Cross-examination and defence evidence are essential before relying on inquiry statements in excise adjudication.

Statements recorded during inquiry under the Central Excise Act cannot be relied on as substantive evidence in adjudication unless the statutory conditions for their use are satisfied and the affected party is given a fair chance to test them by cross-examination. Where the assessee seeks cross-examination of alleged job workers and files defence affidavits to rebut clandestine manufacture allegations, the adjudicating authority must examine the evidentiary requirements before confirming the demand. Rejection of defence evidence on an unsustainable delay ground, coupled with denial of cross-examination, leaves the evidentiary basis incomplete and vitiates the adjudication. The matter must be remanded for fresh decision after cross-examination and consideration of defence evidence.

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Issues: Whether the adjudication could rest on statements recorded behind the assessee's back without granting cross-examination, and whether the defence affidavits ought to have been considered before confirming the demand.

Analysis: The statements of the alleged job workers were recorded under Section 14 of the Central Excise Act, 1944 and were relied upon to allege clandestine manufacture and clearance. The assessee sought cross-examination and also produced affidavits to rebut the allegation of no job work. The Tribunal held that, in the light of Section 9D of the Central Excise Act, 1944 and the principles laid down for treating such statements as relevant evidence, the adjudicating authority was required to examine whether the statutory conditions for relying on those statements were satisfied. As no attempt was made to produce the witnesses for cross-examination and the defence affidavits were rejected on an unsustainable ground of delay, the evidentiary foundation of the adjudication was found to be incomplete.

Conclusion: The denial of cross-examination and the non-consideration of the defence affidavits vitiated the adjudication, and the matter had to be remanded for fresh decision after permitting cross-examination and defence evidence.

Final Conclusion: The impugned order was set aside and the appeals were allowed by way of remand for de novo adjudication on the open issues.

Ratio Decidendi: Statements recorded during inquiry cannot be treated as substantive evidence in adjudication unless the statutory conditions for their use are satisfied and the affected party is afforded a fair opportunity to test them by cross-examination.

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