CESTAT Quashes Excise Duty Demand Citing Inadmissible Electronic Records, Uncorroborated Loose Sheets, etc.

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Kolkata has quashed a central excise duty demand and penalties imposed on a steel manufacturer and its director, holding that the Department’s case was built on inadmissible electronic records, uncorroborated loose sheets, and statements not tested as required under the law. The bench of R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) has observed that the investigation was premised on uncorroborated loose papers, inadmissible electronic data, and statements without statutory authentication. The Department failed to establish any “positive evidence” of clandestine removal. The case originated from a DGCEI search conducted on February 26, 2014 at the company's factory in Deoghar, Jharkhand. Officers seized loose sheets, a pen drive allegedly containing production-related data and statements of factory personnel A show cause notice issued in March 2015 alleged clandestine clearance of finished goods without payment of duty, demanding ₹97.97 lakh along with interest and equal penalty. A matching penalty was also proposed on the company’s director. The adjudicating authority confirmed the demand, appropriated ₹10 lakh paid under protest, and imposed penalties. The Commissioner (Appeals) later upheld the order, prompting the present appeals before the Tribunal. The company’s counsel challenged the very foundation of the demand, arguing that the evidence relied upon was neither lawful nor reliable. Key submissions included: The Department failed to follow Section 36B of the Central Excise Act, which regulates the admissibility of electronic records. No certification of the printouts or device source was produced. Statements of employees and the director were relied upon without complying with Section 9D, which mandates examination of the makers before the adjudicating authority. The so-called “weekly wage register” allegedly recovered from the pen drive was challenged because several entries included descriptions like “Carriage Contractor”, “Rod Cutting Contractor”, “Hukdi Contractor”—not actual worker names. The number of workers shown (150+) contradicted official ESIC/EPF verified records showing only 35–36 workers. No evidence of excess wages for extra labour was found. The appellants pointed out the absence of basic corroborative indicators no excess consumption of electricity, no unaccounted purchase of raw materials, no transport documents, vehicle owner/driver statements, no evidence from any alleged buyers of clandestine goods and stock verification did not show any shortage or excess The weight of ingots and TMT bundles was derived through unscientific averaging, with no disclosed basis. The Department argued that the pen-drive data, loose sheets, and recorded statements together proved clandestine clearance. It claimed that absolute mathematical precision was unnecessary when multiple indicators pointed to evasion. The Tribunal held that two requirements namely Statements recorded during investigation cannot be used unless the makers are produced before the adjudicating authority and examined and electronic evidence is inadmissible without compliance with Section 36B were blatantly violated, making the very foundation of the demand illegal. The Tribunal noted that the seized sheets contained contradictory entries, listed job descriptions instead of worker names, showed worker counts inconsistent with verified statutory records and were neither authenticated nor corroborated. The Tribunal emphasized that clandestine removal must be proved with positive evidence, not assumptions. The Department failed to show sources of unaccounted raw materials, any transportation of unrecorded finished goods, any buyer who received such goods, and any payments related to the alleged clandestine activities Accordingly, the Tribunal set aside the duty demand, interest, and penalties, granting full relief to both the company and its director. Case Details Case Title: M/s. Vikromatic Steels Pvt.Ltd. Versus Commissioner, CGST & CX, Ranchi Case No.: Excise Appeal No.77761 of 2018 Date: 02.12.2025 Counsel For Appellant: Arnab Chakraborty & Shri Abhijit Biswas Counsel For Respondent: A. Mukherjee, Authorized Representative Click Here To Read Order Read More: Delhi High Court Dismisses Plea by Woman Seeking Exemption From Personal Appearance Before ED Under FEMA Summons

CESTAT Quashes Excise Duty Demand Citing Inadmissible Electronic Records, Uncorroborated Loose Sheets, etc.

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