012
to 27.12.2012â€. The extract does not mention as to which unit of the appellant, the transactions were from. Under these circumstances, we find that
demand cannot be slapped on a particular unit, in this case unit (iii), without any evidence and without any substantiation. On this count too, the
demand of duty from the appellants fails.
23. We find that learned Commissioner has relied upon few cases as cited above and has given findings to the affect that “right to cross
examination is not an absolute rightâ€; admitted facts “need not be provedâ€; “clandestine removal need not be proved with mathematical
precision†and “it will be humanly impossible to establish every link in the chain of clandestine activity without a breakâ€. We find that other than
the averments in brief Paras 4.8 to 4.10, no reasoning, whatsoever, as to how, the instant case is comparable to the cases cited therein has been given.
On going through the case laws cited by the learned Commissioner, it is seen that the facts of the cases are entirely different. In those cases, the
investigations therein were on the appellants themselves; the appellants have agreed of their mala fide activity in the statements and some level of
corroboration has been done during the investigation. In the instant case, no evidence has been collected from the appellants and the appellants are
their authorised signatory did not accept the allegations. Under these circumstances, we find that it is not correct to rely upon such cases as the facts
are different. Hon’ble Apex Court in the case of CCE, Bangalore Vs Srikumar Agencies Civil Appeal Nos. 4872-4892 of 2000, decided on 27-11-
2008.
5. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of
cases by blindly placing reliance on a decision is not proper.
The following words of Lord Denning in the matter of applying precedents have become locus classicus:
“Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant
detail may alter the entire aspect, in deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching
the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to
another case is not at all decisive.â€
*** *** ***
“Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches
else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it.â€
We find that reliance on case laws cannot be with an intent to invoke catchy sentences/phrases which can in no way a substitute for slipshod
investigation.
24. Appellants contended that DGCEI, New Delhi issued another SCN, alleging clandestine removal by the appellants, and that the period covered
therein also includes the period covered in the instant case and therefore, the SCN in the instant case does not survive. We find that DGCEI New
Delhi have investigated a case of clandestine removal by Unit-III and Unit-IV of the appellants and have issued a show cause notice dated 23.04.2015
to the appellants. Though, there is no bar in issuing SCNs for the same period covering different aspects backed by different set of evidence, it is not
understood as to why the Department chose to issue different SCNs to the appellant on the allegation of clandestine removal when the genesis of both
the cases was in the investigation conducted by DGCEI against M/s SPRML. However, as we found that the present SCN is not sustainable on
merits, we are not going into the above issue. The appellants have also raised an issue that while the appellants have been issued a SCN alleging
clandestine removal to M/s SPRML on the basis of documents alleged to have been recovered from M/s SPRML, M/s SPRML have not been made
party to the impugned SCN and thereby, the case suffers from the principle of non-joinder. The appellants have also alleged that penalty has been
imposed on Shri Aditya Jajodia, Managing Director even though his statement has not been recorded. For the reasons mentioned above, we are not
giving any finding on these issues.
25. In view of the above, Appeal Nos. E/76211,76212,76213/2018 are allowed.
(Order pronounced in the open court on 12 November 2020)
