[Order per : P.S. Bajaj, Member (J)]. - This appeal has been directed by the appellants against the impugned order-in-original vide which the adjudicating authority has confirmed the demand and imposed penalties as detailed therein against them.

2. The appellants are engaged in the manufacture of flexible printed laminated plastic rolls of 3 layer and 2 layer, co-extruded multi layer poly films, printed poly, printed poly bags, printed plastic sheets (polyester) etc. Shri Ajai Jain and Shri Vipul Jain are their Directors. Proceedings were initiated against them through a show cause notice dated 13-12-2001 by alleging that they had indulged in suppression of production, clandestine removal of the excisable goods without payment of duty during the period in dispute i.e. December, 1988 to July, 1999. They had been purchasing/procuring unaccounted raw-material without entering in the statutory records and used that raw material in the manufacture of the finished excisable goods which they removed without payment of duty as well as without issuance of the invoices. They also indulged in the clandestine removal of the goods from their depot with the help of parallel set of invoices. Payments of the goods were received by them in cash which were not entered by them in their records. The allegations were based on the one hard disc, 10 zip discs and 16 floppies (hereinafter referred to as ‘Peripherals’) which were taken into possession from the Head Office-cum-Sale Depot of the appellants on 30-7-1999 and the statements of Shri Ajai Jain, Director; Shri Brajesh Dwivedi., Authorised Signatory; Shri Rajesh Srivastava, Clerk, Ms. Arti Srivastava, Computer Operator; Shri R.D. Gupta, Director of M/s. Vindhvasni Carriers Pvt. Ltd. (Transporter); Shri R.K. Dixit, Accountant - M/s. Pawan Carrying Corporation (Transporter); Md. Irfan, Partner - M/s. Syndicate Tobacco Product (Buyer), who purchased the finished goods from the appellants, were recorded. The printout of certain informations pertaining to only 2 zip discs, was taken out on 30-7-1999 - the date of raid on the factory premises of the appellants. Thereafter, on 18-8-1999, the Officers copied 9 zip discs in their Departmental computer. On the basis of this evidence, the duty demand of the disputed amount with a proposal to impose penalty was raised against the appellants.

3. The appellants in reply to the show cause notice disputed the authenticity of the print outs and the copied 9 zip discs. They made request for having access to the peripherals, but could not get the same. They also took with them the computer engineer for copying the information/data on the peripherals, but the same was not available. The adjudicating authority through the impugned order confirmed the duty demand and the penalty, as detailed therein.

4. We have heard both sides and gone through the record. We find that the allegations of clandestine receipt of the raw-material and removal of the finished goods manufactured out of that raw material, have been primarily based on the strength of one hard disc, 10 zip discs and 16 floppies (peripherals) allegedly recovered from the Head Office-cum-Sale Depot of the appellants. But print out of all the zip discs was not taken out at the spot on 30-7-1999 - the date of seizure. The perusal of the Panchnama prepared on that date shows that the print out of only certain information pertaining to part of 2 zip discs was obtained by the Central Excise Officers. It was recorded in the Panchnama that due to scarcity of time, the remaining print out of these discs and other discs could not be taken. We also find that the place of recovery of these discs and floppies had been recorded at different places in the Panchnama dated 30-7-1999 and the annexure appended to it, as in the Panchnama, the recovery place shown is the Office premises, while in the annexure, it had been shown as business premises. Both these premises are not located in the same building but at different places. The computer operator, Ms. Arti Srivastava, whose statement was also recorded after more than a month i.e on 2-9-1999 had not admitted either of these places of recovery, of the discs and floppies. She had rather stated that some floppies were recovered from the computer room while 2-3 zip floppies were recovered from the table of the computer room and rest from the Almirah placed in the computer room. Apart from these discrepancies which reflect adversely the very recovery of the discs and floppies from the possession of the appellants, we also find from the Panchanama dated 18-8-1999 that 9 zip discs were copied in the computer of the Department in the absence of the appellants without associating their any employee or the Director. One disc was declared to be blank by the Officers which was allegedly returned to the appellants. In the Panchnama prepared on 18-8-1999, there is no reference to the earlier taking out of the print outs or that any zip disc taken into possession on 30-7-1999, was blank. After a period of over six months, these peripherals were again handled by the officers of the Department on 1-3-2000 as is evident from the Panchnama of that date and they obtained print out of some more information through the computer of the Department in their Commissionerate Office. Again this was done at the back of the appellants. None of the Directors or the employees was associated at that time. Besides this, in that Panchnama dated 1-3-2000, there is no reference to the earlier copied out 9 zip discs by the Officers, on 18-8-1999. It is also evident from the record that on 6-5-2002 when from the peripherals, which were in the custody of the Department, as the appellants requested for taking information of the data contained therein, it revealed that the six floppies were blank and others could not be opened. Even 9 zip discs could not run on the computer. The hard disc also could not be opened. It could not be the case of the Department that peripherals in question were damaged by lapse of time. We find that the appellants sought opinion from the IIT, Kanpur, and that institute opined that long storage did not normally affect the zip disc and hard disc as the zip disc has a shelf life of 10 years. That institute negatived the view of the Department that the floppies became/turned, blank or could not be opened or run on the computer due to lapse of time.

5. The Department has no doubt placed much reliance on the provisions of Section 36-B, to sustain the admissibility of the computer print outs for proving the charge of clandestine receipt of raw material and manufacture of the final products by the appellants, but admissibility of the printed material under the said Section, has been made subject to the fulfilment of certain conditions, detailed therein. The condition in respect of the computer print out laid down in that Section, as is evident from the reading of its clause (ii), is that, the computer print out containing the statement was produced by the computer during the period over which the computer was used regularly to store or possess the information. In the instant case, the print outs were not produced by the computer. Peripherals were picked up by the Officers from the Head Office-cum-Sale Depot of the appellants and they were inserted into the computer, and that too, not all but certain informations from the part of two zip discs were taken in the absence of the appellants. Certain zip discs were copied out by the Officers in the computer of the Department and that too without associating any authorized person of the appellants’ company. As observed above, when the appellants wanted to have access to the peripherals and requested for obtaining the information or data from those peripherals, some floppies were found blank while some even could not run on the computer. The hard disc even could not be opened for the reason best known to the Department as all these peripherals remained in their custody after the date of seizure i.e. 30-7-1999.

6. The contention of the learned SDR that Shri Ajay Jain was one of the Directors of the appellants, admitted the correctness of the entries in the print out and that the computer operator Ms. Arti Srivastava also admitted of having prepared and generated the bills in the name of different buyers through computer and entered the data from the slips and as such the computer print outs are sufficient to charge the appellants with the clandestine receipt of the raw material and the manufacture and removal of the finished goods without payment of duty, cannot be accepted. The testimony of Ms. Aarti Srivastava that she was given the responsibility to do the work related to the designs in the computer, preparation and generation of the bills through the computer, making entries from certain slips made available to her by Shri Ajay Jain, Director of the appellants’ company, and misc. typing work relating to the computer, did not in any manner prove the clandestine receipt of the raw material and manufacture and removal of the finished goods by the appellants in a clandestine manner. No details of the entries and the bills prepared and generated from the computer had been furnished by her. Similarly, the bald statement of Shri Vipul Jain, Director of the appellants’ company, that the computer print outs contained entries regarding the receipt of the raw material from various suppliers and manufacture and clearance of the finished goods to various buyers during the period in dispute by the appellants, also could not be taken as a conclusive proof, for want of corroboration from any other tangible evidence. No statement of any supplier of raw material of having supplied the same to the appellants in a clandestine manner without any invoices, has been brought on record. The alleged buyers of the finished goods from the appellants have not supported the case of the Department. Shri Deepak Kothari, Proprietor of M/s. R.K. Products, had denied the receipt of finished goods i.e. packing material from the appellants without the cover of duty paid invoices. He had deposed that his statement during investigation was taken under pressure and he made the statement as the Revenue Officers wished him to make. Similarly, Shri Satnam Arora of M/s. S.F. Flavours has denied of having made any incriminating statement against the appellants before the Central Excise officers regarding the receipt of the finished goods from them without the cover of the invoices. To the same effect had been the statement of Md. Shahzad, Manager of M/s. Syndicate Tobacco Product. The argument of the learned SDR that the retraction of the earlier statements by these witnesses, was afterthought, cannot be accepted as they got the opportunity to state the truth only during the adjudication proceedings when they were called for cross-examination. Earlier their statements during investigation, were recorded at the back of the appellants. Their cross-examination has to be taken as a part of their complete statements and it cannot be discarded for the simple reason that it was recorded after a long time. The delay in recording their cross-examination, cannot be attributed to the appellants as the expeditious disposal of the adjudication proceedings was in the hands of the Department and not within their power. Whatever the raw material was purchased by the appellants and the finished goods were cleared by them by producing out the same, during the period in dispute, were entered in their record. We find that separate show cause notice was served on the appellants on account of detection of the excess finished goods lying in their factory. Those goods were initially ordered to be confiscated by the adjudicating authority on the ground that the same were intended to be removed in a clandestine manner, but the Commissioner (Appeals) vacated that confiscation by observing that the allegations of intended clandestine removal of the goods on the part of the appellants, did not hold good in the circumstances. He, however, reduced the redemption fine for the release of the goods and the penalty.

7. In the absence of any tangible evidence regarding the clandestine receipt of the raw material by the appellants from the suppliers and the manufacture of the finished goods out of that material and clandestine removal of the same to the buyers, without payment of duty, the uncorroborated statement of Shri Vipul Jain, Director of the appellants’ company, could not be made sole basis by holding the appellants guilty of the manufacture and removal of the finished goods without payment of duty during the disputed period. The appellants have rather produced affidavits of some raw material suppliers wherein they had denied of having supplied the raw material to them without the cover of duty paid documents. The evidence of Shri R.D. Gupta, Director of a transport company, M/s. Vindhvasni Carriers Pvt. Ltd., did not advance the case of the Department to any logical end. No details of the consignees to whom the goods were delivered, at the behest of the appellants, without the cover of the invoices, has been disclosed by them and no statement of any such consignee had been recorded, to seek corroboration of their statements.

8. The recovery of loose slips, named as dispatch slips, and certain transport documents from the possession of Shri Rajesh Srivastava and his statement and that of Shri Brajesh Dwivedi, authorized signatory of the appellants’ company, did not provide any tangible evidence regarding the clandestine receipt of the raw material and manufacture of the final product out of that material and clearance of the same in a clandestine manner by the appellants. The statement of Shri Rajesh Srivastava that the slips showed the dispatch of goods to M/s. Syndicate Tobacco Products and were also reflected in the computer print outs and that the transport bilties found in the file resumed from his possession contained the dispatch of the goods to different parties, could not be attached any authenticity and legal value as M/s. Syndicate Tobacco Products had not accepted the receipt of the goods without payment of duty from the appellants. The transporter involved in the alleged dispatches had only disclosed that the goods were transported through them, but no consignee to whom the goods were allegedly delivered has come forward to corroborate their version and accept the receipt of the goods through them, from the appellants, without the cover of the duty paid invoices.

9. Similarly, the ocular testimony of Shri Brajesh Dwivedi, alleged authorized signatory of the appellants, regarding the receipt of the raw material in a clandestine manner and manufacture of the goods out of that material and despatch of the same to various buyers through various transporters, did not carry any legal authenticity for want of corroboration from any other tangible evidence. The generation of more than one invoice having common number, as allegedly stated by Shri Brajesh Dwivedi, and also Ms Aarti Srivastava also did not advance the case of the Department in any manner for lack of any evidence to prove the actual receipt of the goods on the basis of those invoices by the buyers - the manufacturers of the ‘PAN MASALA’. The raising of unsecured loans by the appellants from the financial companies, namely, M/s. AVP Investments (P) Ltd. and M/s. VRS Fininvest (P) Ltd. also did not in manner help the Department in proving the evasion of the duty by clandestine removal of the excisable finished goods by them. None of those companies had admitted that the advancement of loan was a sham transaction and that it was the money of the appellants which they collected by evasion of the Central Excise Duty by clandestine sale of the excisable goods. Similarly, the statements filed with the bank by the appellants for the purpose of financial accommodation, loan, payment schedules, overdrafts etc., also did not furnish any tangible proof of clandestine receipt of the raw material and manufacturer and removal of the finished goods in a clandestine manner by them. Those statements were given by the appellants for procuring more finances from the bank. It is well settled that the record maintained by an assessee for arranging finance, would not be sufficient for proving the clandestine removal of the finished goods by them as laid down by the Tribunal in the case of M/s. T.M. Industries v. CCE - . The flaws in the investigation and imperfectness of the evidence has been even acknowledged by the adjudicating authority in the Impugned order itself. He has, however, still accepted the incomplete and inconclusive evidence for saddling the appellants with the duty liability and the penalty for clandestine manufacture and removal of the excisable goods without payment of duty. The law is well settled that the charge of clandestine removal of the dutiable goods by an assessee has to be proved by the Department by adducing cogent, convincing and tangible evidence. Such a charge cannot be based on assumptions and presumptions. In this context, reference may be made to - (i) Kalvert Foods India Pvt. Ltd. v. CCE, Mumbai - (T); (ii) Deepak Tandon v. CCE, Bhubaneswar - (T) and Oudh Sugar Mills Ltd. v. Union of India - (S.C.), wherein such a proposition of law has been laid down.

10. The learned SDR has relied upon the following cases :

(1)     Indocoat Footwear v. CCE, Kanpur - ;

(2)     Haryana Acrylic Mfg. Co. Pvt. Ltd. v. CCE - ;

(3)     Columbia Electronics Ltd. v. CCE, Indore - ;

(4)     Krishna Carbon Paper Co. v. CCE, Kanpur - ;

(5)     S.P. Tobacco Products Pvt. Ltd. v. CCE - (T) = 2004 (95) ECC 665;

(6)     Maheshwari Marbles & Granites (India) v. CCE, Jaipur - ;

(7)     Chowbey Sugandhit Tambaku Co. v. CCE, Patna - ;

(8)     Bute Cosmetics v. CCE, Trichy - ;

(9)     Polymech Plast Machines Ltd. v. CCE, Vadodara - ;

(10)  ACCE, Madras-1 v. Govindasamy Ragupathy - ;

(11)  Surjeet Singh Chhabra v. Union of India - (S.C.);

(12)  Dy. Director of Enforcement, Madras v. A.M. Ceaser - (Mad.);

(13)  K.I. Pavunny v. AC (Hq.) CE Collectorate, Cochin - (S.C.);

(14)  State of Maharashtra v. Mohd. Yakub & Ore - (S.C.);

(15)  Mineral & Metal Trading Corporation v. R.C. Mishra - (S.C.);

(16)  Sunvijay Re-rolling & Eng. Works Pvt. Ltd. v. CCE, Nagpur - ;

(17)  CCE, Madras v. Madras Chemicals - ;

(18)  Godavari Steel (P) Ltd. v. CCE, Aurangabad - ;

(19)  India Tin Industries (P) Ltd. v. CCE, Bangalore - ;

(20)  Simpled Expeller Works v. CCE, Chandigarh-I - ;

(21)  Rukmini Indus. & Shri Damodar Rao v. CCE, Hyderabad - (Tribunal) = 2004 (65) RLT 70;

(22)  Superior Steel Products v. CCE, Delhi - ;

(23)  Mangat Ram v. CC, New Delhi - ; and

(24)  Karupasamy & Anr. v. State by Superintendent, Customs Tuticorin - 2004 (94) ECC 306 (Mad.).

But the law laid down in none of these cases, regarding the proof of clandestine removal of the goods by an assessee and the evidential value of the retracted statements of the witnesses is not attracted, in the light of the facts and circumstances, detailed above, to the present case. It is a question of fact to be decided, keeping in view the facts and evidence of each case, as to whether the change of clandestine removal of the goods without payment of duty, stands proved as against the assessee or not. The findings of the Tribunal/Court in a particular case in favour of the Department regarding clandestine removal of goods by the assessee based on the evidence brought on record therein cannot be made applicable to another case, wherein tangible evidence is missing for proving such a change against the assessee.

11. In view of what has been discussed above, in our view, the charge of clandestine receipt of the raw material, manufacture of the final products and clearance of the same in clandestine manner, without payment of duty during the period in dispute and the evasion of the duty amount, detailed in the show cause notice, by the appellants, does not at all stand proved. The impugned order of the adjudicating authority is, therefore, set aside and the appeals of the appellants are accepted with consequential relief, if any, permissible under the law.