2008 (12) TMI 31 - SC - FEMA

What would be the effect of a retracted confession for the purpose of levy of penalty under FERA, 1973 - violation of Section 8(3) and 9(1)(a) - remittance of the foreign exchange worth US Dollars - no reliance should be placed on the retracted confessional statement unless the same was corroborated by some independent evidence - order of the Tribunal and HC cannot be sustained assessee s appeal is allowed - amount which is with the Department shall be refunded to the appellant

Summary

Issues Involved:
1. Effect of a retracted confession on the levy of penalty under the Foreign Exchange Regulation Act, 1973.
2. Burden of proof regarding the voluntariness of the confession.
3. Legality of imposing a consolidated penalty based on a retracted confession.

Detailed Analysis:

1. Effect of a Retracted Confession on the Levy of Penalty under FERA:
The primary issue was whether a retracted confession could be used to levy a penalty under the Foreign Exchange Regulation Act, 1973. The appellant had retracted his confession made to the Enforcement Directorate, alleging that it was obtained under duress. The Tribunal and the High Court upheld the penalty, relying on the confession despite its retraction.

2. Burden of Proof Regarding the Voluntariness of the Confession:
The appellant argued that the burden of proof was wrongly placed on him to prove that the confession was involuntary. The court observed that a confession made by an accused falls under Section 24 of the Indian Evidence Act, which states that a confession caused by inducement, threat, or promise is irrelevant in criminal proceedings. The court emphasized that the initial burden to prove that the confession was voluntary lies with the Department. The court cited previous judgments, including Noor Aga vs. State of Punjab & Anr., which held that evidences brought on record by way of confession must be substantially corroborated by other independent and cogent evidences.

3. Legality of Imposing a Consolidated Penalty Based on a Retracted Confession:
The court noted that the Tribunal and the authorities did not properly consider the appellant's retraction and failed to provide cogent reasons for rejecting it. The court highlighted that the retraction was not a bald statement and included specific allegations of coercion. The court also pointed out that the authorities did not refute the appellant's claim of being detained illegally. The court concluded that the authorities misdirected themselves in law by placing the burden of proof solely on the appellant and not considering the retraction properly.

Conclusion:
The Supreme Court set aside the orders of the Tribunal and the High Court, stating that the burden of proving the voluntariness of the confession was on the Department. The court held that the confession, being retracted and not properly corroborated by independent evidence, could not be the sole basis for imposing a penalty. The court ordered the refund of Rs. 2,65,000/- to the appellant and allowed the appeal, emphasizing the need for proper consideration of retracted confessions and the burden of proof in such cases.