1999 (11) TMI 907 - AT - FEMA

Summary

Issues Involved:
1. Voluntariness of the appellant's statement.
2. Validity of the search and seizure process.
3. Admissibility and evidentiary value of the appellant's statements.
4. Proof of recovery of foreign exchange and documents from the appellant.
5. Specific charges under the six Show-Cause Notices (SCNs).

Issue-wise Detailed Analysis:

1. Voluntariness of the appellant's statement:
The appellant contended that his statements recorded on 18-3-1988 and 19-3-1988 were not voluntary and were made under duress while he was in prolonged custody of the Enforcement Officers. The appellant argued that the incriminating portions of the statement were dictated by the officers. The judgment noted that the appellant was in custody during the night of 18/19-3-1988, and the circumstances indicated that the statements were recorded under duress.

2. Validity of the search and seizure process:
The appellant challenged the recovery of foreign exchange and documents, asserting they were wrongly attributed to him and actually belonged to another individual, I.S. Raj, who was present during the search but allowed to leave. The judgment highlighted inconsistencies in the search process, such as the absence of independent witnesses before the search commenced and the presence of another person whose identity was not ascertained. The search was not conducted in the presence of the panch witnesses, and the Panchnama did not accurately record the place of recovery.

3. Admissibility and evidentiary value of the appellant's statements:
The judgment determined that the statements recorded on 18-3-1988 and 19-3-1988 could not be treated as statements under section 40 of the Foreign Exchange Regulation Act, 1973, but rather under section 39. Consequently, these statements did not have the status of admissible evidence. The judgment emphasized that the statements needed to be corroborated by independent evidence, which was lacking.

4. Proof of recovery of foreign exchange and documents from the appellant:
The appellant argued that the department failed to prove that the foreign exchange and documents were recovered from his possession. The judgment found merit in this argument, noting that the evidence did not conclusively establish the recovery from the appellant's exclusive possession. The presence of another individual and the discrepancies in the search process raised doubts about the department's claims.

5. Specific charges under the six Show-Cause Notices (SCNs):

SCN I:
The charge of purchasing foreign exchange in violation of section 8(1) and (2) could not be substantiated solely based on the recovery of foreign exchange. The judgment noted that evidence of the complete transaction involving both the seller and purchaser was required, which was absent.

SCN II:
The charge of purchasing and transferring foreign exchange could not be substantiated without evidence of the transaction and the involvement of other persons. The judgment set aside the findings due to the lack of evidence.

SCN III:
The charge of making payments to individuals allegedly residing outside India could not be substantiated as the department failed to prove that the individuals were non-residents. The judgment noted that the appellant had provided evidence of their residence in India, which was not controverted by the department.

SCN IV:
The charge of making payments on behalf of individuals residing in Dubai could not be substantiated due to the lack of evidence proving their non-resident status and the absence of evidence of the alleged payments.

SCN V:
The charge of receiving payments from persons in India on behalf of individuals residing in Dubai could not be substantiated for the same reasons as SCNs III and IV.

SCN VI:
The charge of contravention of section 9(1)(c) could not be made out as there was no evidence of a right being credited in favor of any non-resident based on the alleged acknowledgment.

Conclusion:
The judgment concluded that the recovery of foreign exchange and documents could not be conclusively attributed to the appellant, and the statements of 18-3-1988 and 19-3-1988 were not reliable. The appeal was allowed, and the impugned order was set aside. The respondents were directed to refund the amount of Rs. 14,200 deposited by the appellant within 45 days.