Cross-examination cannot be demanded before replying to a show cause notice, though de novo adjudication may still be ordered for fairness.

A noticee who has not filed a reply to a show cause notice cannot insist on cross-examination of departmental witnesses as a precondition to answering the allegations, because no live dispute arises until the notice is denied. On that basis, refusal of cross-examination did not by itself amount to breach of natural justice. However, to secure a fair opportunity to contest the notice, the CESTAT set aside the ex parte adjudication and remanded the matter for de novo adjudication after permitting the assessee to file a reply, lead evidence and obtain personal hearing.

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Issues: Whether the adjudication order confirming duty, interest and penalties could be set aside and the matter remanded for de novo adjudication where the noticee had not filed a reply to the show cause notice and had sought cross-examination of witnesses before replying.

Analysis: The appeals arose from an ex parte adjudication based on a show cause notice alleging clandestine removal, with reliance on documents and statements recorded under Section 14 of the Central Excise Act, 1944. The appellants had not replied to the notice despite opportunities, but had sought cross-examination of witnesses on the ground that effective defence was not possible without it. The Tribunal held that, until the allegations in the notice were denied by a reply, there was no live dispute requiring adjudication and the persons whose statements supported the notice remained witnesses for the Department. On that basis, the Tribunal rejected the contention that denial of further cross-examination amounted to breach of natural justice. However, considering the request for one final opportunity to file a reply and participate in adjudication, the Tribunal found it appropriate in the interest of justice to set aside the order and direct fresh adjudication after permitting reply, evidence and personal hearing.

Conclusion: The impugned order was set aside and the matter was remanded for de novo adjudication after filing of reply and grant of reasonable opportunity.

Ratio Decidendi: A noticee who has not replied to the show cause notice cannot insist on cross-examination of departmental witnesses as a prior condition to answering the allegations, though the adjudication may still be remanded to ensure a fair opportunity to contest the notice.

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