Section 9D evidence and CENVAT credit verification rules limit reliance on investigation statements and upstream supply-chain allegations.

Statements recorded during excise investigation could not be relied on to prove their contents in adjudication because the mandatory procedure under Section 9D was not followed; once excluded, the remaining material was insufficient to sustain the demand. CENVAT credit also could not be denied merely on an allegation that the supplier issued invoices without supplying goods, where the assessee had received the goods and recorded them in its accounts. The recipient's obligation was limited to receipt and proper accounting of the goods, and it was not required to verify the entire upstream supply chain. The demand and penalties were therefore unsustainable.

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Issues: (i) Whether statements recorded during investigation could be relied upon in adjudication without compliance with the procedure under Section 9D of the Central Excise Act, 1944, and whether denial of cross-examination mattered when such statements were not first rendered admissible. (ii) Whether CENVAT credit could be denied to the assessee on the allegation that the supplier had issued invoices without supplying goods, and whether the assessee was obliged to verify the entire supply chain.

Issue (i): Whether statements recorded during investigation could be relied upon in adjudication without compliance with the procedure under Section 9D of the Central Excise Act, 1944, and whether denial of cross-examination mattered when such statements were not first rendered admissible.

Analysis: The statements relied upon by the Revenue were recorded before Central Excise officers, but the statutory procedure for their admissibility under Section 9D was not followed. In the absence of compliance with that provision, such statements could not be treated as relevant evidence to prove the truth of their contents. Cross-examination becomes material only after the statements are first brought within the fold of admissible evidence. Once the statements were excluded, the remaining relied upon material was insufficient to sustain the demand.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): Whether CENVAT credit could be denied to the assessee on the allegation that the supplier had issued invoices without supplying goods, and whether the assessee was obliged to verify the entire supply chain.

Analysis: The assessee had received goods against invoices issued by a registered dealer and had accounted for them. The legal responsibility of the recipient was limited to receiving the goods and maintaining proper accounts. The assessee was not required under the CENVAT regime to investigate the entire upstream chain or ensure that every intermediary had correctly dealt with its own credit or procurement. The order also emphasised that lower authorities were bound to follow existing Tribunal precedent under the principle of judicial discipline. On the facts, no material established that the supplier had issued invoices without supplying goods to the assessee.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The Revenue failed to establish a sustainable basis for denial of CENVAT credit, and the impugned order setting aside the demand and penalties was upheld.

Ratio Decidendi: Statements recorded during excise investigation are not admissible for proving their contents in adjudication unless the mandatory procedure for relevance and admission under Section 9D is followed, and a CENVAT credit recipient is not required to verify the entire supply chain beyond receipt and accounting of goods against valid invoices.

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