International Computer Ribbon Corpn. v. Commr. Of C. Ex., Chennai

[Order per : S.L. Peeran, Member (J) (Oral)]. - Both Revenue and party are aggrieved with the Order-in-Original No. 15/2001, dated 29-8-2001. This is third round of litigation. The matter had been remanded to the Commissioner to supply the appellants with copies of 108 floppies seized from the appellants. Further directions were that principles of natural justice should be observed. The direction given in the second Tribunal’s Order No. 882/98, dated 5-5-98 as in para 4 of the said order which is extracted herein below :-

“4. On careful consideration of the submissions made and on perusal of the order, we notice in the first instance that the remand order has not been complied with. The remand order is a detailed one which delineates the circumstances leading to violation of principles of natural justice. In the impugned order, the Commissioner has observed that 108 floppies in question which contained relevant information were found to be blank and they are being ignored. If this be the case, then the Commissioner ought to have discussed the evidence on which he has proceeded. He has merely concluded that private records indicate about supply of new ribbons and that they had not reconditioned or re-inked old ribbons to new ribbons. The Commissioner has also recorded that enquiries conducted at the end of the customers also revealed about this fact. However, the portion from which he has drawn such a conclusion has not been indicated in the order. Therefore, it is very clear that the impugned order is totally non-speaking order. It is pertinent to observe that the defence of the appellants was that they had maintained the detailed records in the form of RT-12 returns, D-3 intimation, Form V register showing receipt of used ribbons and the same having been reconditioned or re-inked and the order pertaining to the defence taken by the appellants. Therefore, while granting waiver of pre-deposit and stay of recovery, we deem it proper that the impugned order is set aside and matter is remanded to the Commissioner for de novo consideration. The Commissioner should disclose the evidence on which the department is proceeding against them, particularly if they are not relying on the 108 seized floppies, and hear the recording the order. The order should be a speaking order dealing with all the aspects of the matter pertaining to the allegations and the defence taken up by the appellants. The Commissioner shall also deal with the aspect pertaining to time bar which has been raised in the matter”.

2. The above direction of the Tribunal is as a consequence of earlier directions given by the Tribunal in Order No. 859/1994, dated 10-11-94 [ (T)]. The findings recorded by the Tribunal in Para 7 of the said order is extracted herein below :-

“7. We have considered the pleas made before us. The demand has been raised against the appellants for the reason that the appellants in the garb of re-inking and repairing of computer ribbons had cleared new cassettes without payment of duty and also cleared the goods without accounting for the same as they had manufactured and clandestinely removed large quantity of cassettes. We observe that so far as the re-inking of the cassettes are concerned, the learned lower authority in his order has entered a finding that in respect of some major organisations like MRL from whom cassettes had been received for re-inking, the particulars furnished in D-3 intimation were found tallying. The question therefore, to be considered is what is the quantum of these ribbons brought for re-inking and whether the appellants had been guilty of any suppression in this regard. We observe that it is a matter of record that the appellants had been filing D-3 intimation and also maintained necessary record prescribed in regard to the same. During the relevant period the appellants had also been filing the necessary RT-12 returns as seen from some of the copies filed by the appellants and filed along with them record of clearances of the re-inked and repaired cassettes (ribbons). The appellants have also pleaded that they had been maintaining elaborate accounts of the cassettes, such as job tickets, packing slips, delivery challans, and invoices etc. copies of which were also filed along with RT 12 returns and the notations as to the nature of work done such as RC, RR, RI etc. which stand for re-conditioning, rectification and re-inking respectively are indicated to distinguish from the ribbons (cassettes) which were to be cleared on payment of duty. The plea is that these records have been seized by the authorities. The question therefore, that arises in this context is when the appellants have been filing the necessary returns before the departmental authorities whether there can be any suppression on the part of the appellants. What has to be considered in such a situation is whether the assessee was holding back any information from the authorities or falsifying/manipulating the records to derive any particular benefit. We find that the learned lower authority has not addressed himself to this question taking into consideration the range of the appellant’s operations and the documents/records maintained by them and the periodic checks done by the authorities of the various statutory records maintained by them and check of the document filed by them as statutorily required in terms of Rules 173H and other Central Excise Rules. Merely stating that only some of the cassettes received for re-inking were returned is not enough. The authorities should have given the result of the investigation in regard to the D-3 intimation and also in regard to the discrepancies found. This not having been done, we hold that the order cannot be considered as a proper one. In regard to the plea that the appellants have been denied access to information as contained in the floppies as except for a small number of copies supplied were found defective and information could be retrieved only from a small numbers, out of the total of 108 floppies, it is observed that the appellants had made their plea in this regard before the learned lower authority and the said authority has noted this plea in Para 115 which is reproduced below for convenience of reference :

“Their next averments are that they have not been provided with all the informations contained in the floppies seized from them and also were not provided with the relevant details with regard to Annexures III, IV and VI of the Show Cause Notice and as such, they were handicapped to offer proper explanations to the charges made in the notice.”

The learned lower authority’s finding in this regard is given in Para 116 of his order which is reproduced below for convenience of reference :

“In this connection it is observed that it is a fact that 108 floppies were seized from the factory in connection with the case. It is also a fact that the floppies were made use of by the investigating officers to gather particulars of value of clearance to arrive at the quantum of duty to be demanded from the noticee. Therefore, it could be seen that relevancy of the floppies were only to gather particulars from one source than going through number of invoices individually to total up the value of clearances. Further the informations contained in the floppies would have been fed into them based on some basic documents and as such, the noticee could have made use of the documents to put up effective defence. Failure to do so would lead one to conclude that they have no explanation to offer to refute the charge. “

The learned lower authority, as could be seen from his observation extracted above, has gone on to say that the appellants could have made use of the other documents to put forth their defence as the relevancy of the floppies was only to gather information from one source. We observe that the appellants had computerised the data and the full data entered in respect of their operations would be relevant and the appellants have the right to interpret the full data entered in respect of their operations, in the floppies to put forth their defence. The appellants in the absence of the information from the floppies should have been given copies of documents which were relatable to the quantities cleared and manufactured. The learned lower authority instead of referring to the appellants’ documents which were relevant has merely observed that the appellants would be knowing about the documents based on which the information was fed on the floppies. We observe that it was incumbent upon the lower authority to relate the documents with the date on which demand has been raised. We observe that the learned lower authority has not been fair in his approach in asking the appellants to get the information from other documents. As it is, the plea is that the documents had been seized by the authorities and it is expected that these would have been scrutinised by the authorities and it should not have been difficult for the authorities to have furnished the copies of the same in case the copies of floppies could not be given. In view of the above, there is force in the plea of the appellants that in the absence of copies of floppies or the other relevant documents having been made available to them, they were handicapped in their defence. No doubt it is shown from the records that copies of the floppies had been given to them, but the appellants had found the same to be defective and the authorities in fairness should have given the copies of the floppies again. The appellants would know better about the information fed into the floppies and the relevance of the same cannot be disputed. Since the authorities have not given copies of all the floppies or other relevant documents as above, and also the investigation report it has to be held that there has been denial of principles of natural justice. In view of the above, we set aside the impugned order as not proper and remand the matter for de novo consideration after affording the appellants an opportunity of hearing in the light of our findings above. Inasmuch as the matter involves large revenue, the appellants are directed to co-operate with the authorities for disposal of the case as expeditiously as possible in the de novo proceedings. The appeal is thus allowed by remand.”

3. The Commissioner in the impugned order in Para 37.1 has categorically noted that he is discarding the evidence on the floppies on account of the fact that there is loss of partial evidence due to the uncertainty and vulnerability of the information technology against the electronic diseases caused by viruses. He has noted that persistent insistence of the appellant on the production of 108 floppies would be of no consequence as the evidence on 108 floppies stands discarded. He has, however, proceeded to decide the case on the basis of information which had been culled out from the 108 floppies and on the oral evidence recorded to hold that the appellants had indulged in clandestine removal of new computer ribbons in the guise of re-inked/reconditioned/re-filled ribbons without payment of duty during March, 1987 to February, 1991. In effect, the Order-in-Original has been passed in total disregard to the direction given by the Tribunal in the above two noted paragraphs of this order. The grievance of the appellant that the impugned order is not sustainable in law and the fact that relied upon document has not been furnished on the basis of their information said to have been taken from the floppies being not authenticated by person who has taken out the information with proper signatures from the appellant is therefore not reliable evidence and cannot be looked into. It is stated that 108 floppies contained all the details right from the stage of procurement of raw material, accounting and use of the same in the manufacture of final products, receipt of already cleared Computer ribbons for re-inking and cassettes for repair etc. The details stored in the floppies are the only evidence on which the case has been built and, therefore, without supply of said documentary evidence in the form of 108 floppies, the order passed by the Commissioner on mere statements is not sufficient to uphold the charge of clandestine removal. It is stated by the appellants they had produced all the documents to show that imported material had been used for manufacture of floppies and for removal of same on payment of duty and that these documents have not been examined despite clear direction from the Tribunal. It is stated that Annexure III to show cause notice is only a printout of floppies. These printouts are not self-explanatory. These printouts only provide sales details and that the appellants were transferring the stocks from the factory to various depots and effecting sales which is confirmed in the proceedings and statements recorded. That being the case, the basis for the demand cannot be termed “Sales”. It is stated that the demands have to be on the basis of removal from the factory. The marketing pattern confirms removal on stock transfer basis and sale from depots/branch offices. Therefore, it is stated that computer printouts are not acceptable for this reason also. It is stated that the entire case being built on 108 floppies for proposing demands and when the Commissioner has given up this vital evidence, nothing sustains for confirming the demand and, therefore, in view of violation of principles of natural justice in not supplying the floppies and floppies being corrupted, the order impugned has to be set aside.

4. Heard ld. Counsel Shri R. Raghavan who argued on the basis of written submissions and the points already delineated above.

5. Ld. DR admitted that 108 floppies have been corrupted and copies of same could not be made out for giving the same in terms of the Tribunal’s direction. He submitted, on a query from the Bench, that the department has relied only on the printouts from 108 floppies which is not authenticated by the signature of the person who has taken out the printouts and there is no mahazar drawn. He, therefore, left the matter to the discretion of the Bench for final decision in the matter. Ld. DR has also filed a written submission from the Additional Commissioner in the matter. The written submissions admits that 108 floppies were corrupted and copies could not be furnished to the appellant. However, it is stated that sales register and invoices were shown as relying upon documents and that appellants did not confront nor acknowledge other evidence.

6. We have carefully considered the submissions and have perused the orders. The Commissioner has confirmed the demands on the basis of printouts taken out from 108 floppies. The printouts are not authenticated and for the same having been taken out from the said floppies without the signature of the person having taken out the printouts and without the appellant’s signature. The authenticity and correctness of the printouts have been challenged by the appellants. Further, on examination of the said copies in the paper book, we notice that these could not be printouts and they are all typed matters and it does not give the detail as to who has typed these matters and given to the appellants. There are several columns drawn in pencil and details recorded therein. These details are not printouts but details which have been given column wise and after taking out the details from 108 floppies. The annexures are all work sheets which are also not corroborated with any reliable evidence, which are required as necessity to be proved in the case with regard to manufacture and clearance of new cassette ribbons as alleged in the show cause notice. The details furnished in the form of tabulated columns which are said to be from 108 floppies is not relied upon evidence. There is no mahazar drawn with regard to printouts taken out from the floppies and the copies of the printouts have also not been furnished to them. The details taken out from these printouts in the form of tabulated columns which has not been signed by anybody. The evidence is not authentic and reliable one. The Commissioner himself has stated in the order that he is not relying on 108 floppies as the same have been corrupted. Revenue has not proved the case by producing 108 floppies or giving copies of said floppies to the appellants. The Revenue has also not taken out printouts by proper mahazar and signature from the appellants and the person who has taken the printouts. In these circumstances, the case being built on a few statements drawn from said floppies cannot be said to be complete in itself to prove the charge of clandestine manufacture and clearance. The direction given by the Tribunal twice in the matter for supplying the relied upon documents to the appellants have not been complied with by Revenue. In this circumstances, the question of remanding the case for de novo consideration does not arise. The Apex Court in the case of Sanghi Textile Processors (P) Ltd. v. CCE, 1993 (65) E.L.T. 397 (S.C.) has clearly laid down that in terms of natural justice, the evidence relied on documents is required to be supplied especially those essential documents which are required for the purpose of the case. In the absence of the most important relied upon documents having not been supplied lo the appellants, it cannot be said that department has proved the case of appellant having allegedly manufactured and cleared cassette ribbons in the matter. They have also taken a ground that the details in the 108 floppies pertained only to sales made by them which does not deal with use of imported fabric for the purpose of manufacture of the final product said to have been cleared clandestinely. There is merit in this submission. In the written submissions also, revenue contend that they have relied on the sales register and invoices for the purpose of proving clandestine manufacture and removal. Revenue is also expected to produce evidence of use of raw material which is imported fabric in the matter and all other related persons to show that the invoices have been used for manufacture of the final product which are cleared. The appellants have been stating that what they have cleared is only re-inked ribbons and not virgin ribbons. It is stated by them that the customers had been sending the ribbons for re-inking and the appellants have only done the said activity of re-inking the ribbons and the registers which have been relied on pertained only to this portion of the activity. There is no clear cut finding on this aspect of the matter and it cannot be said that appellants have not carried out the process of re-inking and had have utilized the imported fabric for the purpose of re-inking and thus have cleared therein the computer ribbons as new goods. Revenue ought to have examined the registers pertaining to import of the ribbons to say as to whether the said ribbons had been utilized for the purpose of re-inking on the customer’s ribbons. The benefit of doubt has to be given to the appellants. The Commissioner has violated the terms of the remand order of the Tribunal and for that reason alone, the impugned order is required to be set aside. In that view of the matter the impugned order is set aside and the appeal of the assessee is allowed.

7. Revenue’s appeal is pertaining to non-imposition of penalty under Section 11AC of the Act for the period prior to the promulgation of the said section. The Commissioner was not justified in not examining the penalty under Section 11AC as the said section had not been promulgated during the period. Revenue’s appeal is, therefore, rejected. Party’s appeal is allowed by setting aside the impugned order. Ordered accordingly.