Cross-examination under Section 9D is mandatory before relying on dealers' statements to sustain central excise demand.

Where the Department relies on dealers' statements to allege unauthorised brand-name use, Section 9D of the Central Excise Act requires cross-examination of those third parties before such evidence can be used against the assessee. The surrounding circumstances were found insufficient on their own to prove use of the brand name during the relevant period, and the denied cross-examination rendered the evidentiary foundation unsustainable. The duty demand and connected penalties were set aside, and the matter was remanded for de novo adjudication with an opportunity of hearing and cross-examination of the dealers.

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Issues: Whether the demand of duty and consequential penalties could be sustained on the basis of dealers' statements without granting cross-examination as required by Section 9D of the Central Excise Act, 1944.

Analysis: The allegation that the goods cleared during the disputed period bore a brand name not owned by the manufacturer rested principally on statements of certain dealers. The surrounding circumstances relied upon by the Department were found insufficient by themselves to establish that the brand name had in fact been used during the relevant period. Where the Department seeks to rely upon statements of third parties as evidence against the assessee, cross-examination of those persons is mandatory under Section 9D(1) and Section 9D(2) of the Central Excise Act, 1944. Since such cross-examination had been sought and was not permitted, the evidentiary basis for the demand was held to be unsustainable.

Conclusion: The duty demand and the connected penalties were set aside, and the matter was remanded for de novo adjudication after granting the assessee an opportunity of hearing and permitting cross-examination of the dealers.

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