Cross-examination and natural justice can vitiate an excise demand when witness statements are the sole evidentiary basis.

Cross-examination of witnesses whose statements form the sole basis of an excise demand is a necessary part of natural justice when those statements are specifically disputed. The adjudicating authority and the Tribunal cannot refuse that opportunity on the basis of speculation that cross-examination would add nothing useful. Where witness statements underpin the show-cause notice and the demand, denial of testing their veracity through cross-examination vitiates the adjudication and the demand cannot be sustained.

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Issues: Whether the order confirming excise duty liability could be sustained when the assessee was denied cross-examination of the witnesses whose statements formed the basis of the demand.

Analysis: The demand rested materially on the statements of two witnesses, and the assessee had specifically disputed those statements and sought an opportunity to test their veracity by cross-examination. Denial of that opportunity amounted to violation of the principles of natural justice. The reasoning of the Tribunal that cross-examination would not have yielded anything useful was held to be impermissible guesswork, since it was not for the adjudicating authority or the Tribunal to speculate about the purpose or effect of the proposed cross-examination. As the witness statements were the sole basis for issuing the show-cause notice, their exclusion from testing through cross-examination fatally affected the foundation of the demand.

Conclusion: The denial of cross-examination vitiated the adjudication and the demand could not be sustained.

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