1989 (4) TMI 343 - AT - FEMA

Appeal Succeeds: Insufficient Evidence Cited in Foreign Exchange Case, Penalty Overturned for Procedural Errors.

Bharat General Stores Versus Director of Enforcement.

The appellate body overturned the adjudicating authority's decision, finding insufficient evidence to support the appellant's alleged contravention of ... - Issues Involved:1. Sufficiency of Evidence2. Admissibility of Statement without Cross-Examination3. Liability of Partnership Firm4. Interpretation of Legal Provisions and Case LawIssue-wise Analysis:1. Sufficiency of Evidence:The appellant was held responsible for contravention of section 9(1)(d) of the Foreign Exchange Regulation Act, 1973, based on the statement of Shri Mohd. Ismail and certain documents recovered from his premises. The evidence was deemed insufficient as it primarily relied on conjecture rather than concrete proof. The appellant argued that there was no material evidence connecting them with the payment to Shri Mohd. Ismail. The adjudicating authority's findings were based on the statement of Mohd. Ismail, which lacked corroboration and failed to establish a direct link between the appellant and the alleged contravention.2. Admissibility of Statement without Cross-Examination:The appellant requested the cross-examination of Shri Mohd. Ismail, whose statement was recorded in their absence, but this request was denied. The statement of Shri Ismail, therefore, could not be considered reliable evidence against the appellant. The adjudicator's reliance on this statement without giving the appellant an opportunity to cross-examine the witness was a significant procedural flaw. The legal principle that an accomplice's statement requires independent corroboration was not adhered to, further diminishing the credibility of the evidence.3. Liability of Partnership Firm:The show-cause notice was issued to the appellant firm and its partners for alleged contravention of section 9(1)(d). However, the adjudicator imposed a penalty only on the firm and not on the individual partners. The appellant contended that the penalty on the firm without identifying the specific partner responsible for the payment was illegal. The evidence did not establish which partner, if any, made the payment to Shri Mohd. Ismail. The adjudicator's decision to penalize the firm without concrete evidence of individual culpability was found to be unsustainable.4. Interpretation of Legal Provisions and Case Law:The adjudicator misconstrued the Supreme Court's decision in Balbir Singh v. State of Punjab, which deals with the admissibility of a co-accused's confessional statement. The observation that a confession implicating the maker substantially to the same extent as the other accused can be considered was not applicable here, as Shri Mohd. Ismail was not a co-accused but a witness. The distinction between receiving and making payments was crucial, and the evidence failed to prove that the appellant made any payment on behalf of a non-resident person. The appellant's lack of involvement in import or export business and the absence of incriminating evidence from their premises further weakened the case against them.Conclusion:The judgment concluded that the case against the appellant was not proved. The findings of the adjudicating authority were set aside, and the appeal was allowed. The penalty, if already paid, was ordered to be refunded to the appellant. The decision emphasized the need for reliable evidence and proper procedural adherence in adjudicating contraventions under the Foreign Exchange Regulation Act.