Foreign exchange penalty cannot rest on conjecture when primary documentary proof of over-invoicing is lacking, and director liability falls with it.

A penalty for alleged contravention of section 8(3) read with section 8(4) of the Foreign Exchange Regulation Act could not be sustained where the record lacked reliable proof of over-invoicing or that the books were of no worth. The adjudicating authority had relied on assumptions, incomplete correspondence, and statements under section 40 instead of primary documentary evidence to establish market price, while the appellants produced price lists, catalogues, and supporting material showing invoice values were consistent with or below market prices. Because the principal contravention was not proved on cogent evidence, the basis for invoking consequential vicarious liability of the directors under section 68(1) also failed.

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Issues: Whether the penalty for alleged contravention of section 8(3) read with section 8(4) of the Foreign Exchange Regulation Act, 1973 was sustainable on the evidence, and whether the consequential liability of the directors under section 68(1) could stand.

Analysis: The record did not contain reliable evidence to prove that the books were over-invoiced or of no worth. The findings of the adjudicating authority were based largely on assumptions, incomplete correspondence, and material that did not amount to admissible or conclusive evidence of the correct market price. The appellants had produced printed price lists, catalogue material, and supporting evidence showing that the invoice values were consistent with or below market prices. The adjudicating authority also misdirected itself by relying on statements recorded under section 40 of the Act for a matter that required primary documentary proof. In the absence of cogent evidence establishing the alleged contravention, the foundation for invoking vicarious liability against the directors also disappeared.

Conclusion: The alleged contravention of section 8(3) read with section 8(4) was not proved, and the penalty could not be sustained. The consequential liability under section 68(1) also failed.

Ratio Decidendi: A penalty for alleged foreign exchange contravention cannot be sustained on conjecture, unsupported correspondence, or statements where the disputed fact requires primary documentary evidence; once the principal contravention fails, consequential vicarious liability also falls.

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