Unexplained foreign exchange entries in seized papers can prove contravention, but penalty must reflect only attributable transactions.

Seized documents recovered from a person's residence, containing unexplained foreign currency entries and conversion details, can support an adverse inference and sustain a finding of contravention of section 8 of the Foreign Exchange Regulation Act, 1973 when not satisfactorily rebutted. At the same time, penalty computation must be confined to transactions actually attributable and proven; duplicated figures and amounts not properly linked to the appellant justified reduction of the monetary penalty. The adjudication on contravention was upheld, but the penalty was substantially scaled down on the basis of excessive computation.

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Issues: (i) whether the appellant had contravened section 8 of the Foreign Exchange Regulation Act, 1973 on the basis of seized documents and currency found at his residence; (ii) whether the penalty imposed required reduction in view of the transactions that could not be attributed to the appellant and apparent duplication in the computation.

Issue (i): whether the appellant had contravened section 8 of the Foreign Exchange Regulation Act, 1973 on the basis of seized documents and currency found at his residence.

Analysis: The seized papers contained entries showing foreign currencies, conversion rates and Indian rupee equivalents, and the appellant did not offer an explanation for those entries or disown the seized currency at the relevant stage. The documents were recovered from his residence, and a presumption attached to their contents. In the absence of a satisfactory rebuttal, adverse inference was warranted. The material was sufficient to sustain the finding of dealings in foreign exchange in violation of the Act.

Conclusion: The finding of contravention of section 8 of the Foreign Exchange Regulation Act, 1973 was upheld against the appellant.

Issue (ii): whether the penalty imposed required reduction in view of the transactions that could not be attributed to the appellant and apparent duplication in the computation.

Analysis: The value adopted by the enforcement authority included amounts relating to cheques that could not be treated as foreign exchange transactions by the appellant in the manner alleged, and certain figures were found to be duplicated across seized documents. The computation of the total value of illegal transactions was therefore excessive to that extent, making the penalty disproportionate to the proven misconduct.

Conclusion: The penalty was reduced from Rs. 5 lakhs to Rs. 1,60,000 and the appellant obtained partial relief.

Final Conclusion: The adjudication was sustained on merits as to contravention, but the monetary penalty was substantially scaled down and modified accordingly.

Ratio Decidendi: Seized documents found at a person's premises, when containing unexplained entries of foreign currency transactions and not satisfactorily rebutted, may justify an adverse inference and a finding of contravention, but the penalty must be confined to the transactions actually attributable and proven, excluding duplicated or incorrectly included amounts.

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