Natural justice defeats duty demands based on untested statements where cross-examination is denied and corroboration is absent.

A duty demand based mainly on statements alleging under-valuation of scrap was unsustainable because no independent documentary evidence supported the allegation and cross-examination of the witnesses was denied, breaching natural justice. The demand for clandestine clearance of motor parts without payment of duty likewise failed because it rested primarily on untested statements, lacked corroborative records, and did not satisfactorily establish the alleged clearances. In both matters, uncorroborated witness statements were given no reliable evidentiary force, and the impugned order and duty demands were set aside in full with consequential relief.

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Issues: (i) Whether the demand on alleged under-valuation of scrap could be sustained when it rested mainly on statements and cross-examination of the witnesses was denied; (ii) Whether the demand for clearance of motor parts without payment of duty could be sustained when it was based primarily on statements and lacked supporting documentary evidence.

Issue (i): Whether the demand on alleged under-valuation of scrap could be sustained when it rested mainly on statements and cross-examination of the witnesses was denied.

Analysis: The demand on scrap valuation was founded chiefly on statements of an employee and a scrap dealer. No independent documentary evidence was produced to substantiate the alleged under-valuation. The request for cross-examination of the witnesses was rejected, although the statements formed the basis of the demand. Where adjudication rests substantially on witness statements, denial of cross-examination amounts to breach of natural justice and deprives such statements of reliable evidentiary force.

Conclusion: The demand on alleged under-valuation of scrap was not sustainable and was set aside.

Issue (ii): Whether the demand for clearance of motor parts without payment of duty could be sustained when it was based primarily on statements and lacked supporting documentary evidence.

Analysis: The alleged clandestine clearance of motor parts was also quantified mainly on the basis of statements of the supervisor and the manager of the authorised service centre. The period of quantification was not satisfactorily supported by those statements, and the record did not contain independent evidence to establish duty-free clearances. Since the statements were not subjected to cross-examination and the allegation was not corroborated by documentary material, the demand could not be upheld.

Conclusion: The demand for clearance of motor parts without payment of duty was not sustainable and was set aside.

Final Conclusion: The impugned order and the duty demands were set aside in their entirety, and the appeal succeeded with consequential relief.

Ratio Decidendi: A demand founded predominantly on uncorroborated witness statements cannot be sustained where cross-examination of those witnesses is denied and no independent evidence supports the allegation.

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