2026-VIL-1696-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Reliance on statements recorded under Section 14 without compliance with Section 9D of the Central Excise Act, 1944 - Revenue alleged that the Appellant availed and utilised CENVAT Credit on invoices of registered dealers without receipt of goods, relying principally on statements recorded under Section 14 of persons associated with the dealers, which the adjudicating authority used directly without examining the makers - Whether the statements recorded under Section 14 can be relied upon to prove the truth of their contents without following the procedure under Section 9D - HELD - Not every statement recorded during investigation automatically acquires substantive evidentiary value. Save in the exceptional circumstances in Section 9D(1)(a), the statement has to pass through the procedure under Section 9D(1)(b), requiring the examination of the maker as a witness before the adjudicating authority and a determination, for reasons recorded in writing, that the statement deserves to be admitted in evidence. The record did not disclose that this exercise was undertaken or that the case fell within any exceptional circumstance, and where the procedure is not followed the statements have to be eschewed from consideration as not relevant for proving the truth of their contents. The statement of the vehicle owner also cannot be admitted as substantive evidence without examination - The statements cannot be relied upon, and the case of the Revenue, constructed on a chain of statements of third parties, dealers and co-accused persons, fails - Central Excise - Admissibility of electronic data retrieved from hard disk seized from third party - Section 36B of the Central Excise Act, 1944 - Revenue relied on electronic data and digital RG-23 records retrieved from a hard disk seized from the premises of a third party dealer, which was not recovered from the Appellant, and no certificate was obtained or annexed at the time of seizure, extraction or reliance - Whether the electronic data retrieved from the hard disk is admissible as evidence against the Appellant - HELD - Section 36B, which is pari materia with Section 65B of the Indian Evidence Act, is a self-contained code under which a certificate identifying the electronic record, describing the manner in which it was produced and giving particulars of the device, signed by a person in a responsible official position, must be produced under Section 36B(4), and its mandatory nature has been consistently enforced. Mere recovery of a hard disk from a third party does not establish the authenticity, integrity or correctness of every entry or the Appellant's participation in the alleged paper transactions, and without certification the contents remain unauthenticated secondary hearsay evidence - The electronic data is legally inadmissible as substantive evidence against the Appellants, and the case built on uncertified digital extractions fails on this count - Central Excise - Denial of CENVAT Credit on allegation of non-receipt of goods - Evidence of non-transportation and upstream irregularities - Revenue alleged that goods were not transported and received, relying on sample checks of vehicle numbers on the VAHAN portal showing vehicles incapable of carrying the goods, a statement of a vehicle owner, a delayed search at the premises of the alleged non-existent manufacturer and the cancellation or irregularities of upstream suppliers, while the Appellant produced valid cenvatable invoices, made payment and recorded receipt and consumption in its statutory books - Whether the demand of CENVAT Credit, interest and penalty on the Appellant company is sustainable - HELD - Under trade practice the dealer arranges freight and delivery, and the law does not cast an unworkable burden on the manufacturing buyer to verify the registration credentials of transport vehicles, nor can it be penalised for clerical discrepancies in vehicle numbers recorded by upstream suppliers once goods are received and accounted for in the stock registers. The Department checked only a small sample of vehicles and was required to establish non-transportation with respect to each specific invoice, and data from public databases is susceptible to errors and cannot be irrebuttable proof dispensing with independent physical verification such as toll gate logs or factory entry registers. The condition of an upstream manufacturer's premises, searched more than two years after the invoices, cannot establish its status for the earlier period, and ignorance of an upstream supplier of subsequent dealings or cancellation of registration cannot by itself prove non-receipt of goods by the Appellant. The Revenue was required to establish a direct, unbroken evidentiary link connecting upstream defects to the specific consignments received, and cannot extend isolated suspicion to declare all transactions fictitious. In absence of admissible evidence establishing non-receipt of inputs, fraudulent collusive activity or cash flow back, the documentary evidence of the Appellant was not displaced - The demand of CENVAT Credit along with interest and equivalent penalty on the Appellant company is unsustainable and set aside - Central Excise - Penalty on Director under Rule 26 of the Central Excise Rules, 2002 - Personal penalty was imposed on the Director of the Appellant company on the allegation of involvement in the irregular availment of CENVAT Credit by procurement of fake invoices - Whether personal penalty under Rule 26 on the Director is sustainable - HELD - Vicarious personal liability cannot be automatically fastened upon a Director merely by virtue of his executive designation or corporate position. To invoke Rule 26, the Department carries a strict burden to prove mens rea, active personal participation and specific overt acts showing that the individual knowingly dealt with goods liable to confiscation or consciously arranged fraudulent transactions, requiring positive, transaction-specific proof of actual knowledge or reasonable belief that the goods were liable to confiscation. The Revenue failed to adduce any admissible evidence on this count, and the main demand against the company stands set aside - The personal penalty on the Director is wholly unsustainable and is set aside - Central Excise - Deposit made during investigation as admission of liability - Revenue sought to draw an adverse inference from the amount deposited by the Appellant during the course of investigation, treating it as an implicit admission of guilt, while the Appellants contended that the deposit and the averments of the Director were made under threat, coercion or duress - Whether the deposit made during investigation amounts to an admission of liability - HELD - An interim deposit or payment made by an assessee during search, seizure or investigative proceedings, often under duress or coercion or on apprehension of coercive penal action, cannot be elevated to the status of an unconditional admission of tax liability - The deposit made during the investigation cannot be equated to an admission of guilt or liability.
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