Section 9D evidence procedure governs adjudication statements; non-compliance can vitiate duty demands and require remand.

Section 9D applies to adjudication as well as prosecution, and statements recorded before a gazetted Central Excise officer can be used to prove their contents only if the statutory conditions are met. If clause (a) does not apply, the maker must be examined as a witness and the adjudicating authority must record a reasoned opinion under clause (b) before admitting the statement in evidence. Reliance on such statements without following this procedure deprives the assessee of cross-examination and offends the statutory scheme and natural justice. The duty-confirming orders were therefore vitiated and liable to be set aside, with remand for fresh adjudication in accordance with Section 9D.

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Issues: Whether the adjudication orders confirming duty demand and penalty were vitiated because the adjudicating authority relied upon statements recorded during investigation without first complying with the mandatory procedure for admitting those statements in evidence under Section 9D, including examination of the makers of the statements and opportunity of cross-examination.

Analysis: Section 9D applies to adjudication proceedings as well as prosecutions. A statement recorded before a gazetted Central Excise officer is relevant for proving the truth of its contents only if the circumstances in clause (a) exist or, failing that, the maker is first examined as a witness and the adjudicating authority records a reasoned opinion under clause (b) that the statement should be admitted in evidence in the interests of justice. If this procedure is not followed, the statement loses evidentiary value and cannot be straightaway relied upon. The adjudicating authority in the present case relied extensively on such statements without invoking clause (a) and without following the mandatory procedure under clause (b), which also deprived the assessee of the opportunity to test the evidence by cross-examination. The resulting adjudication was therefore contrary to the statutory scheme and principles of natural justice.

Conclusion: The duty-confirming orders were vitiated for non-compliance with Section 9D and were liable to be set aside, with the matters remitted for fresh adjudication after following the prescribed procedure and affording cross-examination where sought.

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