Foreign exchange contravention through NRE account transfers upheld; denial of cross-examination and criminal acquittal did not defeat penalty.

Receipt of Indian rupees from an NRE account funded with foreign exchange was treated as dealing in foreign exchange and fell within the mischief of Section 8(1) of the Foreign Exchange Regulation Act, 1973, so the contravention was upheld. Denial of cross-examination did not vitiate the summary adjudication because the person concerned could not be secured, and the finding was supported by bank records and the appellants' own statements, so the challenge failed. Acquittal in the criminal case did not require interference with the penalty order because adjudication and prosecution are independent and the tribunal had sufficient documentary material and admissions, so the penalty was sustained.

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Issues: (i) Whether receipt of money in Indian rupees from an NRE account funded with foreign exchange amounted to contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973. (ii) Whether denial of cross-examination of the non-resident account holder vitiated the adjudication order. (iii) Whether the appellants' acquittal in the criminal case required setting aside the penalty order.

Issue (i): Whether receipt of money in Indian rupees from an NRE account funded with foreign exchange amounted to contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973.

Analysis: The NRE account was shown to have received foreign currency deposits and thereafter withdrawals were made by cheques in favour of the appellants. The statutory prohibition under Section 8(1) extends to dealing with foreign exchange without prior permission, and the explanation treats deposit of foreign exchange or opening of an account in foreign exchange as lending foreign exchange. The transfer from an NRE account funded by foreign exchange was therefore within the mischief of the provision, even though the appellants received Indian currency.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Issue (ii): Whether denial of cross-examination of the non-resident account holder vitiated the adjudication order.

Analysis: The proceedings were summary and quasi-judicial in nature. The person whose cross-examination was sought had not been examined before the authority and his presence could not be secured despite efforts. The adjudication was supported by bank records and the appellants' own statements, so the absence of cross-examination did not cause fatal prejudice.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Issue (iii): Whether the appellants' acquittal in the criminal case required setting aside the penalty order.

Analysis: Adjudication proceedings and criminal prosecution are independent, and the outcome of one does not automatically govern the other. The acquittal was based on the evidence before the criminal court, whereas the tribunal had sufficient documentary material and admissions to sustain the adjudication finding. The differing standards of proof also mattered.

Conclusion: The issue was decided against the appellants and in favour of the Revenue.

Final Conclusion: The penalty findings were upheld, and no ground was made out to interfere with the adjudication on either legality or merits.

Ratio Decidendi: Receipt of funds from an NRE account funded with foreign exchange constitutes dealing in foreign exchange for the purposes of Section 8(1) of the Foreign Exchange Regulation Act, 1973, and in summary adjudication proceedings the absence of cross-examination or a later criminal acquittal does not invalidate a finding otherwise supported by documentary evidence and admissions.

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