2005 (9) TMI 700 - AT - FEMA

Summary

Issues Involved:
1. Contravention of Foreign Exchange Regulation Act, 1973 by the appellants.
2. Validity of the recovery of foreign currency and admissibility of evidence.
3. Confessional statements and their retraction.
4. Denial of cross-examination and principles of natural justice.
5. Standard of proof in FERA proceedings.

Issue-wise Detailed Analysis:

1. Contravention of Foreign Exchange Regulation Act, 1973:
The appellants were penalized for contravening sections 8(1), 8(2), and 64(2) of the Foreign Exchange Regulation Act, 1973. The first appellant attempted to sell and the second appellant acquired and sold foreign exchange at rates different from those prescribed by the RBI without any general or special permission. The adjudication order imposed a penalty of Rs. 10,00,000 on each appellant.

2. Validity of the Recovery of Foreign Currency and Admissibility of Evidence:
Foreign currency was recovered from the first appellant's car, including US dollars, UK pounds, and Canadian dollars. The appellant argued that the recovery was not in accordance with section 34(5) of the Act as witnesses were not from the locality and were not presented for cross-examination. However, the Tribunal held that the irregularity in conducting the search does not invalidate the recovery. The evidence was accepted as valid, citing precedents such as Abdul Sattar v. State of Maharashtra and Kishan Lal v. State of Haryana, which state that non-local witnesses do not render the evidence inadmissible.

3. Confessional Statements and Their Retraction:
The first appellant made a confessional statement admitting habitual dealings in foreign currency with the second appellant, which was later retracted. The Tribunal noted that officers of the Enforcement Directorate are not considered police officers, and thus confessional statements made to them are admissible, referencing Balkishan A. Devidayal v. State of Maharashtra. The retraction was not found credible as it lacked supporting evidence of duress or threat. The Tribunal cited K.I. Pavunny v. Asstt. Collector, Central Excise Collectorate, Cochin, stating that retracted confessions can be accepted if believed to be true and voluntary.

4. Denial of Cross-examination and Principles of Natural Justice:
The appellants argued that the denial of cross-examination of witnesses violated principles of natural justice. The Tribunal found no merit in this argument, stating that the demand for cross-examination appeared to be a tactic to delay proceedings. The Tribunal emphasized that the principles of natural justice are flexible and must be applied contextually. It rejected the reliance on judgments such as Central Government v. Fr. Alfred James Fernandez and State of Kerala v. K.T. Shaduli Grocery Dealer, noting that the facts of those cases were distinguishable.

5. Standard of Proof in FERA Proceedings:
The Tribunal acknowledged that the standard of proof in FERA proceedings is beyond reasonable doubt. However, it concluded that the circumstantial evidence, including the confessional statement, recovery of foreign exchange, and corroborative documents, established the appellants' guilt beyond reasonable doubt. The Tribunal referenced the Calcutta High Court judgment in Adelaide Mande Tobias v. William Albert Tobias, highlighting the sufficiency of strong circumstantial evidence in proving contraventions.

Conclusion:
The Tribunal dismissed both appeals, affirming the adjudication order and maintaining the penalties imposed. The appellants were directed to deposit the remaining penalty amount within 15 days, failing which recovery would proceed in accordance with the law.