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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the penalty for contravention of sections 9(1)(b) and 9(1)(d) of the Foreign Exchange Regulation Act, 1973 could be sustained on the basis of retracted confessional statements without adequate corroboration and without proof of the essential ingredients of the alleged contravention.
Analysis: The adjudicatory finding rested substantially on statements recorded under the Act, but those statements were later retracted on the assertion that they had been obtained by coercion. A retracted confession can be acted upon only if its voluntariness is established and the retraction is duly considered; prudence also requires corroboration from surrounding evidence. The burden remained on the department to prove the ingredients of the offence, including the identity and status of the alleged person resident outside India and the link between the impugned payments and his instructions. In the absence of reliable material showing that this burden was discharged, the reliance placed on the retracted statements was unsafe.
Conclusion: The penalty order was not sustainable and was liable to be set aside.
Final Conclusion: The appellate challenge succeeded because the adjudication was founded on uncorroborated retracted statements without sufficient proof of the alleged foreign exchange contraventions.
Ratio Decidendi: A retracted confessional statement can support liability only when its voluntariness is affirmatively considered and the essential ingredients of the contravention are independently established by the department, at least to the extent required by prudence and corroboration.
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