2026-VIL-1799-CESTAT-KOL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Admissibility of statements recorded during investigation under Section 14 of the Central Excise Act, 1944 in the absence of compliance with Section 9D – Appellant company, a manufacturer of sponge iron and charcoal, was alleged on the basis of searches to have cleared finished goods clandestinely without invoices and duty, the allegation resting on statements of its manager, plant-in-charge and assistant accountant together with data retrieved from seized computers, and duty, interest and equal penalty were confirmed on the company with personal penalty on its director under Rule 26 of the Central Excise Rules, 2002 – Appellants contended that the statements were never tested by cross-examination and some were recorded under coercion – Whether the statements are admissible as evidence in the absence of compliance with the procedure under Section 9D – HELD – The statements relied upon by Revenue were never tested by examination-in-chief before the adjudicating authority or by cross-examination. Following the Hon'ble High Court of Punjab and Haryana, Section 9D(1) is mandatory, and unless the circumstances in clause (a) exist, the maker of the statement must be examined as a witness before the adjudicating authority who must then form the opinion that the statement should be admitted in the interests of justice, failing which the statement is to be eschewed from consideration as not relevant for proving the truth of its contents. The Tribunal in earlier decisions has taken the same view – The statements recorded during investigation are inadmissible as evidence - Admissibility of data retrieved from seized CPUs and pen drives without compliance with Section 36B of the Central Excise Act, 1944 – Department relied upon data and printouts retrieved from computers and a pen drive seized from the factory, office and residence of the director to allege clandestine clearance – Appellants contended that the printouts were not accompanied by the certificate under Section 36B(4) and that the persons who made the entries, some being ex-employees, were not examined – Whether the data retrieved from CPUs and pen drives is admissible as evidence – HELD – The data was never tested in terms of Section 36B(2) and Section 36B(4). Section 36B(4) mandatorily requires a certificate identifying the document, describing the manner of its production and the particulars of the device, signed by a person in a responsible official position in relation to the operation of the device, on the same footing as the corresponding provision of the Evidence Act as laid down by the Hon'ble Supreme Court. Pen drives being floating devices, the data cannot be relied upon unless the persons who entered it are identified and the certificate is produced – The data and printouts are not admissible evidence to sustain the charge of clandestine clearance - Sustainability of demand for clandestine manufacture and clearance and consequent penalties on the company and its director – Demand was confirmed along with equal penalty under Section 11AC and personal penalty on the director under Rule 26 – Appellants contended that there was no tangible corroborative evidence such as stock discrepancy, excess electricity consumption, statements of buyers, transport documents or proof of movement of goods – Whether the charge of clandestine clearance is sustainable and whether penalties can be imposed – HELD – Clandestine manufacture and removal requires tangible evidence and not inferences or assumptions, such as excess raw materials, actual removal of unaccounted goods, sale to identified parties, receipt of sale proceeds, excess use of electricity, statements of buyers and proof of transportation. Neither the manufacturing capacity of the Appellant was examined nor was any proper investigation conducted of the buyers, the suppliers of raw materials, the labour required or the electricity needed for such production. Once the statements and the computer data are held inadmissible and no other evidence remains, the charge is not sustainable – The demand is set aside, no penalty can be imposed on the company or its director, and the appeals are allowed.
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