Custodial statements need corroboration before sustaining FERA contravention; independent recovery can still justify limited penalty relief.

A custodial statement recorded under section 108 of the Customs Act was held unreliable where it was made in customs custody, coercion was raised at the earliest opportunity, and medical material supported involuntariness; without independent corroboration, it could not sustain a contravention under section 9(1)(d) of FERA, and that finding was set aside. A separate contravention under section 9(1)(b) was sustained because recovery of the amount from the appellant's premises provided independent support, but the penalty was reduced because the appellant was not the principal operator and the confiscation had already deprived the intended beneficiaries of the proceeds.

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Issues: (i) Whether a statement recorded under section 108 of the Customs Act, 1962 while the appellant was in customs custody could be treated as voluntary and used as the sole basis for holding contravention of section 9(1)(d) of the Foreign Exchange Regulation Act, 1973. (ii) Whether the finding of contravention under section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 and the penalty required interference.

Issue (i): Whether a statement recorded under section 108 of the Customs Act, 1962 while the appellant was in customs custody could be treated as voluntary and used as the sole basis for holding contravention of section 9(1)(d) of the Foreign Exchange Regulation Act, 1973.

Analysis: The statement was recorded while the appellant was in customs custody, and the surrounding circumstances, including the complaint of coercion made at the earliest opportunity and the supporting medical material, showed that the statement could not be treated as voluntary. A custodial statement obtained in such circumstances could not form the sole foundation for a finding of contravention. Since no independent corroborative evidence supported the alleged contravention, the statement could not be relied upon to sustain the charge under section 9(1)(d).

Conclusion: The finding of contravention under section 9(1)(d) was set aside in favour of the assessee.

Issue (ii): Whether the finding of contravention under section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 and the penalty required interference.

Analysis: Recovery of Rs. 4 lakhs from the appellant's premises provided independent material supporting the charge under section 9(1)(b). The charge was sustained only to that extent. However, the facts showed that the appellant was not the principal operator and that the confiscation of the amount had already deprived the intended beneficiaries of the proceeds. In these circumstances, the penalty called for reduction rather than total exoneration.

Conclusion: The finding under section 9(1)(b) was sustained to the extent of Rs. 4 lakhs, and the penalty was reduced to Rs. 10,000 in favour of the assessee.

Final Conclusion: The appeal succeeded only in part: one charge was set aside, the remaining contravention was sustained only to a limited extent, and the penalty was substantially reduced.

Ratio Decidendi: A custodial statement obtained under coercive circumstances cannot be treated as voluntary or used as the sole basis of a finding of contravention unless independently corroborated; where independent evidence exists, relief may still be limited to the extent justified by that evidence.

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