Clandestine removal cannot be sustained on uncorroborated third-party records and uncertified electronic printouts.

The company manufactured sponge iron and was alleged to have made clandestine clearances and under-invoiced goods during 2007–08.

The Department relied principally on computer-generated records recovered from GIPL and a handwritten ledger recovered from OSPL, together with statements of persons associated with GIPL.

A show-cause notice dated 28 March 2011 proposed duty of ₹17,60,744, interest and penalties; the adjudicating authority confirmed the demand and imposed penalties, and the Commissioner (Appeals) upheld that order.

The company and its director appealed to the Tribunal, disputing the reliability and admissibility of the third-party records and statements and the sufficiency of corroborating evidence.

1. Whether third-party computer records and a handwritten ledger, without independent corroboration, established clandestine manufacture and clearance by the company

2. Whether the computer printouts were admissible without compliance with Section 36B of the Central Excise Act, 1944, and whether the statements could be relied upon without compliance with Section 9D

3. Whether the “souda” notations, without evidence of additional consideration received by the company, established under-invoicing or undervaluation

4. Whether the duty demand and penalties against the company and its director could be sustained on the evidence on record

Section 36B of the Central Excise Act prescribes conditions for admitting computer printouts as evidence, including the certificate contemplated by Section 36B(4); Section 36A’s presumptions do not, on the facts here, operate against persons from whom the documents were neither seized nor produced.

Section 9D governs the evidentiary use of statements recorded under Section 14 and requires the statutory procedure to be followed before such statements are relied upon as substantive evidence.

Alleged clandestine manufacture and removal must be established by cogent evidence and cannot rest merely on uncorroborated third-party records or inference; relevant corroboration may include evidence of inputs, production, transport and receipt of unaccounted consideration [*Arya Fibres Pvt. Ltd. v. Commissioner of Central Excise, Ahmedabad-II*, 2014 (311) E.L.T. 529 (Tri.-Ahmd.)].

The Tribunal also relied on *Trikoot Iron & Steel Casting Ltd. v. ADG (Adjn.), DGGI*, Final Order No. 58546 of 2024, concerning Section 36B compliance, and *Dinabandhu Steel and Power Ltd. v. Commissioner of Central Excise*, 2024 (4) TMI 721 (CESTAT Kolkata), concerning the need for corroboration and proof of authorship.

Duty under Section 11A, interest under Section 11AB and penalty under Section 11AC depend on a sustainable duty liability and the applicable statutory requirements; Rule 26 requires evidence of the person’s relevant dealing with goods and the requisite knowledge or belief.

The Tribunal found that the principal records originated from GIPL and OSPL, not the company, and that the Department had not independently connected the entries to actual production and clearance by the company.

There was no corroborating evidence of excess raw-material procurement, physical movement through identified transporters, or receipt of unaccounted consideration.

The computer printouts lacked the Section 36B(4) certificate and the Department had not satisfactorily established the devices’ preservation and chain of custody; the OSPL ledger’s author was unidentified.

The statements relied upon were not tested through the procedure required by Section 9D, and the director’s inability to explain another entity’s records was not an admission.

The “souda” entries likewise did not prove that the company received consideration above the invoiced value.

The Tribunal therefore held that neither clandestine clearance nor undervaluation had been established by reliable, corroborated evidence.

It also set aside the company’s penalty under Section 11AC and the director’s penalty under Rule 26, and allowed both appeals with consequential relief, if any, in accordance with law.