2007 (4) TMI 690 - HC - FEMA

Summary

Issues Involved:
1. Admissibility of retracted statements taken in custody.
2. Consideration of statements recorded u/s 40 of FERA without cross-examination.
3. Sufficiency of evidence for imposing penalties.

Summary:

1. Admissibility of Retracted Statements Taken in Custody:
The appellants contended that the statements of Smt. Gurmit Kaur Dhillon and Shri Saudagar Singh, recorded under coercion and duress while in custody, were subsequently retracted and thus could not form the basis for imposing penalties. The court referenced the judgment of the Hon'ble High Court of Madras in Anil G. Merchant v. Director of Revenue Intelligence, Madras, which emphasized that statements obtained under coercion or duress are inadmissible. The court found that the statements were recorded under duress and subsequently retracted, making them unreliable for imposing penalties.

2. Consideration of Statements Recorded u/s 40 of FERA Without Cross-Examination:
The appellants argued that the statements recorded u/s 40 of FERA were inadmissible as the persons who made these statements were not produced for cross-examination. The court referred to the judgment of the Hon'ble Kerala High Court in Central Govt. v. Alfred James Fernandes, which held that the right to cross-examine witnesses is essential for a fair enquiry. The court concluded that the failure to allow cross-examination rendered the statements inadmissible.

3. Sufficiency of Evidence for Imposing Penalties:
The appellants challenged the sufficiency of evidence, arguing that the case was based solely on retracted confessions without corroborative evidence. The court cited the Hon'ble Supreme Court's judgment in Bhana Khalpa Bhai Patel v. Assistant Collector of Customs, Bulsar, Gujarat, which stated that confessional statements could only be considered if supported by other satisfactory evidence. The court found that the impugned orders were based on no evidence, as the statements recorded under duress and without cross-examination could not be relied upon.

Conclusion:
The court allowed the appeals, setting aside the orders passed by the Enforcement Director and the Appellate Tribunal for Foreign Exchange. It directed the refund of the amount deposited in the fixed deposit to Smt. Gurmit Kaur Dhillon, concluding that the penalties imposed were not supported by admissible evidence.