Cross-examination of relied-upon witnesses is mandatory; denial under Section 9D vitiates adjudication and warrants fresh decision.

Where adjudication is founded on witness statements recorded during investigation, those statements cannot be used against the assessee unless cross-examination is afforded under Section 9D of the Central Excise Act, 1944. Refusing cross-examination of 17 requested witnesses, while allowing only the chemical examiner, violated natural justice and undermined the adjudication. The impugned order was therefore liable to be set aside, and the matter restored to the adjudicating authority for fresh decision after giving the appellants due opportunity, with all issues kept open.

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Issues: Whether the denial of cross-examination of witnesses whose statements were relied upon in the show cause notice vitiated the adjudication and required the impugned order to be set aside.

Analysis: The adjudication was founded on statements recorded during investigation and relied upon in the show cause notice. Cross-examination was sought of 18 persons, but permission was granted only for the chemical examiner and refused for the remaining witnesses. In view of Section 9D of the Central Excise Act, 1944, statements recorded during investigation could not be used against the assessee without affording a proper opportunity of cross-examination. The refusal to permit cross-examination of 17 witnesses amounted to a violation of the principles of natural justice and impaired the adjudication process.

Conclusion: The denial of cross-examination was unlawful and the impugned order was liable to be set aside.

Final Conclusion: The matter was restored to the adjudicating authority for fresh decision after giving due opportunity to the appellants, with all issues kept open.

Ratio Decidendi: Where adjudication relies on witness statements, those statements cannot be used unless the affected party is afforded cross-examination in accordance with Section 9D of the Central Excise Act, 1944 and the principles of natural justice.

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