Contravention under FEMA sustained on documentary nexus, penalties reduced and confiscation of un-surrendered foreign currency upheld.

Contraventions of the Foreign Exchange Management Act were sustained where documentary remittance references and matching bank credits created a reliable nexus on the preponderance of probabilities, establishing violations under the Act and attracting penalties; seized foreign currency not shown to be lawfully retained within the statutory surrender period was held liable to confiscation; seized Indian cash attributable to the respondent was permissibly adjusted against cumulative penalties after factual allocation; and net penalties were recalculated and reduced accordingly while confiscation was upheld.

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Issues: (i) Whether contraventions of Section 3(d) and Section 7(1)(a) of the Foreign Exchange Management Act, 1999 are established to the extent of Rs. 4,43,96,119/-; (ii) Whether foreign currency of value Rs. 1,70,880/- seized from the individual's premises is liable to confiscation; (iii) Whether adjustment of seized Indian currency (cash in hand Rs. 27,88,125.98) towards the cumulative penalty is permissible; (iv) Whether the penalty amounts require modification.

Issue (i): Whether contraventions of Section 3(d) and Section 7(1)(a) of the Foreign Exchange Management Act, 1999 are established to the extent of Rs. 4,43,96,119/-.

Analysis: The decision applies the adjudicatory standard of proof on a preponderance of probabilities. Documentary references to multiple telegraphic transfers (TTs) recovered from an entity engaged in arranging foreign remittances, together with undisputed bank credit entries corresponding to those TTs in the concerned account, form corroborative evidence. The absence of a direct cash-transfer admission does not negate the probative value of the documentary nexus and corroborated remittance records. Proceedings under the Customs Act are treated as independent and their non-initiation does not vitiate FEMA adjudication.

Conclusion: The contraventions of Section 3(d) and Section 7(1)(a) of the Foreign Exchange Management Act, 1999 are established to the extent of Rs. 4,43,96,119/-.

Issue (ii): Whether foreign currency of value Rs. 1,70,880/- seized from the individual's premises is liable to confiscation.

Analysis: The seizure date and the absence of evidence showing lawful possession within the 180-day surrender period were considered. The regulatory provisions concerning surrender and repatriation under FEMA and the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 were applied to the facts.

Conclusion: The foreign currency of value Rs. 1,70,880/- is liable to confiscation under Section 13(2) of the Foreign Exchange Management Act, 1999.

Issue (iii): Whether adjustment of seized Indian currency (cash in hand Rs. 27,88,125.98) towards the cumulative penalty is permissible.

Analysis: The adjudicating authority allocated cash attributable to the concerned company (excluding amounts attributable to unrelated third-party proprietorship) and adjusted the available cash against penalties imposed on the company and on its director under Section 42 of the Foreign Exchange Management Act, 1999. The adjustment was assessed for reasonableness against the factual determinations about source and ownership of the seized amounts.

Conclusion: The adjustment of the seized Indian currency amount of Rs. 27,88,125.98 towards the cumulative penalty is upheld as reasonable.

Issue (iv): Whether the penalty amounts require modification.

Analysis: Having upheld the primary findings of contravention and confiscation, the tribunal reviewed the monetary computation and prior procedural waiver of pre-deposit, and recalculated the net payable penalties after permitting adjustments from seized cash and considering amounts already addressed.

Conclusion: The cumulative penalty on the company is reduced to Rs. 11,98,894/- and the cumulative penalty on the individual is reduced to Rs. 15,89,232/-, and the confiscation of foreign currency of Rs. 1,70,880/- is upheld.

Final Conclusion: The appeals are partly allowed insofar as penalties are reduced as specified while the findings of contravention and confiscation are upheld; ancillary applications, if any, are disposed of accordingly.

Ratio Decidendi: Where documentary evidence establishes a clear nexus between recovered remittance references and bank credit entries, an adjudicatory finding of contravention under the Foreign Exchange Management Act, 1999 may be sustained on the preponderance of probabilities; seized foreign currency not shown to have been lawfully retained within the statutory surrender period may be confiscated, and available seized cash attributable to the respondent may be adjusted against penalties.

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