Cross-examination and Section 9D compliance are essential when witness statements form the basis of a demand.

Statements recorded during investigation cannot be relied upon to sustain a demand unless the procedure under Section 9D of the Central Excise Act, 1944 is followed, including making the witnesses available for cross-examination where their statements form the basis of the case. Denial of cross-examination in such circumstances constitutes a serious procedural defect and violates principles of natural justice. On that basis, the adjudication was held unsustainable and the matter was remanded for fresh decision after granting cross-examination and complying with Section 9D.

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Issues: Whether the denial of cross-examination of witnesses whose statements were relied upon by the Revenue vitiated the adjudication and justified remand for fresh decision.

Analysis: The decision turned on the statutory procedure governing reliance on statements recorded during investigation. The evidence relied upon against the assessees consisted substantially of witness statements, and the appellants sought cross-examination of those witnesses. The applicable legal position, as followed from the cited precedent, is that statements used to sustain demand cannot be straightaway relied upon unless the procedure under Section 9D of the Central Excise Act, 1944 is followed. Where the statements form the basis of the demand, denial of cross-examination amounts to a serious procedural defect and offends principles of natural justice. The adjudication was therefore found unsustainable because the material witnesses were not made available for cross-examination before reliance was placed on their statements.

Conclusion: The denial of cross-examination rendered the impugned order unsustainable, and the matter was remanded for fresh adjudication after affording cross-examination and following Section 9D of the Central Excise Act, 1944.

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