Retraction and weak documentary nexus cannot sustain foreign exchange contravention findings; overlapping proceedings require consolidation.

A retracted search statement, unsupported by clear corroboration from seized documents, was held insufficient to establish contraventions under the Foreign Exchange Regulation Act where the alleged transactions were not clearly linked to the material on record. The text also states that two adjudications based on the same search material and overlapping allegations should not proceed separately, because duplication and inconsistency required consolidated fresh consideration. On the existing record, the alleged contraventions were not proved to the required standard, and the penalty order concerning seized cash was set aside, with the matter directed for fresh consolidated adjudication.

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Issues: (i) Whether two separate adjudications based on substantially the same search material and overlapping allegations could be sustained; (ii) Whether contravention of section 9(1)(b) and section 9(1)(d) of the Foreign Exchange Regulation Act, 1973 was proved on the basis of a retracted statement and the seized documents.

Issue (i): Whether two separate adjudications based on substantially the same search material and overlapping allegations could be sustained.

Analysis: The charges in the two proceedings arose from the same search, the same seized documents, and closely connected facts. The separation of the matter into two adjudications created duplication, overlap, and inconsistency in the treatment of the alleged transactions. The material did not justify treating the same factual matrix as two independent charges without consolidation.

Conclusion: The separate adjudications were not sustainable and the matter required fresh consideration in consolidated proceedings.

Issue (ii): Whether contravention of section 9(1)(b) and section 9(1)(d) of the Foreign Exchange Regulation Act, 1973 was proved on the basis of a retracted statement and the seized documents.

Analysis: The statement recorded at the time of search was immediately retracted and could not, by itself, furnish a safe foundation for guilt. The seized papers and receipts also did not conclusively connect the disputed amounts with the alleged contraventions, and the specific entries relied upon by the department were not adequately linked to the charge. On the material as it stood, the proof was insufficient to sustain the findings of contravention for the amounts alleged in the show-cause notices.

Conclusion: The alleged contraventions were not proved to the required standard on the existing record.

Final Conclusion: The penalty order concerning the seized cash was set aside, the assessee's challenge to the larger adjudication failed, and the connected enforcement appeal succeeded only to the extent of requiring a fresh consolidated adjudication on both notices.

Ratio Decidendi: A retracted statement, without adequate corroboration from the seized documents and without a clear nexus between the documents and the alleged transactions, is insufficient to sustain findings of contravention; where the same factual foundation is split into overlapping proceedings, consolidation is required to avoid inconsistent adjudication.

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