Burden of proving lawful foreign exchange possession upheld; rate-based conversion charge failed for lack of essential proof.
Possession of foreign exchange beyond the statutory threshold was held unlawful where the possessor failed to prove lawful acquisition under the burden cast by section 71(3); a belated retraction, unsupported by the record, did not displace an earlier statement treated as voluntary and reliable. The charge under section 8(2) failed because the record did not establish the authorised exchange rate at the relevant time, leaving an essential ingredient unproved. Confiscation of the seized US $ 500 was maintained, but the penalty was reduced to Rs. 500 in view of the incomplete section 8(2) case and the appellant's physical handicap.
Issues: (i) Whether the appellant had contravened section 8(1) of the Foreign Exchange Regulation Act, 1973 in relation to possession of US $ 500; (ii) Whether the charge under section 8(2) of the Foreign Exchange Regulation Act, 1973 was established; (iii) Whether confiscation of the seized US $ 500 and the penalty required modification.
Issue (i): Whether the appellant had contravened section 8(1) of the Foreign Exchange Regulation Act, 1973 in relation to possession of US $ 500.
Analysis: The seizure of US $ 500 was not disputed. The appellant failed to establish lawful possession of the amount as required by the statutory burden cast under section 71(3). The explanation that the amount represented foreign travel exchange was not supported by the material on record, and the retraction of the earlier statement was made belatedly without convincing explanation. On the circumstances, the earlier statement was treated as voluntary and true.
Conclusion: The contravention under section 8(1) was proved and the finding against the appellant was sustained.
Issue (ii): Whether the charge under section 8(2) of the Foreign Exchange Regulation Act, 1973 was established.
Analysis: Liability under section 8(2) required proof of conversion at a rate other than the rate authorised by the Reserve Bank of India, apart from the absence of permission. The record did not establish the authorised rate prevailing at the relevant time, and the adjudication order also contained no finding on that essential ingredient. The necessary factual foundation was therefore incomplete.
Conclusion: The charge under section 8(2) was not proved and the finding against the appellant was set aside.
Issue (iii): Whether confiscation of the seized US $ 500 and the penalty required modification.
Analysis: The confiscation was treated as justified in view of the appellant's involvement in an illegal foreign exchange racket. However, the penalty was considered excessive in light of the appellant's physical handicap and the failure of the section 8(2) charge. The penalty was therefore reduced to a nominal amount.
Conclusion: Confiscation of the seized amount was maintained, while the penalty was reduced from Rs. 4,000 to Rs. 500.
Final Conclusion: The appellant succeeded only in part, with relief confined to reduction of the penalty, while the finding of contravention under section 8(1) and the confiscation were upheld.
Ratio Decidendi: Where possession of foreign exchange beyond the statutory threshold is not satisfactorily explained, the burden to prove lawful possession lies on the possessor, and a belated retraction unsupported by the record may not displace an otherwise voluntary and reliable statement; but a charge requiring proof of the authorised exchange rate fails if that essential ingredient is not established.