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

Denial of cross-examination of material witnesses whose statements formed the basis of a demand renders the adjudication unsustainable where the Revenue relies on those statements to prove its case. The adjudicating authority must comply with the safeguards under Section 9D of the Central Excise Act, 1944 before using such statements against the assessee. Failure to grant cross-examination in these circumstances violates natural justice. The impugned orders were therefore set aside and the matter remanded for fresh adjudication after permitting cross-examination and following Section 9D.

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Issues: Whether denial of cross-examination of the material witnesses whose statements were relied upon to sustain the demand vitiated the adjudication and required remand for a fresh decision under Section 9D.

Analysis: The demand was founded substantially on statements recorded during investigation. The request for cross-examination of the witnesses relied upon by the Revenue had been specifically made before the authorities, but it was denied. The governing position, as applied in the decision, is that where such statements are relied upon to prove the case against the assessee, the adjudicating authority must follow the statutory procedure under Section 9D of the Central Excise Act, 1944, and cannot straightaway rely on those statements without compliance with the prescribed safeguards. Denial of cross-examination in such circumstances is a violation of natural justice and renders the adjudication unsustainable.

Conclusion: The denial of cross-examination vitiated the impugned orders, and the matter was required to be set aside and remanded for fresh adjudication after granting cross-examination and following Section 9D.

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