Retracted statements and currency nexus rules shape foreign exchange contravention findings, confiscation relief, and penalty reduction.
Contravention of foreign exchange restrictions was upheld where seized documents, recovery of Indian currency and the appellant's own statement showed receipt and onward distribution of funds outside proper banking channels; a retracted statement could still be relied on to the extent it was voluntary and true, and denial of cross-examination of retracted co-accused statements caused no prejudice on these facts. Confiscation of the seized currency was set aside because the department failed to prove a sufficient nexus with the alleged contravention and no presumption arose merely from possession of Indian currency. The monetary penalty was reduced in light of the appellant's financial position and the composite nature of the transactions.
Issues: (i) whether contravention of sections 9(1)(b) and 9(1)(d) of the Foreign Exchange Regulation Act, 1973 was established on the basis of seized documents and the appellant's retracted statement, and whether denial of cross-examination of retracted co-accused statements vitiated the finding; (ii) whether confiscation of the seized amount of Rs. 48,000 was sustainable in the absence of adequate nexus with the alleged contravention; (iii) whether the penalty required reduction having regard to the appellant's financial position and the composite nature of the transactions.
Issue (i): Whether contravention of sections 9(1)(b) and 9(1)(d) of the Foreign Exchange Regulation Act, 1973 was established on the basis of seized documents and the appellant's retracted statement, and whether denial of cross-examination of retracted co-accused statements vitiated the finding.
Analysis: The seized documents, the recovery of Indian currency from the appellant's premises, and the appellant's own statement provided substantive material linking him to receipt and onward distribution of amounts otherwise than through proper banking channels. Once the co-accused had retracted their statements, refusal of cross-examination caused no prejudice on the present charge. A retracted statement is not automatically obliterated in its entirety; it may still be relied upon to the extent it is found voluntary and true. On the facts, the statement relating to receipt and distribution of amounts was treated as reliable, and the charge under both provisions was upheld.
Conclusion: The findings of contravention under sections 9(1)(b) and 9(1)(d) were sustained against the appellant.
Issue (ii): Whether confiscation of the seized amount of Rs. 48,000 was sustainable in the absence of adequate nexus with the alleged contravention.
Analysis: The confiscation rested essentially on the appellant's retracted explanation regarding the seized cash. The department did not establish by adequate evidence that the amount was connected with the alleged contravention, and no legal presumption applied merely from possession of Indian currency. In the absence of reliable proof of nexus, the appellant was entitled to the benefit of doubt on this aspect.
Conclusion: The confiscation of Rs. 48,000 was set aside.
Issue (iii): Whether the penalty required reduction having regard to the appellant's financial position and the composite nature of the transactions.
Analysis: While the contraventions were upheld, the penalty had to reflect the appellant's financial capacity and the factual overlap between the receipt and payment transactions. The matter warranted a reduced monetary penalty rather than separate heavy penalties for each contravention. The penalty was therefore scaled down to an amount considered adequate to meet the ends of justice.
Conclusion: The penalty was reduced to Rs. 75,000 and the confiscated amount was directed to be treated as part payment.
Final Conclusion: The appeal succeeded only in part: the violations were affirmed, the confiscation was annulled, and the monetary penalty was moderated.
Ratio Decidendi: A retracted statement may still be relied upon to the extent it is found voluntary and true, but confiscation of currency requires proof of nexus with the contravention and cannot rest on mere possession; penalty may also be moderated to reflect the circumstances and financial capacity of the person proceeded against.