Retracted confession and lack of corroboration cannot prove foreign exchange contravention or sustain confiscation and penalty.

A retracted confession, even when linked to a co-noticee's statement, was treated as insufficient to prove contravention without independent corroboration of the alleged foreign exchange dealings. The alleged chain of purchase and sale could not be independently established, and the related proceedings against the co-noticee had already failed for lack of adequate evidence. A banking-channel credit of drafts was also held not to establish unlawful acquisition of foreign exchange, since the facts showed receipt of Indian currency rather than prohibited foreign exchange. On that basis, the confiscation and penalty were not sustained and the impugned adjudication was annulled with consequential refund relief.

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Issues: (i) Whether the charge of contravention of section 8(1) and (2) of the Foreign Exchange Regulation Act, 1973 could be sustained on the basis of a retracted statement without independent corroboration. (ii) Whether the transaction of crediting drafts to the appellant's bank account amounted to acquisition of foreign exchange in contravention of section 7(1) and (2) of the Foreign Exchange Regulation Act, 1973 and justified confiscation and penalty.

Issue (i): Whether the charge of contravention of section 8(1) and (2) of the Foreign Exchange Regulation Act, 1973 could be sustained on the basis of a retracted statement without independent corroboration.

Analysis: The finding of guilt rested substantially on the statement of the co-noticee and the appellant's own confession, both of which had been retracted. The linked proceedings against the co-noticee had already failed for want of adequate evidence, and the same alleged chain of transactions could not be independently proved against the appellant. A retracted confession, standing alone and unsupported by material corroboration of the alleged purchase and sale of foreign exchange, was insufficient to establish contravention.

Conclusion: The charge under section 8(1) and (2) was not proved and the finding of contravention was unsustainable.

Issue (ii): Whether the transaction of crediting drafts to the appellant's bank account amounted to acquisition of foreign exchange in contravention of section 7(1) and (2) of the Foreign Exchange Regulation Act, 1973 and justified confiscation and penalty.

Analysis: The drafts were credited through banking channels and, on the facts found, the appellant received Indian currency rather than unlawfully acquired foreign exchange. The expression "foreign exchange" had to be read in context, and the transaction did not establish receipt of foreign exchange in breach of the Act. Since the alleged nexus through the co-noticee had failed, and no independent evidence showed unlawful acquisition or sale, the confiscation and penalty could not be sustained.

Conclusion: The charge under section 7(1) and (2) was not proved and the confiscation and penalty were set aside.

Final Conclusion: The appeal succeeded in full, and the impugned adjudication, including confiscation and monetary penalty, was annulled with consequential refund relief.

Ratio Decidendi: A retracted confession unsupported by independent corroboration cannot sustain a finding of contravention, and a transaction effected through banking channels will not amount to unlawful acquisition of foreign exchange unless the prohibited foreign exchange transaction is proved by reliable evidence.

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