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2019 (6) TMI 1027 - AT - FEMAOffence under FEMA - unauthorized dealing of foreign exchange - recovery of US 3,30,400 at Aizwal Airport on 27.10.2006 from a person by name Shri Thlabik and subsequent recording of statement of Shri Thlabik, who had taken the name of the appellant in his statement - HELD THAT - From the record, it is evident that there is no clear and cogent evidence against the appellant that he had been dealing in illegal foreign exchange trade or if he had dealt with foreign exchange without the permission of the RBI. No doubt, there are allegation against him that he had received a sum of ₹ 35,00,000/- (Rupee Thirty five lakhs only) from Shri Thlabik (the amount recovered at the time of search of the premises). His case is that it was the money representing the payment was owned by two purchasers of Jewellery at Mizoram. It is not in dispute that the department has allowed him to cross examination of main witness (accused) Shri Thlabik, however, the said witness was not produced for the said purpose. When verified, it was informed that he was absconding, therefore, could not be produced for cross-examination. In the present case, the main accused as per respondent is Thlabik who is absconding. It was the duty of the respondent to trace him out. Despite of prayer of the appellant for cross-examination allowed, the witness was not produced for cross examination. Thus, merely on the basis of presumption, the inference can be drawn against the appellant without clinching evidence. The benefit of doubt under these circumstances goes in his favour. The submission of the respondent does not help the case in view of peculiar facts and circumstances of the matter. In the light of the above, the appeal is allowed. The impugned order against the appellant is set aside.
Issues Involved:
1. Alleged contravention of Section 3(a) of the Foreign Exchange Management Act (FEMA), 1999 by the appellant. 2. Admissibility and reliability of evidence, including statements and documents. 3. Violation of principles of natural justice and right to cross-examination. Issue-Wise Detailed Analysis: 1. Alleged Contravention of Section 3(a) of FEMA, 1999: The appellant was accused of dealing in foreign exchange equivalent to ?35 lakhs without the general or special permission of the Reserve Bank of India (RBI) during the period from June 2006 to September 2006. This was based on the recovery of US $3,30,400 from Shri Thlabik at Aizwal Airport and subsequent statements implicating the appellant. The appellant denied involvement in unauthorized foreign exchange dealings, asserting that the money received was for legitimate business transactions related to gems and jewelry. However, the adjudicating authority found the appellant liable for penalty under Section 13(1) of FEMA, 1999, based on the statements and seized documents. 2. Admissibility and Reliability of Evidence: The respondent relied on statements made by the appellant and Shri Thlabik, as well as entries in a seized notebook, to establish the contraventions. The appellant argued that these statements and documents lacked evidentiary value due to the absence of cross-examination and the inability to verify the authenticity of the notebook entries. The tribunal noted that the main witness, Shri Thlabik, was absconding and could not be cross-examined, which diminished the reliability of his statements. Additionally, the tribunal referenced legal precedents, including the Supreme Court rulings in "CBI vs. V.C. Shukla & Ors." and "South Central Railway v. B. Yashodabai," to emphasize that inadmissible evidence, such as unverified diary entries, cannot be used to substantiate allegations. 3. Violation of Principles of Natural Justice and Right to Cross-Examination: The appellant contended that the adjudicating proceedings were conducted in gross violation of the principles of natural justice, as the right to cross-examine key witnesses was not honored. Despite the appellant's request, the main witness, Shri Thlabik, was not produced for cross-examination, and other witnesses who allegedly sent money to the appellant also did not appear. The tribunal agreed that the inability to cross-examine these witnesses undermined the fairness of the proceedings and the reliability of the evidence against the appellant. The tribunal concluded that the benefit of doubt should go in favor of the appellant due to the lack of clear and cogent evidence and the procedural lapses in the adjudication process. Conclusion: The tribunal allowed the appeal, setting aside the impugned order against the appellant. The decision emphasized the importance of adhering to the principles of natural justice and ensuring the reliability of evidence in adjudication proceedings. The tribunal concluded that the allegations against the appellant were not substantiated by clear and cogent evidence, and the procedural deficiencies, including the denial of cross-examination, warranted the reversal of the penalty imposed.
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