Natural justice in Cenvat credit disputes requires cross-examination of supplier witnesses before adverse reliance is placed.

Denial of Cenvat credit could not be sustained where the finding rested on an untested statement of the supplier's employee and the related proceedings against the supplier were still pending. Reliance on such a statement without offering cross-examination breached natural justice and left the evidentiary basis insufficient for the adjudication. The matter was therefore remanded to the original adjudicating authority for fresh decision after cross-examination and after considering the outcome of the supplier proceedings.

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Issues: Whether denial of Cenvat credit could be sustained on the basis of an untested statement and pending proceedings against the supplier, and whether the matter required remand for fresh adjudication.

Analysis: The demand against the appellants depended substantially on the position in the proceedings against the supplier, which were still pending. The finding below was also founded on the statement of an employee of the supplier who was not offered for cross-examination. In such circumstances, reliance on that statement without testing its veracity violated principles of natural justice. The evidentiary basis was therefore insufficient to sustain the adjudication as it stood, and fresh consideration was necessary with an opportunity for cross-examination and due regard to the outcome of the proceedings against the supplier.

Conclusion: The denial of credit was not sustained, and the matter was remanded to the original adjudicating authority for decision afresh after cross-examination and consideration of the supplier proceedings.

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