Retracted statements and undisclosed evidence cannot sustain foreign exchange penalty findings without independent proof and fair hearing

Pre-deposit was waived where the penalty order relied on material not supplied to the appellant, causing prima facie prejudice. The penalty adjudication based on retracted confessional statements required de novo consideration after disclosure of the relied-upon evidence and a fresh opportunity of hearing. Contraventions under sections 8(1), 8(2), 9(1)(a) and 9(1)(c) of the Foreign Exchange Regulation Act, 1973 could not be sustained solely on an admission or retracted statement without independent supporting evidence; the findings were set aside for reconsideration and the penalty order was annulled.

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Issues: (i) Whether the appellant was entitled to waiver of pre-deposit on the ground of prima facie hardship. (ii) Whether the penalty adjudication based on retracted confessional statements required fresh consideration after supplying the relied upon evidence and affording opportunity of hearing. (iii) Whether the contraventions under sections 8(1), 8(2), 9(1)(a) and 9(1)(c) of the Foreign Exchange Regulation Act, 1973 could be sustained on the existing record.

Issue (i): Whether the appellant was entitled to waiver of pre-deposit on the ground of prima facie hardship.

Analysis: The record showed that the impugned order rested not only on the appellant's statements but also on other evidence that had not been supplied to him for rebuttal. The denial of access to material relied upon in support of the penalty created a serious prejudice at the stage of pre-deposit.

Conclusion: The requirement of pre-deposit was waived in favour of the appellant.

Issue (ii): Whether the penalty adjudication based on retracted confessional statements required fresh consideration after supplying the relied upon evidence and affording opportunity of hearing.

Analysis: The adjudication could not proceed fairly unless the appellant was supplied the material discussed in the impugned order and was given a proper opportunity to meet that evidence. The authority was required to examine whether the charges could be established independently of the retracted confessional statement and to determine the matter afresh on the entire record.

Conclusion: The matter required de novo adjudication after supply of evidence and fresh hearing.

Issue (iii): Whether the contraventions under sections 8(1), 8(2), 9(1)(a) and 9(1)(c) of the Foreign Exchange Regulation Act, 1973 could be sustained on the existing record.

Analysis: A payment to a non-resident could attract section 9(1)(a), but that by itself did not automatically establish acquisition of foreign exchange in violation of sections 8(1) and 8(2). Likewise, a charge under section 9(1)(c) could not rest merely on an admission before customs authorities when that admission had been retracted and no independent supporting evidence had been examined.

Conclusion: The findings of contravention were set aside for reconsideration on the basis of independent evidence.

Final Conclusion: The penalty order was annulled and the case was sent back for fresh adjudication in accordance with law, with the appellant to be given an opportunity to meet the evidence relied upon.

Ratio Decidendi: Where penalty findings rest partly on undisclosed material or retracted statements, the affected party must be supplied the material and afforded an effective opportunity to rebut it, and the charges must be examined on independent evidence before adverse findings are sustained.

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