Cross-examination required before denying Cenvat credit on third-party statements; remand ordered for fresh adjudication.

Denial of Cenvat credit based solely on purchasers' statements was found unsustainable because the deponents were not produced for cross-examination, so the evidentiary basis could not be tested in accordance with Section 9D and settled principles of natural justice. The record also showed maintenance of statutory documents, including D-3 returns and prescribed registers, which supported the assessee's case. On these facts, the matter was remanded to the Original Adjudicating Authority for cross-examination of witnesses and fresh adjudication.

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Issues: Whether the demand of Cenvat credit could be sustained on the basis of third-party statements without affording cross-examination, and whether the matter required remand for fresh adjudication.

Analysis: The dispute turned on statements of purchasers relied upon by the Revenue to deny credit under Rule 16. Since those statements formed the exclusive basis of the allegation, their veracity could not be tested unless the deponents were produced for cross-examination. The record also indicated that the appellant had maintained statutory records, including D-3 returns and entries in the prescribed registers. In these circumstances, the evidentiary value of the statements could not be accepted without compliance with the procedural safeguard embodied in Section 9D and the settled principles requiring an opportunity to cross-examine witnesses whose statements are used against an assessee.

Conclusion: The denial of credit on the basis of untested statements was not sustainable, and the matter was rightly remanded to the Original Adjudicating Authority for cross-examination and fresh decision.

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