Uncorroborated seized records and retracted third-party statements cannot sustain excise duty demand without cross-examination and statutory safeguards.

Central excise duty demand for alleged clandestine procurement of khandsari molasses was unsustainable because the seized BS-26 register, by itself, did not prove receipt of the goods in the factory. The alleged third-party statement was retracted, corroboration from suppliers or transporters was not obtained, and cross-examination was denied, so the statement lost evidentiary value. The statutory safeguards for relying on such a statement were not satisfied. The impugned order was set aside and the appeal was allowed in favour of the assessee.

---

---

Issues: Whether the demand of central excise duty on alleged procurement of khandsari molasses could be sustained on the basis of the BS-26 register and the statement of a third party, in the absence of corroboration and cross-examination.

Analysis: The demand rested mainly on a register recovered by the Income-tax Department and on a statement attributing the supplies to the appellant. The register by itself did not establish receipt of the quantities in the appellant's factory, and no further investigation was undertaken to corroborate the alleged clearances from the suppliers or transporters. The third-party statement was retracted, and the request for cross-examination was declined. In such circumstances, the statement lost evidentiary value and could not safely be relied upon to fasten duty liability. The statutory requirement governing use of such statements was also not satisfied.

Conclusion: The duty demand was not sustainable and the finding went in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed, as the Revenue failed to prove the alleged clandestine procurement and receipt of molasses with legally reliable evidence.

Ratio Decidendi: A duty demand cannot be upheld on the basis of an uncorroborated seized record and a retracted third-party statement when cross-examination is denied and the statutory safeguards for relying on such statement are not complied with.

---