Cross-examination rights in excise adjudication: reliance on witness statements failed without statutory compliance and natural justice.

Statements recorded during inquiry cannot be used against an assessee unless the statutory procedure for admissibility is followed and the assessee is given an effective opportunity to cross-examine the witnesses. Denial of cross-examination, where the Revenue relies on those statements to sustain the demand, constitutes a serious procedural defect and violates natural justice. The Tribunal applied Section 9D of the Central Excise Act, 1944 and the settled line of authority to hold that non-compliance vitiates the adjudication. The impugned order was set aside and the matter remanded for fresh decision after granting cross-examination and following the prescribed procedure.

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

Analysis: The appeal turned on the mandatory procedure governing reliance on statements recorded during inquiry. The Tribunal applied the settled rule that such statements cannot be straightaway relied upon unless the requirements of Section 9D of the Central Excise Act, 1944 are followed. Where the Revenue bases its case on such statements, the affected party must be afforded the opportunity to cross-examine the material witnesses, and denial of that opportunity amounts to a serious procedural defect. The Tribunal followed the earlier remand order in the appellant's own case and the binding line of authority recognising that non-allowance of cross-examination violates natural justice.

Conclusion: The denial of cross-examination vitiated the adjudication. The impugned order was set aside and the matter was remanded to the adjudicating authority for a fresh decision after granting cross-examination and following the prescribed procedure.

Ratio Decidendi: Statements relied upon in adjudication cannot be used against an assessee without compliance with the statutory procedure for admissibility and an effective opportunity to cross-examine the witnesses whose statements form the basis of the demand.

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