Evidentiary Standards in Clandestine Removal: CESTAT Quashes Demand Based on Uncorroborated Private Records and Uncertified Electronic Data

The judicial landscape surrounding indirect taxation has consistently emphasized that allegations of clandestine manufacture and clearance are exceptionally grave. Consequently, the burden of proof rests heavily on the revenue authorities to establish such charges with tangible, irrefutable evidence rather than relying on mere surmises or unverified private documents. In a landmark ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata, in the matter of Bhardwaj Steels Private Limited Vs Principal Commissioner of CGST & Central Excise, systematically dismantled a duty demand built on uncorroborated private records, uncertified electronic evidence, and untested witness statements.

This comprehensive analysis delves into the factual matrix, the legal arguments presented, and the critical statutory interpretations regarding the admissibility of evidence under the Central Excise Act 1944.

Factual Matrix of the Dispute

The assessee, Bhardwaj Steels Private Limited, is primarily engaged in the manufacturing of M.S. Rods and allied products, which are classified under Chapter 72 of the Central Excise Tariff Act 1985. The dispute pertains to the operational period spanning from January 2017 to June 2017.

The genesis of the litigation traces back to a series of search and seizure operations executed by the investigative wing of the department on 23.01.2018. The searches were conducted across multiple locations, specifically:

  1. The factory premises of the assessee located in Giridih, Jharkhand (which had ceased operations since June 2017).
  2. M/s. Hotel Ashoka International, a property associated with one of the directors.
  3. An alleged secret administrative office.

During these operations, the authorities recovered various private records, note pads, registers, and electronic storage devices. Following the search, the investigating officers recorded the statements of key personnel under Section 14 of the Central Excise Act 1944. On 23.01.2018, statements were obtained from Ranjan Kumar Singh (Authorised Signatory-cum-Accountant) and Bablu Kumar (Director). Subsequently, on 12.02.2018, the statement of Ashok Singh (Managing Director) was recorded. Further statements were extracted from Ranjan Kumar Singh and Bablu Kumar on 24.04.2018.

Based on the recovered private documents and the recorded statements, the department issued a Demand-cum-Show Cause Notice on 11.03.2019. The notice leveled serious allegations against the assessee, including:

  • Covert clearance of finished excisable commodities.
  • Unexplained discrepancies in the physical stock.
  • Deliberate suppression of actual production metrics.

The adjudicating authority subsequently confirmed a central excise duty demand amounting to Rs. 3,03,68,060/-, alongside applicable interest. Furthermore, an equivalent penalty of Rs. 3,03,68,060/- was levied on the assessee company, and a separate personal penalty of Rs. 30,00,000/- was imposed on the Managing Director, Ashok Singh. Aggrieved by this stringent order, the assessee escalated the matter to the CESTAT, Kolkata.