Section 9D compliance and cross-examination are essential before third-party records can sustain a clandestine removal allegation.

Allegations of clandestine removal based solely on third-party records and a third party's statement were held unreliable where Section 9D of the Central Excise Act, 1944 was not complied with and effective cross-examination was not provided. In the absence of the witness being produced for examination and without corroborative evidence from the appellant's premises or independent investigation, the third-party material could not sustain the charge. The duty demand, interest, and penalties were therefore not upheld.

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Issues: Whether the demand of duty and penalties for alleged clandestine removal could be sustained on the basis of third-party records and a statement recorded from the third party, without compliance with Section 9D of the Central Excise Act, 1944 and without offering cross-examination.

Analysis: The allegation of clandestine removal rested on records recovered from a third party and on the statement of its director. The records and statement were relied upon by the Revenue, but the witness was not produced for examination in support of the documents and the appellant was not afforded effective cross-examination in the manner contemplated by Section 9D of the Central Excise Act, 1944. In the absence of such compliance and without corroborative evidence from the appellant's premises or independent investigation, the third-party material could not be treated as reliable evidence to sustain the charge.

Conclusion: The charge of clandestine removal was not sustainable, and the duty demand, interest, and penalties could not be upheld.

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