Issues: (i) Whether contravention of Section 3(a) of the Foreign Exchange Management Act, 1999 by the appellant was established and the penalty of Rs. 3,00,000/- justified; (ii) Whether the alleged failure to allow cross-examination of witnesses and related procedural/contentions rendered the impugned orders non-speaking or nullity.

Issue (i): Whether contravention of Section 3(a) of the Foreign Exchange Management Act, 1999 was established and the penalty of Rs. 3,00,000/- upheld.

Analysis: The seized diaries and currency were recorded in Panchnama and Seizure List as recovered from the office premises of the appellant's proprietary concern. The statutory presumption concerning documents seized from the custody or control of a person was engaged. A sole proprietorship being a business name of the proprietor provided basis to treat documents seized from the firm as seized from the person. The appellant made multiple consistent statements admitting receipt and payment of Bangladesh Taka and acknowledging the seized diaries as his, which provided corroboration to the entries in the seized documents. Authorities and precedents distinguishing admissibility from acceptability, and requiring corroboration of confessional or third-party statements, were applied to assess reliability; corroborative material was found to exist. The penalty quantum was measured against the contravention amount and found reasonable.

Conclusion: Contravention of Section 3(a) of the Foreign Exchange Management Act, 1999 was established and the penalty of Rs. 3,00,000/- is upheld (against the appellant).

Issue (ii): Whether denial of cross-examination or non-consideration of affidavits rendered the adjudication or appellate orders non-speaking or void.

Analysis: The absence of cross-examination was recognised as a procedural deficiency cognisable under principles of natural justice. However, the evidentiary record contained contemporaneous seizure documents, statements of independent witnesses, and multiple consistent statements of the appellant which collectively corroborated the material facts. Affidavits relied on by the appellant were found to be hearsay or not credible on their face. The substantive issues raised were addressed in the impugned orders in substance, and omission to address each point in isolated terms did not convert the orders into nullities where reasons and material findings exist.

Conclusion: The procedural complaints do not vitiate the impugned orders; they do not render the orders non-speaking or void (against the appellant).

Final Conclusion: The appellate challenge against confirmation of the adjudication order and the penalty is dismissed; the impugned orders remain operative and the penalty stands upheld.

Ratio Decidendi: Where documents and currency are seized from the premises of a sole proprietorship, the statutory presumption as to documents seized from the custody or control of a person applies to the proprietor, and consistent admissions by the proprietor together with independent seizure records suffice to corroborate the seized documents and sustain a penalty under Section 3(a) of the Foreign Exchange Management Act, 1999.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the appellant's retracted statements under FEMA and earlier statements before DGCEI, alleged to be coerced, could be relied upon to establish contravention of Section 3(b) of FEMA, 1999.

1.2 Whether denial of cross-examination of third-party witnesses whose statements were relied upon in adjudication violated principles of natural justice and vitiated the penalty.

1.3 Whether statements, records, and findings gathered by DGCEI under Customs/Central Excise laws, and proceedings before the Settlement Commission, could validly be used as material in FEMA adjudication.

1.4 Whether, on the evidence on record, imports and non-channelised payments for those imports were established, and whether the burden of proof was correctly applied in holding the appellant guilty of contravention of Section 3(b) of FEMA, 1999.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Use of retracted and prior statements to establish contravention under Section 3(b) FEMA

Legal framework (as discussed)

2.1 The Tribunal considered the law on retracted confessions and voluntariness of statements as discussed in precedent, including that (a) a retracted confession is not automatically involuntary; (b) the maker alleging coercion must establish it; (c) authorities must apply their mind to the retraction and record reasons if they choose to rely on the inculpatory statement; and (d) a retracted confession can be used if substantially corroborated by independent and cogent evidence.

Interpretation and reasoning

2.2 The Tribunal distinguished precedents relied on by the appellant (including those where the impugned statements were either not referred to in the initiating memorandum, were recorded while the person was in custody, or where immediate retraction and illegal detention were established). It held those factual matrices did not exist here.

2.3 The Tribunal noted: (i) DGCEI recorded statements in 2003; (ii) ED recorded detailed statements in 2011; (iii) there was a long time gap between DGCEI and ED statements; and (iv) by 2011 any alleged threat or coercion from 2003 could reasonably have been overcome. Yet the appellant gave elaborate admissions before ED, expressly affirming and adopting earlier DGCEI statements.

2.4 The appellant's statements before ED (30.06.2011 and 14.11.2011) were found to contain: (a) admissions of floating multiple entities in the names of relatives and employees; (b) admissions that he controlled their affairs, imports, negotiations with overseas suppliers, assembly, and sale of refurbished photocopiers; (c) acceptance of his role as beneficiary; (d) admission that bills of entry and connected documents were destroyed on his instructions; (e) clear admissions that in "majority" and ultimately "all" imports, payments were made through hawala/illegal channels to overseas suppliers or their representatives; and (f) acceptance of the quantified import value based on the worksheet showing 13 companies and total import value.

2.5 The Tribunal recorded that the adjudicating authority had expressly examined the credibility of these statements, considered the alleged retraction, and rejected the plea of coercion after correlating the statements with seized materials and bank information.

2.6 The Tribunal further held that the confessional statements were corroborated by independent documentary evidence: seized DGCEI files containing bills of entry and orders in original in the names of entities floated by the appellant; bank statements showing cash credits/debits without overseas remittances; commercial tax documents including bills of lading and correspondence indicating imports; and other seized materials tying the appellant to the importing entities.

Conclusions

2.7 The Tribunal concluded that: (a) the appellant failed to establish that his statements were obtained by threat, coercion, or improper means; (b) mere retraction did not render the statements involuntary; (c) the adjudicating authority had properly applied its mind to the retraction and found the statements voluntary; and (d) in any event, the inculpatory statements were sufficiently corroborated by independent and cogent evidence. The statements were therefore legally admissible and could be relied upon to sustain the finding of contravention under Section 3(b) of FEMA.

Issue 2 - Denial of cross-examination and principles of natural justice

Interpretation and reasoning

2.8 The Tribunal noted that the adjudicating authority had refused cross-examination of third-party witnesses (including statements of associated persons and a forex dealer) on the ground that such statements were only corroborative and not solely relied upon, citing certain judicial decisions to justify denial.

2.9 The Tribunal, after considering precedents on cross-examination and natural justice, held that where the adjudicating authority proposes to rely on statements of third parties and a specific request for cross-examination is made, an opportunity of cross-examination "ought to have been given." It found that reliance on such statements, without allowing cross-examination, was "questionable," and those statements could not, by themselves, be taken as good evidence for imposition of penalty.

2.10 However, the Tribunal observed that the enforcement case did not rest solely, or even primarily, on third-party statements. The core basis comprised incriminating seized materials, the appellant's own statements before DGCEI (never retracted) and ED, and banking information demonstrating absence of authorised remittances.

Conclusions

2.11 The Tribunal held that although denial of cross-examination rendered the use of third-party statements as substantive evidence questionable, the contravention under Section 3(b) remained independently established on the strength of the appellant's own admissions and documentary evidence. Therefore, the penalty proceedings were not vitiated on this ground.

Issue 3 - Use of DGCEI materials and proceedings under other statutes in FEMA adjudication

Interpretation and reasoning

2.12 The appellant argued that statements and documents collected by DGCEI under Customs/Central Excise laws, and facts relating to proceedings before the Settlement Commission, were "alien" to FEMA and could not be used in FEMA adjudication. Reliance was placed on decisions concerning the inadmissibility of statements recorded under other enactments in certain criminal prosecutions and on the alleged impermissibility of cross-use of material between distinct statutory regimes.

2.13 The Tribunal examined the cited cases and held:

(a) The decision concerning prosecution for perjury under the Income-tax Act and CrPC turned on the impropriety of launching a perjury prosecution in one regime based solely on statements recorded under another; that ratio, addressed to criminal prosecution, did not govern a civil penalty proceeding under FEMA, where the standard of proof and nature of sanction are different.

(b) In the present matter, there was no criminal prosecution; it was a penalty adjudication. Moreover, the appellant's statements before DGCEI had not been retracted, and ED had independently recorded his statements under FEMA and examined his conduct.

(c) The decision involving NDPS and Customs concerned the status of customs officers as "police officers" for the purpose of applying Section 25 of the Evidence Act in criminal prosecutions, and the specific statutory scheme of NDPS. It did not prohibit use of customs-derived material in a distinct, civil adjudicatory context under FEMA.

(d) The decision on the effect of exoneration under the Customs Act held, in fact, that penalty proceedings under customs and under foreign exchange law operate in different fields and that an outcome under one statute does not bar action under the other. The Tribunal treated this as supporting the view that enforcement authorities under FEMA may proceed independently even where customs proceedings have a different outcome.

2.14 The Tribunal further relied on a High Court decision explicitly recognising that statements made to DRI can be used in proceedings under FEMA.

2.15 On this basis, the Tribunal held that ED was entitled to refer to and rely upon: (a) statements recorded by DGCEI; (b) documents seized in DGCEI proceedings; and (c) factual findings recorded in those proceedings, while independently adjudicating contravention under FEMA. The use of such material did not amount to impermissible cross-application of "alien" enactments.

Conclusions

2.16 The Tribunal concluded that reliance on DGCEI materials and references to Settlement Commission-related facts was legally permissible for FEMA adjudication, and the appellant's challenge on the "alien enactment" ground failed.

Issue 4 - Proof of imports, non-remittance through authorised channels, and burden of proof under Section 3(b) FEMA

Interpretation and reasoning

2.17 The appellant contended that: (a) no imports had been made by him; he merely procured dismantled components domestically and sold reconditioned machines; (b) if any imports existed, they were by distinct companies whose proprietors/directors should have been investigated; (c) no confirmations from foreign suppliers of receipt of payments outside banking channels existed; and (d) no specific identification of the persons to whom illicit payments were made had been established, rendering Section 3(b) inapplicable.

2.18 The Tribunal rejected these contentions, relying on documentary and oral evidence, including:

(a) Seized DGCEI files from the appellant's residence containing copies of orders-in-original and bills of entry for imports in the names of concerns such as Infotech Services, Bharat Agency, Rainbow Traders, Crystal Systems & Services, etc., which were admitted to have been floated and controlled by the appellant.

(b) Seized bank statements showing cash deposits and withdrawals in accounts of these concerns without any corresponding authorised overseas remittances to suppliers.

(c) Documents seized by Commercial Tax authorities, including a bill of lading evidencing import of used computer/photocopier parts by entities operating from premises connected with the appellant and letters showing use of imports as security for bank funding for import and sale of photocopier machines.

(d) The appellant's own statements admitting: operation of a network of 13 companies floated in the names of relatives and employees; use of these companies to import second-hand photocopier components in CKD/SKD condition to circumvent EXIM restrictions; assembly and sale of refurbished photocopiers; destruction of import documents; negotiation with overseas suppliers and their representatives; and that all import payments were ultimately settled in cash in India through hawala/illegal channels payable to suppliers or their representatives (including local representatives "Surya" and "Jefri").

2.19 The Tribunal held that, given these admissions and documents, there was no real dispute that imports had taken place in the names of entities floated and controlled by the appellant, and that he was the effective importer and beneficiary. In such circumstances, there should have been banking records showing authorised payments through AD banks; however, enquiries with the banks yielded categorical replies that no overseas remittances had been made for these imports on behalf of the appellant or the concerned entities.

2.20 On the burden of proof, the Tribunal accepted the adjudicating authority's approach that, once (a) imports in fact were established; (b) the appellant admitted responsibility for those imports; and (c) AD banks confirmed absence of any authorised foreign exchange remittances, the evidentiary burden shifted to the appellant to show legitimate payment through authorised channels. The appellant failed to produce any such documentary proof, despite being given time and himself admitting he had never submitted import documents to banks for effecting payments.

2.21 The Tribunal also rejected the argument that lack of confirmations from foreign suppliers or non-identification of every individual payee in India defeated the contravention. It held that, on the preponderance of probabilities, the combination of seized import documents, banking records showing no authorised remittances, and the appellant's own detailed admissions of cash settlement in India with representatives of overseas suppliers was sufficient to prove that foreign exchange was, in effect, acquired and dealt with through unauthorised channels in contravention of Section 3(b).

Conclusions

2.22 The Tribunal concluded that:

(a) Imports of photocopier components and sub-assemblies through multiple entities floated by the appellant were proved by seized documents and corroborated by the appellant's admissions.

(b) No payments for these imports were made through authorised banking channels, as evidenced by bank replies and the appellant's own admissions.

(c) The evidentiary burden having shifted to the appellant, he failed to establish lawful payment through authorised means.

(d) On the preponderance of probabilities, the case that the appellant made payments in India to representatives of overseas suppliers through hawala/illegal channels, thereby contravening Section 3(b) of FEMA, 1999, was sufficiently established.

2.23 On this basis, the Tribunal held that the adjudicating authority rightly found the appellant guilty of contravention of Section 3(b) of FEMA, 1999 to the extent of the quantified imports and that the penalty imposed under Section 13(1) was justified. The appeal was dismissed, with no order as to costs.

Issues: Whether the appellant had failed to prove import against the foreign exchange remittances so as to attract contravention under Section 10(6) of the Foreign Exchange Management Act, 1999 read with Regulation 6(1) of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000, and whether the penalty could be sustained in view of the lapse in bank records and the long delay in initiation of proceedings.

Analysis: The appellant produced import documents for three of the five disputed remittances, and the supporting airway bills and invoices showed the consignee as the predecessor bank with intimation to the importer. On that basis, the missing records were not treated as sufficient proof of contravention for those transactions. For the remaining two remittances, the Tribunal accepted that the documents could not be traced after 13 to 14 years and that the lapse of the erstwhile bank and the absence of complete successor-bank records could not fairly be visited on the appellant. In these circumstances, the Tribunal held that the appellant was entitled to benefit of doubt and that penalty could not be sustained merely because the documents were not available after such a long interval.

Conclusion: The alleged contravention was not established against the appellant, and the penalty order was unsustainable.

Final Conclusion: The appeal succeeded and the penalty order was set aside.

Ratio Decidendi: In quasi-penal foreign exchange proceedings, where part of the import evidence is produced and the remaining records are unavailable after a long lapse of time due to circumstances attributable to the bank record chain, the authority must give the appellant the benefit of doubt and cannot sustain penalty solely on non-production of old documents.

Issues: (i) whether the bank contravened section 9(1)(e) of the Foreign Exchange Regulation Act, 1973 and was liable to penalty in view of section 49 of that Act; (ii) whether the penalty imposed on the bank required reduction on the facts of the case.

Issue (i): Whether the bank contravened section 9(1)(e) of the Foreign Exchange Regulation Act, 1973 and was liable to penalty in view of section 49 of that Act.

Analysis: Section 9(1)(e) prohibits a person in or resident in India from placing any sum to the credit of a person resident outside India. The bank had admitted lapses in opening the account for a non-resident entity without RBI permission, and the absence of mens rea did not exonerate the contravention because FERA treated such contraventions on a strict footing and presumed culpable mental state where relevant. At the same time, the liability could not be characterised merely as abetment, because section 49 deems the holder of the permission or licence to have contravened the provision when the statutory conditions are breached.

Conclusion: The bank was held to have contravened the provision and was liable in principle for penalty.

Issue (ii): Whether the penalty imposed on the bank required reduction on the facts of the case.

Analysis: The bank had itself brought the matter to the notice of the RBI and the Enforcement Directorate, deliberate mala fides were not established, and the record did not satisfactorily prove wilful non-cooperation. The lapse occurred in the context of an older transaction period when KYC norms were less stringent and enforcement was less rigorous. Considering these mitigating circumstances and the status of the bank as a public sector institution holding public money, the original penalty was found excessive.

Conclusion: The penalty was reduced substantially to Rs. 5,00,000/-.

Final Conclusion: The finding of contravention was maintained, but the monetary penalty was materially scaled down in view of mitigating circumstances.

Ratio Decidendi: A person or institution holding permission under FERA is deemed to have contravened the statutory condition if that permission is used in breach of the Act, while the quantum of penalty may be moderated where the lapse is non-fraudulent and mitigating circumstances substantially diminish culpability.

Issues: Whether the penalty imposed under Sections 3(a) and 4 of the Foreign Exchange Management Act, 1999 on the appellant is sustainable and whether the penalty should be reduced in view of prior adjudication and the appellant's pecuniary condition.

Analysis: The Tribunal examined the material supporting recovery of large quantities of foreign currency from the appellant's checked luggage and hotel room and considered the plausibility of the defence that the currency was planted. The Tribunal noted prior adjudication by the Customs authorities where a penalty had been imposed and subsequently reduced on appeal, and that the appellant had deposited an amount by way of fixed deposit (pre-deposit) before adjudication of the present appeal. The Tribunal balanced the evidence of recovery and the respondent's finding against the appellant's factual and financial circumstances and the existence of earlier penalty proceedings in reaching an equitable outcome.

Conclusion: The Tribunal modified the impugned order by holding that the amount of Rs. 1.5 lakhs deposited by the appellant by way of FDR is just, sufficient and reasonable to satisfy the penalty for contravention of Sections 3(a) and 4 of the Foreign Exchange Management Act, 1999, and disposed of the appeal accordingly in favour of the appellant to that extent.

Issues: (i) Whether the appellants contravened provisions of the Foreign Exchange Management Act, 1999 and corresponding regulations by failing to make requisite intimation/FC-GPR filings and by not refunding inward remittances within the prescribed period? (ii) Whether the penalties imposed by the Adjudicating Authority were justified in law and whether the quantum of penalty required modification?

Issue (i): Whether the appellants committed contraventions under Section 6(3)(b), Section 42(1) and related provisions of the Foreign Exchange Management Act, 1999 read with Regulation 5 (Schedule 1 paras) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 by not filing intimation/FC-GPR and not refunding remittances within prescribed time.

Analysis: The facts establishing receipt of foreign remittances into the accounts of the companies and the directors, and the admitted failure to file required intimation and FC-GPR forms and to refund remittances within the prescribed period, were examined. The nature of FEMA liability as civil/monetary and the statutory scheme requiring compliance with filing and refund obligations were applied to the admitted non-compliance.

Conclusion: In favour of Respondent.

Issue (ii): Whether the penalties imposed by the Adjudicating Authority should be upheld or modified having regard to the nature of contraventions, mitigating factors, compounding history and discretion vested in the authority.

Analysis: The factors relevant to exercise of discretion on quantum were considered, including absence of criminal mens rea not being a bar to civil penalty, the possibility of compounding by RBI (which had declined to consider the application), comparative leniency in quantum by the Adjudicating Authority and mitigating material placed by the appellants. The balance between statutory mandate to levy monetary penalties for non-compliance and equitable mitigation was applied to the facts and amounts involved.

Conclusion: In favour of Appellant (penalty quantum modified downward as specified by the Tribunal).

Final Conclusion: The appeals are disposed of on merits by affirming liability for the FEMA contraventions while modifying the quantum of penalties levied by the Adjudicating Authority; the adjudication order is accordingly modified to the reduced penalties specified by the Tribunal.

Ratio Decidendi: Failure to comply with mandatory filing and refund obligations under the Foreign Exchange Management Act, 1999 and the relevant regulations attracts civil monetary liability irrespective of mens rea, but the appellate authority retains discretion to moderate penalty quantum based on mitigating factors and the statutory scheme.

Issues: (i) Whether the appellant banks and their officers abetted contravention of foreign exchange restrictions by continuing to open letters of credit and remit foreign exchange despite repeated non-submission of Bills of Entry and other documentary deficiencies; (ii) Whether the banks could avoid liability by contending that they were only bound to act on the documents presented and not to verify the underlying genuineness of the import transactions.

Issue (i): Whether the appellant banks and their officers abetted contravention of foreign exchange restrictions by continuing to open letters of credit and remit foreign exchange despite repeated non-submission of Bills of Entry and other documentary deficiencies.

Analysis: The record showed a repeated and continuing pattern of remittances over several years despite the importers' failure to furnish exchange control copies of Bills of Entry, despite reminders, and despite quarterly reporting of defaults. The Tribunal held that the banks were not entitled to keep extending facilities indefinitely once the defaults were known. Continued remittances in the face of persistent non-compliance, together with the handling of transactions involving disputed insurance claims and deficient shipping documents, amounted to facilitation of the contraventions.

Conclusion: The issue was decided against the appellant banks and their officers; the conduct constituted abetment and attracted liability under the foreign exchange law.

Issue (ii): Whether the banks could avoid liability by contending that they were only bound to act on the documents presented and not to verify the underlying genuineness of the import transactions.

Analysis: The Tribunal held that the banks were required to act in accordance with the Exchange Control Manual and the Uniform Customs and Practice for Documentary Credits, which required due care in examining documents and compliance with prescribed banking safeguards. The duty was not limited to mechanical acceptance of papers. Where the documents repeatedly lacked essential particulars and where the banks continued remitting funds despite obvious irregularities and non-submission of Bills of Entry, the plea of mere documentary processing was rejected.

Conclusion: The issue was decided against the appellant banks; they could not rely on a purely ministerial role to escape liability.

Final Conclusion: The Tribunal found no ground to interfere with the adjudication order and upheld the penalties imposed on the appellant banks and the concerned officers, resulting in dismissal of all appeals.

Ratio Decidendi: Where an authorised dealer, with knowledge of repeated non-compliance and documentary irregularities, continues to facilitate foreign exchange remittances, such continued facilitation can amount to abetment of contravention notwithstanding the contention that banks deal only with documents and not goods.

Issues: (i) Whether the ex parte adjudication and denial of cross-examination vitiated the order for breach of natural justice; (ii) Whether the retracted statements and seized documents, supported by corroborative evidence, established the contraventions under FERA; (iii) Whether the penalties warranted reduction.

Issue (i): Whether the ex parte adjudication and denial of cross-examination vitiated the order for breach of natural justice.

Analysis: Multiple opportunities had been given during adjudication, but the noticees sought adjournments and did not effectively participate. The adjudicating authority had considered the replies on record and was not bound to grant a further hearing immediately before passing the order. The record also showed disclosure of relied-upon material, and no prejudice was demonstrated from the non-grant of cross-examination at the appellate stage.

Conclusion: The challenge based on breach of natural justice failed.

Issue (ii): Whether the retracted statements and seized documents, supported by corroborative evidence, established the contraventions under FERA.

Analysis: The seized diaries, loose sheets, statements recorded on the date of search, and subsequent investigations into persons named in the documents provided corroboration for the admissions contained in the statements. The later retractions were considered, but the adjudicating authority had recorded reasons for accepting the original statements. The material on record was sufficient to sustain the findings of contravention and abetment under the foreign exchange law.

Conclusion: The contraventions were proved and the findings of guilt were sustained.

Issue (iii): Whether the penalties warranted reduction.

Analysis: Although the contraventions were established, the Tribunal took note of the appellants' economic condition and the fact that the pre-deposit ordered earlier had already been made. In the interests of justice, the penalties were brought down to the amounts corresponding to the pre-deposit already made.

Conclusion: The penalties were reduced.

Final Conclusion: The findings of contravention were maintained, but the monetary liabilities were substantially scaled down, resulting in a modified order in the appellants' favour to that extent.

Ratio Decidendi: A retracted statement may be relied upon when it is supported by independent and cogent corroborative evidence, and an ex parte adjudication is not invalid where adequate opportunities were given and no prejudice from denial of cross-examination is shown.

Issues: Whether the penalty imposed for contravention of the foreign exchange law warranted reduction in the circumstances of the case.

Analysis: The appeal arose from a show-cause notice issued long ago and the appellant had already deposited part of the penalty. The challenge to the finding of contravention was not pursued on merits, and the relief sought was confined to reduction of the monetary penalty. Considering the age of the matter, the limited amount already deposited, and the overall circumstances, the Tribunal found it appropriate to scale down the penalty and to treat the amount already deposited as satisfaction of the reduced liability.

Conclusion: The penalty was reduced from Rs. 5 lakhs to Rs. 2 lakhs, with Rs. 1 lakh attributable to each contravention, and the appellant was not required to make any further deposit.

Issues: Whether the appellant's role in permitting his proprietorship concerns to be used for over-invoiced book imports and foreign exchange remittances established contravention under FERA, and whether the penalty imposed required reduction.

Analysis: The recorded statements under section 40 of the Foreign Exchange Regulation Act, 1973, the financial records, and the surrounding material were treated as sufficient to prove the appellant's involvement in the scheme. The appellant was found to have permitted the use of his proprietorship firms for import transactions for commission, and the books were used as part of a design to remit inflated amounts abroad in foreign exchange. On that material, the denial of knowledge was not accepted. At the same time, the appellant was not treated as the main architect of the scheme, which warranted moderation of the penalty.

Conclusion: The contravention of section 8(3) read with section 8(4) and section 64(2) of the Foreign Exchange Regulation Act, 1973 was held established against the appellant, but the penalty was reduced to Rs. 2 lakhs and the blocked amount was directed to be released to the appellant after adjustment.

Final Conclusion: The liability finding was sustained, but the punitive consequences were substantially scaled down in the appellant's favour.

Ratio Decidendi: Contravention under FERA can be established on the basis of recorded inculpatory statements and corroborative financial material showing knowing facilitation of the prohibited transactions, even where the person is not the principal mastermind.

Issues: (i) whether the appellants had contravened the foreign exchange law by converting non-convertible funds without prior permission, and whether the conduct amounted only to negligence; (ii) whether the penalty imposed was disproportionate and liable to be reduced, and whether the adjudicating authority acted as judge in its own cause.

Issue (i): Whether the appellants had contravened the foreign exchange law by converting non-convertible funds without prior permission, and whether the conduct amounted only to negligence.

Analysis: The admitted factual position was that non-convertible funds were credited and thereafter transferred so as to become convertible without prior permission of the Reserve Bank of India. The subsequent return of the amount did not erase the original contravention. On the facts, the conduct was not treated as a mere inadvertent error, as the transfers occurred on more than one occasion, though the matter was confined to negligence in view of the earlier direction of the High Court.

Conclusion: Contravention of the foreign exchange law was established, and the appellants were held negligent.

Issue (ii): Whether the penalty imposed was disproportionate and liable to be reduced, and whether the adjudicating authority acted as judge in its own cause.

Analysis: The contention that the adjudicating authority acted as judge in its own cause was rejected because the authority proceeded on the material placed before it and followed the prescribed adjudicatory procedure. However, while contravention was sustained, the quantum of penalty was found to be excessive in light of the restricted scope indicated by the High Court and the surrounding facts, including the return of funds. The penalty was therefore viewed as disproportionate to the default.

Conclusion: The objection on bias was rejected, but the penalty was reduced from Rs.65 lakhs to Rs.30 lakhs on the bank and from Rs.10 lakhs to Rs.3 lakhs each on the individual appellants.

Final Conclusion: The appeals succeeded only to the extent of reduction in penalty, while the finding of contravention was maintained.

Ratio Decidendi: A proven contravention of foreign exchange law is not neutralised by subsequent return of the funds, but the penalty must still remain proportionate to the nature of the default and the proved level of culpability.

Issues: (i) Whether statements recorded under Section 108 of the Customs Act, 1962 could be relied upon in adjudication under the Foreign Exchange Regulation Act, 1973; (ii) whether the appellant's alleged retraction displaced reliance on those statements in the absence of credible material showing timely retraction or lack of corroboration; (iii) whether the material on record established contravention of Section 8(1) and Section 9(1)(a) of the Foreign Exchange Regulation Act, 1973; and (iv) whether the proceedings were vitiated by non-service of notice or by expiry of the sunset period under the Foreign Exchange Management Act, 1999.

Issue (i): Whether statements recorded under Section 108 of the Customs Act, 1962 could be relied upon in adjudication under the Foreign Exchange Regulation Act, 1973.

Analysis: The statements recorded under Section 108 were treated as part of the material available for adjudication and not as evidence for criminal conviction. The legal distinction between prosecution and adjudication was emphasized, and reliance on such statements was held permissible in adjudicatory proceedings, especially where they related to the same transaction and were supported by surrounding material.

Conclusion: The reliance on statements recorded under Section 108 of the Customs Act, 1962 was held to be permissible in the adjudication under the Foreign Exchange Regulation Act, 1973.

Issue (ii): Whether the appellant's alleged retraction displaced reliance on those statements in the absence of credible material showing timely retraction or lack of corroboration.

Analysis: The record did not establish a proved retraction by acceptable documentary material. Even otherwise, a retracted statement was not automatically unreliable; its effect depended on the circumstances of retraction, the explanation for delay, and the existence of corroborative material. The Tribunal found supporting material in the seizure of foreign exchange and the statements of other persons involved.

Conclusion: The alleged retraction did not prevent reliance on the statements, and the appellant's challenge on this ground was rejected.

Issue (iii): Whether the material on record established contravention of Section 8(1) and Section 9(1)(a) of the Foreign Exchange Regulation Act, 1973.

Analysis: The evidence showed that foreign currency was acquired, routed, and carried for delivery to a person outside India without the requisite permission. The Tribunal held that the facts satisfied both the restriction on acquisition or transfer of foreign exchange and the restriction on payment to a person resident outside India.

Conclusion: Contravention of Section 8(1) and Section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 was established.

Issue (iv): Whether the proceedings were vitiated by non-service of notice or by expiry of the sunset period under the Foreign Exchange Management Act, 1999.

Analysis: The notice had been issued and attempts at service were made. The appellant's wife received one notice, and an adjournment request was sent by telegram, which supported the inference that the appellant was aware of the proceedings. The Tribunal also held that initiation of proceedings occurred on issuance of the show-cause notice within the relevant period, so the sunset-period objection failed.

Conclusion: The objections based on non-service and limitation were rejected.

Final Conclusion: The Tribunal upheld the penalty and found no merit in the appeal, leaving the adjudication order undisturbed.

Ratio Decidendi: Statements recorded under Section 108 of the Customs Act, 1962 may be relied upon in foreign exchange adjudication when they relate to the same transaction and are supported by surrounding material, and a belated or unproved retraction does not by itself nullify their evidentiary value.