Inadmissible Electronic Data, Computer Printouts Cannot Determine Excise Duty Liability: CESTAT Chennai

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, has held that electronic data and computer printouts cannot form the basis for determining Central Excise duty liability unless the statutory requirements for their admissibility are met.

The tribunal discarded electronic records relied upon to quantify alleged clandestine manufacture and removal of TMT bars by Sri Kamalaganapathy Steel Rolling Mills Ltd. It set aside the order to the extent that the demand was quantified using those records and remanded the matter for fresh quantification.

“Following the ratio of the above decisions, and in the absence of the requisite certificate satisfying the statutory requirements, we hold that the electronic data/printouts relied upon in the present proceedings cannot be treated as admissible evidence for sustaining the demand,” the tribunal observed, relying in SC precedents.

“Accordingly, the electronic data, including the alleged purchase, production and sales figures contained therein, is discarded from consideration.”, it ruled.

A bench comprising Judicial Member P. Dinesha and Technical Member M. Ajit Kumar was hearing the appeals

The company is engaged in manufacturing TMT bars. The dispute arose during an investigation into alleged clandestine removal of ingots by Geetham Steels Pvt. Ltd.

The department searched the company's premises on March 7, 2012. It seized sales invoice files, a CD and computer printouts.

The investigation later extended to V.V. Iron and Steel Company Pvt. Ltd., Universal Transport Services and buyers of TMT rods. The department alleged that the company procured MS ingots without accounting for them and used them to manufacture TMT bars.

It further alleged that the bars were cleared without payment of duty between April 1, 2011 and February 2, 2012.

The Commissioner confirmed a Central Excise duty demand of ₹4,08,12,318, along with interest. An equivalent penalty was imposed on the company under Section 11AC of the Central Excise Act.

A further penalty of ₹2 crore was imposed on Saravanan under Rule 26(1) of the Central Excise Rules.

Section 11AC provides for a penalty in specified cases involving non-payment or short payment of Central Excise duty. Rule 26(1) provides for penalty where a person knowingly deals with excisable goods liable to confiscation.

The company argued that the principal demand of ₹3.97 crore was based on computer printouts taken from the seized CD. It contended that the requirements under Section 36B of the Central Excise Act for admitting electronic records had not been fulfilled.

The department maintained that the electronic data was corroborated by invoices, transport records, statutory returns, weighment slips and statements of suppliers, transporters, purchasers and company officials.

The tribunal separately examined the electronic records and statements recorded during the investigation. It held that the electronic data could not be relied upon without satisfying the statutory requirements for its admissibility.

The statements were treated differently. The tribunal held that they could be assessed independently and noted that the persons concerned had not retracted them.

The company had also sought cross-examination of persons whose statements were relied upon. The tribunal observed that the appellant had not demonstrated specific prejudice caused by the denial of cross-examination.

At the same time, the tribunal cautioned that an admissible statement would not by itself establish the entire quantity of clandestinely manufactured and cleared goods.

“The Department is required to establish, with reasonable certainty, the quantity of goods clandestinely procured, manufactured and cleared and the corresponding duty liability,” the tribunal observed.

It therefore held that quantities appearing only in the discarded electronic records could not be adopted merely by relying on statements.

Invoices, transport records, weighment records and statutory records could still be considered where they independently established particular transactions or quantities.

The tribunal consequently set aside the order to the extent that it determined the entire demand on the basis of electronic records. It remanded the matter for re-quantification using admissible statements and independent documentary or circumstantial evidence.

The adjudicating authority was directed to give the company an opportunity to make oral and written submissions and pass a fresh order within 90 days. Interest and penalties are also to be redetermined based on the duty liability ultimately established.

For Appellants: Advocate S. Durairaj,

For Respondent: G. Krupa, Authorised Representative