Cross-examination and Section 9D compliance are essential before using investigation statements against an assessee.

Denial of cross-examination of the panchas, despite a specific request in the reply to the show cause notice, breached natural justice where the case rested on the panchnama. The adjudicating authority also failed to follow Section 9D of the Central Excise Act, 1944 before relying on statements recorded during investigation. As those statements could not be used against the assessee without the statutory procedure and an opportunity to test the evidence, the proceedings were vitiated. Remand for de novo adjudication was therefore justified.

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Issues: Whether denial of cross-examination and non-compliance with Section 9D of the Central Excise Act, 1944 vitiated the adjudication and warranted remand for de novo adjudication.

Analysis: The request for cross-examination of the panchas had been specifically made in the reply to the show cause notice, but no finding was recorded on it. The case rested on the panchnama, and the adjudicating authority had not followed the procedure under Section 9D of the Central Excise Act, 1944. In such circumstances, refusal of cross-examination caused prejudice and amounted to breach of the principles of natural justice. The decision also relied on the settled position that statements recorded during investigation cannot be used against an assessee without following the statutory procedure and allowing an opportunity to test the evidence.

Conclusion: The denial of cross-examination and non-compliance with Section 9D of the Central Excise Act, 1944 vitiated the proceedings, and remand for de novo adjudication was justified.

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