FEMA penalty burden of proof: vague statements and unsupported findings cannot sustain quasi-criminal penalty without departmental evidence.

Penalty under the Foreign Exchange Management Act, 1999 was held unsustainable where the appellant's statement was vague, unsupported by material particulars, and the department relied on an incorrect factual premise. The evidentiary burden remained on the department, as FEMA does not create a general reverse burden and the special knowledge principle did not dispense with the need for some supporting evidence. Affidavits explaining travel expenses were wrongly ignored, and the quasi-criminal nature of the proceeding required proof of deliberate, dishonest, or contumacious conduct. The penalty and the appellate order were set aside.

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Issues: Whether penalty under the Foreign Exchange Management Act, 1999 could be sustained on the basis of the appellant's statement and the materials relied on by the authorities, and whether the burden of proof had been wrongly shifted to the appellant.

Analysis: The statement recorded from the appellant was found to be vague and not supported by material particulars showing that the entire amount referred to was spent in foreign exchange. The complaint also proceeded on an incorrect factual premise, and the authorities relied on that incorrect reading as the sole basis for the adverse findings. The evidentiary burden remained on the department, because unlike the earlier foreign exchange regime and the Prevention of Money Laundering Act, the Foreign Exchange Management Act, 1999 did not create a general reverse burden. The general rule under the Indian Evidence Act, 1872 places the burden on the person asserting the fact, and the special knowledge principle does not relieve the department of producing some evidence. The affidavits filed in support of the appellant's travel expenses were ignored on an erroneous understanding of law and facts. Penalty in such a quasi-criminal proceeding was not justified in the absence of deliberate, dishonest, or contumacious conduct.

Conclusion: The penalty and the appellate order were unsustainable and were set aside.

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