Foreign exchange penalty evidence failed where diary entries, retracted statements, and denied cross-examination could not prove contravention.

Penalty under the Foreign Exchange Regulation Act, 1973 was examined in light of diary entries, a custodial statement, a co-noticee's retracted statement, and denial of cross-examination. The Tribunal noted that the earlier criminal discharge had already treated the diary entries as unreliable evidence of real transactions, and that finding had attained finality, so the same entries could not sustain foreign exchange liability. It also found the appellant's custodial statement infirm because of corrections, missing attestations, absent signatures on earlier pages, and indications of tampering. The co-noticee's retracted statement, without independent corroboration, was insufficient, and denial of cross-examination offended natural justice, so the penalty was not sustainable.

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Issues: Whether the penalty imposed under the Foreign Exchange Regulation Act, 1973 was sustainable in view of the alleged diary entries, the retracted/coerced statements, the objection to denial of cross-examination, and the finality of the earlier discharge order.

Analysis: The record showed that the Department's case rested substantially on a pocket diary, a statement recorded while the appellant was in custody, and the co-noticee's statement. The earlier criminal discharge had already found that the diary entries did not constitute reliable evidence of real transactions, and that finding had attained finality. The Tribunal treated that factual determination as binding for the present proceedings and held that the same diary entries could not be used to sustain liability under the foreign exchange law. It also found material infirmities in the appellant's custodial statement, including corrections, lack of proper attestation, absence of signatures on the first pages, and circumstances suggesting tampering. The request for cross-examination of witnesses was relevant because the impugned order was based on statements whose veracity had not been tested, and the denial of that opportunity offended natural justice. The co-noticee's retracted statement, without independent corroboration, was insufficient to prove the alleged contravention.

Conclusion: The penalty could not be sustained and the appellant succeeded.

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