The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata has overturned a central excise duty demand of ₹97.97 lakh raised against Vikromatic Steels Pvt. Ltd. and revoked the penalties imposed on the company and its director. The Tribunal held that the Department’s case relied entirely on electronic records and loose sheets that were not admissible as evidence, along with statements that were never tested in the manner required under law.
The matter stemmed from a DGCEI search carried out on 26 February 2014 at the company’s plant in Deoghar, Jharkhand. Officers seized loose papers, a pen drive that allegedly contained production details, and recorded statements from staff members. Based on these materials, a show cause notice issued in March 2015 alleged clandestine clearance of finished steel products without payment of duty. The adjudicating authority confirmed the full demand, appropriated ₹10 lakh already deposited, and imposed equal penalties on the company and the director. The Commissioner (Appeals) later upheld the order.
Before the Tribunal, the appellants argued that the electronic data taken from the pen drive could not be treated as evidence because it was never certified as required under Section 36B of the Central Excise Act, which governs the admissibility of electronic records. No certificate authenticating the source or accuracy of the records was produced. They also submitted that statements recorded during the investigation could not be used without following Section 9D, which requires the makers of statements to be examined before the adjudicating authority unless specific reasons are recorded for not doing so. The Tribunal agreed with these arguments.
The bench noted that the so-called wage register extracted from the pen drive contained entries like Carriage Contractor, Rod Cutting Contractor and Hukdi Contractor and reflected more than 150 workers. This was found inconsistent with PF and ESIC records that showed only 35 to 36 employees. The Tribunal further observed that there was no evidence of increased wage payments, which would have been expected if extra labour had been engaged to support the alleged unrecorded production.
The Tribunal also recorded that the Department had not produced any supporting indicators normally looked for in clandestine removal cases. There was no proof of unusual electricity use, no evidence of excess consumption of inputs or raw materials, no transport records, and no confirmation from any alleged buyers. Stock verification at the time of the search did not reveal discrepancies. It rejected yield calculations based on averages that had no disclosed basis.
Holding that clandestine removal must be proven through positive evidence and not presumptions, the Tribunal ruled that once the electronic records were excluded and the statements were rendered unusable, the loose sheets alone could not sustain the demand. Loose papers, it noted, have no evidentiary value unless independently corroborated.
The Tribunal therefore set aside the duty demand, interest and penalties in full and allowed the appeals with consequential benefits.
The appeals were argued by Arnab Chakraborty and Abhijit Biswas for the appellants, and by A. Mukherjee for the Revenue.
Case: M/s Vikromatic Steels Pvt Ltd v. Commissioner, CGST & CX, Ranchi
Case No: Excise Appeal No. 77761 of 2018
Coram: R. Muralidhar (Judicial Member), K. Anpazhakan (Technical Member)
