Foreign exchange adjudication: third-party documents were admissible, and unexplained remittances could be treated as prohibited transactions.

In adjudication under the Foreign Exchange Regulation Act, 1973, documents obtained under Income-tax proceedings were treated as admissible under Section 72, with authenticity and contents capable of presumptive reliance; the proceedings were civil in nature and governed by preponderance of probability, so denial of cross-examination did not, by itself, vitiate the order. The tribunal also treated an inward remittance of foreign currency, unsupported by a valid investment route, RBI permission, or credible documentation, as a prohibited transaction and upheld director liability where the company received and handled the funds. An unexplained foreign receipt from a non-existent source was likewise treated as contravention of Section 8(1), with connected confiscation sustaining on the same basis.

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Issues: (i) Whether documents obtained from Income-tax proceedings were admissible in adjudication under the Foreign Exchange Regulation Act, 1973 and whether denial of cross-examination vitiated the order; (ii) Whether receipt of US $ 5 lakhs from a foreign citizen was an investment or a temporary loan amounting to contravention of Section 9(1)(c) of the Foreign Exchange Regulation Act, 1973 and liability of the company and its directors under Section 68(1); (iii) Whether receipt of US $ 1 lakh from a non-existent foreign source warranted a finding of contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973.

Issue (i): Whether documents obtained from Income-tax proceedings were admissible in adjudication under the Foreign Exchange Regulation Act, 1973 and whether denial of cross-examination vitiated the order.

Analysis: Section 72 of the Foreign Exchange Regulation Act, 1973 permits reliance on documents seized or produced under the Act or under any other law, and the provision authorises presumptions regarding their authenticity and contents. The adjudication was based on civil liability, where the applicable standard is preponderance of probability, and the adjudicatory proceedings remain independent of prosecution. Denial of cross-examination, by itself, did not invalidate the impugned order in the facts of the case.

Conclusion: The objection to admissibility failed and the plea based on denial of cross-examination was rejected.

Issue (ii): Whether receipt of US $ 5 lakhs from a foreign citizen was an investment or a temporary loan amounting to contravention of Section 9(1)(c) of the Foreign Exchange Regulation Act, 1973 and liability of the company and its directors under Section 68(1).

Analysis: The remittance was received from a US citizen resident abroad, the memorandum of understanding stood frustrated within a short time, no formal agreement materialised, and the funds were quickly transferred onward on the remitter's instructions. The materials did not establish a valid investment route or RBI permission, and the claimed share issuance did not displace the conclusion that the money was in the nature of a temporary loan or acknowledged debt from abroad. On the evidence, the company's receipt and handling of the funds amounted to acceptance of foreign exchange in a prohibited manner, and the directors connected with the transaction were liable.

Conclusion: Contravention of Section 9(1)(c) of the Foreign Exchange Regulation Act, 1973 was proved against the company, and liability of the concerned directors under Section 68(1) was upheld.

Issue (iii): Whether receipt of US $ 1 lakh from a non-existent foreign source warranted a finding of contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973.

Analysis: Overseas enquiry showed that the alleged remitter's business premises and identity could not be verified, and no material was produced to dislodge the inference that the remittance was arranged by the concerned appellant himself. The unexplained foreign receipt was therefore treated as a transaction in foreign exchange falling within the mischief of Section 8(1). The connected confiscation under Section 63 also stood on the same footing.

Conclusion: Contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973 was proved against the concerned appellant.

Final Conclusion: The impugned adjudication order was sustained in full and the penalties and connected consequences remained undisturbed.

Ratio Decidendi: In adjudication under the Foreign Exchange Regulation Act, 1973, documents obtained under another law are admissible under Section 72, the standard of proof is preponderance of probability, and foreign remittances unsupported by lawful authorisation or credible explanation may be treated as prohibited foreign exchange transactions.

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