Retracted statements can support FEMA contravention when corroborated, while penalties may be reduced on equitable grounds.

A retracted statement is not inadmissible merely because it was withdrawn; it may still be relied on when supported by independent, cogent corroboration. The seized notebook, diaries, loose sheets, cash, phone records and other statements were treated as sufficient corroborative material to sustain the finding of contravention under FEMA. The Tribunal also considered mitigating factors, including financial distress, physical disability and relative involvement, and reduced the penalties on equitable grounds without disturbing the liability finding.

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Issues: (i) Whether the retracted statements of the appellants could be relied upon along with seized documents and other corroborative material to sustain liability for contravention under FEMA; (ii) whether the penalties imposed on the appellants required reduction on the facts of the case.

Issue (i): Whether the retracted statements of the appellants could be relied upon along with seized documents and other corroborative material to sustain liability for contravention under FEMA.

Analysis: Retraction of a statement does not by itself render it involuntary or inadmissible. A retracted statement can be acted upon when it is supported by independent and cogent corroboration. The adjudicating authority had considered the retractions and recorded reasons for rejecting them. The seized notebook, diaries, loose sheets, cash, phone records and statements of other persons provided corroboration of the appellants' involvement in the hawala transactions. The record therefore established voluntary and corroborated material sufficient to sustain the finding of contravention.

Conclusion: The liability finding under FEMA was upheld against the appellants.

Issue (ii): Whether the penalties imposed on the appellants required reduction on the facts of the case.

Analysis: Although the contraventions were sustained, the Tribunal took into account the financial distress and physical disability of one appellant, and the comparative extent of involvement and amount attributable to the other appellant. On that basis, it considered that the interests of justice would be met by reducing the penalties to more moderate amounts and adjusting the pre-deposit already made by one appellant.

Conclusion: The penalties were reduced to Rs. 6,00,000/- for Shri Mohd. Rafiq and Rs. 3,00,000/- for Shri Hukam Chand Soni.

Final Conclusion: The appeals succeeded only to the limited extent of reduction of penalties, while the findings of contravention under FEMA were affirmed.

Ratio Decidendi: A retracted statement may be relied upon when it is corroborated by independent evidence and the authority has applied its mind to the retraction; penalty may be moderated on equitable grounds without disturbing the finding of contravention.

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