Corroborated section 40 statement sustained foreign exchange contravention, while penalty was reduced on proportionality grounds.

A statement recorded under section 40 of the Foreign Exchange Regulation Act, supported by seized documents and corroborative confirmation from named persons, was treated as sufficient material to sustain the alleged contraventions under section 9(1)(b) and section 9(1)(d); the claim of duress was rejected and the finding of contravention was maintained. On penalty, the tribunal applied proportionality and found the original amount excessive in the circumstances, reducing it substantially and directing adjustment of the confiscated amount against the penalty.

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Issues: (i) Whether the appellant had contravened the foreign exchange restrictions alleged under section 9(1)(b) and section 9(1)(d) of the Foreign Exchange Regulation Act, 1973. (ii) Whether the penalty of Rs. 10,00,000 required reduction.

Issue (i): Whether the appellant had contravened the foreign exchange restrictions alleged under section 9(1)(b) and section 9(1)(d) of the Foreign Exchange Regulation Act, 1973.

Analysis: The recorded statement under section 40 of the Act, the documents seized from the appellant's possession, and the follow-up confirmation from the persons named in the seized material were treated as mutually supporting material. The claim that the statement had been obtained under duress was not accepted. On that basis, the contravention alleged in the show cause notice was held to be established.

Conclusion: The finding of contravention under section 9(1)(b) and section 9(1)(d) was sustained.

Issue (ii): Whether the penalty of Rs. 10,00,000 required reduction.

Analysis: The penalty was examined on the question of justice and proportionality, and the amount imposed was considered excessive in the circumstances. The confiscated amount was also directed to be adjusted towards the penalty.

Conclusion: The penalty was reduced to Rs. 1,00,000.

Final Conclusion: The adjudication on contravention was maintained, but the monetary penalty was substantially reduced with adjustment of the confiscated amount.

Ratio Decidendi: A statement recorded under section 40 of the Foreign Exchange Regulation Act, 1973, when supported by seized documents and corroborative material, can sustain a finding of contravention, while the penalty may be reduced where the circumstances justify moderation in quantum.

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