Doubtful search evidence and uncorroborated custodial statements cannot sustain FERA contravention; confiscation remained intact.

A finding of contravention under the Foreign Exchange Regulation Act cannot rest on doubtful search-and-seizure material or an involuntary, uncorroborated statement. The Board found that the panchnama and panch witness evidence did not reliably prove recovery of foreign or Indian currency from the appellant, and the search was not supported by the essential witness who conducted it. It also treated the appellant's custodial statement, promptly retracted and lacking independent corroboration, as unsafe proof of foreign exchange dealings. The contravention finding and penalty were therefore set aside. Confiscation of the seized currency and connected articles was, however, maintained because lawful ownership was not established and the alleged recovery from the appellant was not proved.

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Issues: (i) Whether the alleged search, seizure, and statement of the appellant were proved so as to sustain the finding of contravention of section 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973 and the penalty imposed therefor; (ii) Whether the order of confiscation of the foreign currency and other seized articles could be interfered with or the articles directed to be returned to the appellant.

Issue (i): Whether the alleged search, seizure, and statement of the appellant were proved so as to sustain the finding of contravention of section 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973 and the penalty imposed therefor.

Analysis: The Board found that the panchnama and the cross-examination of the panch witnesses did not reliably establish that the foreign currency and Indian currency were recovered from the appellant. The contemporaneous record appeared doubtful, the essential witness who conducted the search was not examined, and the department failed to prove the alleged recovery by credible evidence. The appellant's statement was also treated as involuntary because it was recorded while he was in custody, was retracted promptly, and was unsupported by independent evidence; it could not safely be accepted as proof of the alleged foreign exchange dealings.

Conclusion: The finding of contravention under section 8(1) and 8(2) could not be sustained, and the penalty was set aside.

Issue (ii): Whether the order of confiscation of the foreign currency and other seized articles could be interfered with or the articles directed to be returned to the appellant.

Analysis: The Board held that the appellant had consistently disowned the seized currency and articles, while the evidence led it to conclude that the property had not been proved to have been recovered from him. In those circumstances, the plea for return of the articles could not succeed, and the absence of proof of lawful ownership by any claimant justified maintaining confiscation.

Conclusion: The confiscation order was not interfered with and the claim for return of the seized articles was rejected.

Final Conclusion: The appeal succeeded only to the extent of deletion of the finding of contravention and the penalty, while confiscation of the seized foreign currency and connected articles remained undisturbed.

Ratio Decidendi: A finding of contravention under the Foreign Exchange Regulation Act cannot rest on doubtful search-and-seizure material or an involuntary, uncorroborated statement, and confiscation will be sustained where lawful ownership is not established and the alleged recovery from the appellant is not proved.

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