FEMA contraventions upheld where shifting explanations for seized currency failed to displace confiscation and penalties.

Contraventions under FEMA were upheld where the noticee's shifting explanations for seized Indian and foreign currency were inconsistent and unsupported by reliable evidence. The tribunal accepted, on a preponderance of probability, that receipt of money on behalf of a person resident outside India without RBI permission established breach of section 3(a) and section 3(c). It also found the foreign exchange was not credibly explained and was not surrendered within the prescribed period, establishing breach of section 8 read with Regulation 6A. The penalties and confiscation were sustained because no infirmity was shown in the adjudication process.

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Issues: (i) Whether the seizure of Indian currency and the explanation offered by the noticee displaced the finding of contravention of section 3(a) and section 3(c) of the Foreign Exchange Management Act, 1999. (ii) Whether the foreign currencies seized from the residence were satisfactorily explained and whether contravention of section 8 of the Foreign Exchange Management Act, 1999 read with Regulation No. 6A of the Foreign Exchange Management (Realisation, Repatriation & Surrender of Foreign Exchange) Regulations, 2000 was established. (iii) Whether the penalties imposed and confiscation ordered under section 13 of the Foreign Exchange Management Act, 1999 were liable to be interfered with.

Issue (i): Whether the seizure of Indian currency and the explanation offered by the noticee displaced the finding of contravention of section 3(a) and section 3(c) of the Foreign Exchange Management Act, 1999.

Analysis: The explanation initially given by the noticee was that part of the cash belonged to a person resident in Hong Kong and the balance was business cash. The later explanation based on sale agreements and alleged advances was found inconsistent and unsupported by reliable evidence. The materials relied upon did not satisfactorily account for the seized cash, and the tribunal found the revised version to be an afterthought. On the noticee's own initial statement and the surrounding circumstances, the receipt of money on behalf of a person resident outside India without RBI permission was accepted as established on the standard of preponderance of probability.

Conclusion: The contravention of section 3(a) and section 3(c) of the Foreign Exchange Management Act, 1999 was held established against the noticee.

Issue (ii): Whether the foreign currencies seized from the residence were satisfactorily explained and whether contravention of section 8 of the Foreign Exchange Management Act, 1999 read with Regulation No. 6A of the Foreign Exchange Management (Realisation, Repatriation & Surrender of Foreign Exchange) Regulations, 2000 was established.

Analysis: The noticee's explanation regarding foreign exchange shifted from unspent balances from overseas travel to prize money allegedly won in casinos and then to documents said to show lawful purchases from money changers. The tribunal found that the documentary material did not correlate with the seized amounts and that no credible proof supported the later explanation. The failure to surrender the foreign exchange within the prescribed period was treated as a further established breach, and the explanation regarding US dollars seized was also not accepted.

Conclusion: The contravention of section 8 of the Foreign Exchange Management Act, 1999 read with Regulation No. 6A of the Foreign Exchange Management (Realisation, Repatriation & Surrender of Foreign Exchange) Regulations, 2000 was held established against the noticee.

Issue (iii): Whether the penalties imposed and confiscation ordered under section 13 of the Foreign Exchange Management Act, 1999 were liable to be interfered with.

Analysis: The tribunal found that the adjudicating authority had considered the record, the explanations and the objections to the corrigendum, and that no infirmity was shown in the adjudication process. In view of the established contraventions and the unsatisfactory nature of the explanations, the penalties and confiscation were affirmed.

Conclusion: The penalties and confiscation order were upheld.

Final Conclusion: The appeal failed on merits and the adjudication under FEMA was sustained in full, leaving the monetary penalties and confiscation intact.

Ratio Decidendi: In adjudication under FEMA, contraventions may be established on the basis of the overall evidence and probabilities where the noticee's explanations are inconsistent, unsupported and unworthy of credence.

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