Cross-examination and documentary evidence prevail over untested statements in proving receipt of inputs and defeating duty demand.

Demand and penalty based mainly on investigation statements could not be sustained where the assessees sought cross-examination and produced statutory records, invoices, cheque payments and endorsed transport documents showing receipt and use of inputs. The analysis states that the witnesses' statements were not tested in the manner required by Section 9D of the Central Excise Act, and denial of cross-examination weakened the Revenue's case. Contemporaneous documentary evidence, together with inconsistencies in the transporters' version, was treated as more reliable than untested oral statements, and the burden to prove non-receipt of inputs remained on the Revenue. The commentary notes that the demand and penalties were held unsustainable, while the dissent would have remanded the matter for de novo adjudication.

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Issues: Whether the demand of duty and penalty based mainly on statements recorded during investigation could be sustained when the assessees sought cross-examination and produced documentary evidence showing receipt and use of inputs.

Analysis: The Revenue's case rested primarily on statements of the supplier's officer and transporters, while the assessees produced statutory records, invoices, cheque payments, and endorsed transport documents indicating receipt of goods. The statements were not subjected to the procedure required by Section 9D of the Central Excise Act, 1944, and the requested cross-examination was denied. The documentary evidence also showed inconsistencies in the transporters' version and supported the assessees' plea that the inputs had been received and consumed in manufacture. In such a situation, untested oral statements could not prevail over contemporaneous documentary evidence, and the burden to prove non-receipt of inputs remained on the Revenue.

Conclusion: The demand and penalties were not sustainable and the assessee's appeal succeeded.

Dissenting Opinion: The Member (Technical) held that the matter should be remanded for de novo adjudication because the statutory procedure under Section 9D had not been followed and the witnesses had not been examined-in-chief before cross-examination could arise.

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