Foreign exchange penalty sustained on corroborated statements and clandestine dealings despite denial of cross-examination.

Penalty for contravention of foreign exchange law was upheld where a circular and overvalued CD-ROM import-export chain was corroborated by seizure material, overseas enquiry, and statements recorded under the Customs Act and FERA. The tribunal treated those statements as usable because they related to the same transaction, and found the clandestine nature of the dealings and the special knowledge of the persons involved sufficient to meet the preponderance of probabilities standard. Denial of cross-examination did not vitiate the adjudication because the material was independently corroborated and no sufficient prejudice was shown.

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Issues: Whether the penalty imposed for contravention of foreign exchange law could be sustained on the basis of statements recorded under the Customs Act and FERA, and whether denial of cross-examination vitiated the adjudication.

Analysis: The import and export chain of CD-ROMs was found to be a circular and overvalued transaction supported by seizure material, overseas enquiry, and statements recorded under Section 108 of the Customs Act, 1962 and Section 40 of the Foreign Exchange Regulation Act, 1973. Those statements, being related to the same transaction, were treated as usable in the adjudication proceedings. The record also showed that the alleged transactions were clandestine in nature and within the special knowledge of the persons involved, so the burden was satisfied on a preponderance of probabilities. The denial of cross-examination did not cause prejudice sufficient to warrant interference because the material already independently corroborated the contravention.

Conclusion: The penalty for contravention of Sections 8(1) and 9(1)(f)(i) of the Foreign Exchange Regulation Act, 1973 was upheld and the challenge based on non-grant of cross-examination failed.

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