Natural justice limits on untested evidence: duty and penalty findings set aside, with remand for fresh adjudication.

Uncorroborated statements and material collected behind the assessee's back could not sustain findings of clandestine manufacture, removal, valuation, or denial of exemption. Several witnesses were unavailable for cross-examination, and others did not support the department's version, weakening the evidentiary basis. The adjudicating authority also relied on verified invoices and related records without giving the assessee an opportunity to meet that material, which violated natural justice. The impugned order confirming duty and penalties was therefore set aside, and the matter was remanded for de novo adjudication on a fresh appraisal of the evidence.

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Issues: Whether the order confirming duty and penalties was sustainable in the absence of reliable corroboration and in view of reliance on material collected behind the assessee's back.

Analysis: The case rested substantially on statements of numerous persons, but several witnesses did not appear for cross-examination and some of those who were cross-examined did not support the department's version. The evidentiary value of untested statements was therefore weakened. The Commissioner also relied on verification of invoices and related records obtained behind the assessee's back and used that material to reject the defence of purchase and sale of second-hand machines. Such reliance, without affording an opportunity to meet the material, offended the principles of natural justice. In the circumstances, the findings on manufacture, clandestine clearance, valuation, and eligibility to exemption could not be sustained without fresh examination of the evidence.

Conclusion: The impugned order was set aside and the matter was remanded for de novo adjudication.

Ratio Decidendi: Uncorroborated statements and evidence relied upon without notice to the affected party cannot sustain findings of clandestine manufacture and removal, and an adjudication founded on such material must be reopened for fresh consideration.

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