2026-VIL-1117-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Admissibility of Statements Recorded under Section 14 of Central Excise Act, 1944 - Section 9D Compliance - Statements recorded during investigation without cross-examination – HELD - The mandatory procedure prescribed under Section 9D(1)(b) requires that persons making statements during investigation must be examined as witnesses before the adjudicating authority, and the authority must form an opinion that admission of such statements is warranted in the interests of justice. The mere inability of a witness to identify entries or express comments, particularly after a considerable lapse of time or when not shown the complete set of invoices, cannot be construed as an admission of clandestine manufacture or removal. The legislative rationale behind Section 9D is manifest—statements recorded during investigation are often obtained under circumstances where coercion, pressure, or inducement cannot be ruled out, and examination before the adjudicating authority coupled with the right of cross-examination constitutes an indispensable safeguard against miscarriage of justice. Where statements are sought to be relied upon as substantive evidence without compliance with Section 9D, and no reasoned satisfaction regarding the circumstances under Section 9D(1)(a) is recorded, the statements are rendered completely devoid of evidentiary value for proving the truth of their contents. The refusal to grant cross-examination of witnesses and the failure to produce deponents before the adjudicating authority amounts to denial of a fundamental right and constitutes a serious infraction of principles of natural justice. Consequently, statements of Directors, workers, and transporters recorded under Section 14 without following the mandatory Section 9D procedure cannot be relied upon to sustain the grave charge of clandestine manufacture and removal - The demand of duty together with interest and the penalty imposed upon the appellant-company are set aside. The appeal is allowed - Admissibility of Computer-Derived Evidence and Seized Documents — Section 36B Compliance - HELD - Documents and computer printouts cannot be treated as admissible evidence without satisfying the mandatory conditions prescribed under Section 36B of the Central Excise Act, 1944, which is pari materia with Section 65B of the Indian Evidence Act, 1872. The Section 36B(2) cumulatively requires proof that the computer printout was produced by the computer during the period it was regularly used to store or process information for activities regularly carried on, that information of the relevant kind was regularly supplied to the computer in the ordinary course of such activities, that the computer was operating properly throughout the material period, and that the information reproduced is derived from information supplied to the computer in the ordinary course of activities. Additionally, Section 36B(4) mandates issuance of a certificate by a person occupying a responsible official position in relation to the operation of the computer, identifying the record and describing the manner of its production. In the absence of such certificates and where no evidence is adduced demonstrating compliance with these foundational conditions, the seized documents, notebooks, and comparison charts cannot be accorded evidentiary value. Further, unsigned, unconfirmed documents bearing no acknowledgment from alleged buyers cannot be elevated to conclusive evidence of clandestine removals, particularly when the adjudicating authority rejects the assessee's explanation without recording cogent reasons. Where the investigating agency undertakes selective comparison of entries only against invoices issued to one customer while ignoring invoices issued to other customers, such truncated analysis is fundamentally flawed and incapable of forming the basis for allegations of clandestine manufacture - Charge of Clandestine Manufacture and Removal — Requirement of Cogent and Corroborative Evidence — HELD - Allegations of clandestine manufacture and removal are quasi-criminal in nature carrying civil and penal consequences and therefore cannot be sustained on the basis of assumptions, presumptions, or inferences alone but must rest upon tangible, independent, and corroborative evidence. Revenue must establish evidence of excess raw materials procurement beyond statutory records, physical stock shortages at the factory, actual instances of removal of unaccounted finished goods (not inferential or assumed), discovery of such goods outside the factory, instances of sales to identified parties, receipt of sale proceeds, use of electricity in excess of what is necessary for lawfully manufactured and cleared goods, statements of buyers with details of illicit transactions, proof of actual transportation without duty payment, and links between recovered documents and factory activities – The methodology adopted by the investigating agency, the failure to conduct comprehensive investigation into various aspects of the alleged transaction, and the reliance upon documents and statements that do not satisfy mandatory evidentiary requirements render the entire allegation unsustainable in law. The demand of duty and the penalty imposed as a consequence thereof are set aside as the principal charge itself fails.
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