Burden of proof under Section 106 cannot replace evidence in alleged foreign exchange contravention.

A penalty for alleged contravention of Section 8(1) of the Foreign Exchange Regulation Act could not stand where export proceeds were shown to have been received through banking channels and there was no evidence of any unauthorised payment outside the banking system. Suspicion arising from the consignee's failure to lift the goods was insufficient, because no inquiry established that the consignee was fictitious or the transaction sham. Section 106 of the Evidence Act could not shift the burden onto the appellants to explain the consignee's conduct, as the relevant facts were capable of verification from the foreign consignee. In the absence of proof of the core allegation, the Tribunal's order was set aside and the exonerating adjudication order restored.

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Issues: Whether the order of the Appellate Tribunal imposing penalty for violation of Section 8(1) of the Foreign Exchange Regulation Act, 1973 could be sustained when there was no evidence that any amount was paid through non-banking channels and the burden was improperly shifted on the appellants by invoking Section 106 of the Evidence Act, 1872.

Analysis: The record showed that the export proceeds had been received through banking channels and that the allegation of an unauthorised payment outside the banking system was unsupported by any evidence. The material relied upon only generated suspicion because the consignee did not lift the goods, but no inquiry established that the consignee was fictitious or that the transaction was sham. The special knowledge rule under Section 106 of the Evidence Act, 1872 could not be used to cast on the appellants the burden of proving the consignee's reasons for not taking delivery, since the consignee was a separate foreign entity and the relevant facts could have been verified from it. In the absence of proof of the core allegation, adverse presumption could not substitute evidence, and the conclusion of contravention under Section 8(1) was unsustainable. The order of adjudication was also supported as there was no legal infirmity shown in the finding that the show cause notice was vague and unsupported by disclosed evidence.

Conclusion: The Tribunal's order was set aside and the adjudication order exonerating the appellants was restored.

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