Foreign exchange penalty fails where compensatory payment in India is not proved by legal evidence.

The penalty for alleged contravention of section 9(1)(f)(i) of the Foreign Exchange Regulation Act, 1973 failed because the required compensatory payment in India was not proved. Although the case alleged foreign currency receipts in Hong Kong and corresponding payments in India, the documents and statements relied upon did not establish that any payment was actually made or arranged in India, to whom it was made, or in what amount and manner. The adjudication was based on inference and suspicion rather than legal evidence, so the contravention was not proved and the penalty could not be sustained.

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Issues: Whether the penalty imposed for alleged contravention of section 9(1)(f)(i) of the Foreign Exchange Regulation Act, 1973 was sustainable in the absence of evidence showing compensatory payment in India.

Analysis: The charge proceeded on the footing that the appellant arranged foreign currency receipts in Hong Kong and, in consideration thereof, caused equivalent payments to be made in India. The material relied upon consisted of erased ledger entries, statements, and correspondence, but none of these documents or statements established that any payment was actually made or arranged in India, to whom it was made, or in what amount and manner. The issue was not whether foreign currency receipts abroad were shown, but whether the specific statutory ingredient of a compensatory payment in India was proved. The adjudication therefore rested on inference, suspicion, and conjecture rather than legal evidence.

Conclusion: The contravention under section 9(1)(f)(i) was not proved, and the penalty order could not be sustained. The appeal succeeded.

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