Cross-examination and Section 9D compliance are mandatory before relying on investigation statements in excise adjudication.

Statements recorded during investigation could not be relied upon to sustain the demand and penalty without offering the material witnesses for cross-examination and without following the procedure under Section 9D of the Central Excise Act, 1944. The Tribunal held that denial of the specific request for cross-examination violated the requirements of fairness in quasi-judicial proceedings, and the adjudicating authority was required to comply with Section 9D before using such statements. The impugned orders were therefore set aside and the matter remanded for fresh adjudication after cross-examination and statutory compliance.

---

---

Issues: Whether the demand and penalty orders were sustainable when the material witnesses whose statements were relied upon had not been offered for cross-examination and the procedure under Section 9D of the Central Excise Act, 1944 was not followed.

Analysis: The Tribunal noted that the Revenue's case rested substantially on statements recorded during investigation. It found that the appellants had made a specific request for cross-examination before the adjudicating authority as well as the appellate authority, but the request was denied without sufficient justification. Relying on the binding position that statements recorded during inquiry cannot be relied upon without compliance with the statutory safeguards governing their admissibility, the Tribunal held that the denial of cross-examination violated the settled requirement of fairness in quasi-judicial proceedings. The Tribunal also held that the adjudicating authority was required to follow the procedure prescribed under Section 9D before relying on such statements.

Conclusion: The impugned orders were not sustainable and had to be set aside, with the matter remanded for fresh adjudication after granting cross-examination and complying with Section 9D of the Central Excise Act, 1944.

---