Unauthorised acquisition of foreign exchange requires proof of actual receipt or control; a rupee-based switch deal alone is insufficient.

Liability for unauthorised acquisition of foreign exchange arises only where the department proves that the person actually purchased, received, borrowed, or otherwise controlled foreign exchange, or was party to a conversion of Indian currency into foreign exchange. On the record, the goods were imported from Hungary against rupee licences, but there was no reliable evidence that the appellants received foreign exchange, authorised any remittance abroad on their behalf, or controlled the alleged foreign remittance. Suspicion drawn from the switch-deal structure and the origin of the goods could not replace proof of the essential ingredients of contravention, so the alleged breach of the Foreign Exchange Regulation Act was not established.

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Issues: Whether the import transactions arranged as switch deals amounted to unauthorised acquisition of foreign exchange so as to attract liability under section 8(1) of the Foreign Exchange Regulation Act, 1973 and section 4(1) of the Foreign Exchange Regulation Act, 1947.

Analysis: The charge required proof that the appellants had purchased, otherwise acquired, or borrowed foreign exchange, or had been party to a conversion of Indian currency into foreign exchange. The record showed that goods were imported from Hungary against rupee licences, and there was no reliable evidence that the appellants themselves received foreign exchange, authorised any remittance abroad on their behalf, or controlled the alleged foreign remittance between the Hungarian supplier and the West German principals. The expressions in the enforcement material and the seized documents did not establish the essential ingredients of the alleged contravention. In adjudication under the Act, the burden remained on the department to prove the charge with credible material, and suspicion or inferential reasoning based only on the origin of the goods could not substitute for proof of acquisition of foreign exchange.

Conclusion: The switch-deal transactions did not constitute contravention of section 8(1) of the Foreign Exchange Regulation Act, 1973 or section 4(1) of the Foreign Exchange Regulation Act, 1947, and the appellants were not liable.

Ratio Decidendi: Liability for unauthorised acquisition of foreign exchange arises only on proof that the charged person actually acquired, received, or controlled foreign exchange; mere import of goods through a rupee-based switch deal, without evidence of such acquisition, is insufficient.

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