Excise Duty Demand Quashed Over Flawed Digital Evidence and Lack of Buyer Testimony: CESTAT

The Delhi Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has dismissed two appeals filed by the Central Excise Department against Paradise Steels and its Director, Rakshit Bhansali, citing serious procedural lapses and lack of evidentiary support.
The bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) upheld the Commissioner’s findings, stressing that the department failed to comply with the mandatory requirements under Section 36B and Section 9D of the Central Excise Act, 1944.
The bench ruled that data extracted from a USB drive during the raid could not be treated as valid evidence since no certification was obtained from the individual responsible for operating the computer, as required under Section 36B. The officers had merely relied on a panchanama and statements from the Director, which the tribunal held did not satisfy legal standards for admissibility.
“Not taking a certificate from the person operating the computer regarding the authenticity of the data is a big flaw and cannot be ignored,” the bench noted.
The bench stated that the department failed to summon or record statements from buyers who allegedly received misclassified goods. The tribunal held that confirmation from buyers was "crucial evidence" to prove clandestine removal, and the department’s omission rendered the allegations unsubstantiated.
The bench ruled that statements given by Director Bhansali during the investigation were ruled inadmissible under Section 9D, as the department had not examined him as a witness during adjudication, nor allowed cross-examination — a mandatory procedural safeguard.
“The provisions of Section 9D... are mandatory and failure to comply... would mean that no reliance can be placed on the statements recorded,” the tribunal ruled.
The dispute arose from a January 2018 order by the Joint Commissioner, who had confirmed a demand of differential central excise duty, along with interest and penalty, against Paradise Steels for allegedly clearing cold rolled stainless steel pattas while misclassifying them as hot rolled pattas — the latter being exempt from excise duty. A penalty of ₹2 lakh was also imposed on Director Bhansali under Rule 26 of the Central Excise Rules, 2002.
However, on appeal, the Commissioner (Appeals), Central Excise and CGST, Jodhpur, overturned both decisions in March 2019, prompting the department to challenge the rulings before CESTAT.
Given the absence of corroborative evidence and procedural compliance, the tribunal dismissed both departmental appeals and upheld the exoneration of Paradise Steels and its Director.
Case Details
Case Title: Commissioner of Central Excise & CGST Versus M/s Paradise Steels Pvt. Ltd.
Case No.: Excise Appeal No. 51315 Of 2019 With Excise Cross No. 50567 Of 2019
Date: June 27, 2025
Counsel For Appellant: Bhagwat Dayal
Counsel For Respondent: Jitin Singhal