TaxTMI 
TaxTMI 
1997 (10) TMI 421
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....ney dealings, that he has been staying in Room No. 305 in Pampa Tourist Home and that he is in possession of some unauthorised tube money, the Circle Inspector of Police, Ernakulam, reached the said premises at 10.00 P.M. on 24-3-1988. The Circle Inspector was accompanied by one Sub-Inspector, one Additional Sub-Inspector, one Head Constable and 7 Constables. On knocking the door of the said premises the appellant opened the door. The police entered the room and searched the VIP suit case which was kept near the appellant's bed and found Indian currency totalling Rs. 11 lakhs. On questioning, the appellant replied that the said money was meant for distribution on tube money distribution arrangements. The Circle Inspector reasonably believed that the money was to be utilised for tube money distribution. The accused, the appellant herein, was arrested at 10.30 P.M. and the properties found in his possession were seized. The appellant was taken to the police station and a case was registered as crime 99/88 under section 9(1)(b), read with section 56 of the Act. The accused appellant was produced before the Chief Metropolitan Magistrate, Eranakulam, at 9.10 A.M. on 25-3-1988. On an app....
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....ile his written reply. He also filed his written submissions. We have considered the record, the written submissions filed by both the parties as well as the oral submissions made by them. It is seen from SCN that the charges against the appellant were that he contravened the following provisions of the Act in respect of the amounts shown against each: Section 9(1)(b) : Rs. 2,60,000 + Rs. 11,00,000 Total Rs. 13,60,000 Section 9(1)(d) : Rs. 2,60,000 Section 9(1)(d) : Rs. 11,00,000 Read with section 64(2) (by abetting distribution of payments totalling Rs. 11 lakhs) The evidence relied on to substantiate the charge is listed under Annexure B to SCN. Annexure B consists of 11 items. It appears to us from a perusal of the documents and the impugned order that the evidence referred to Sl. Nos. 5 to 11 pertain to the charge of contravention of section 9(1)(b) in respect of Rs. 2,60,000 alone whereas the charge of contravention of that provision in respect of Rs. 11,00,000 is based on the evidence referred to at Sl. Nos. 1 to 5. Similarly, the charge of contravention of section 9(1)(d), read with section 64(2) ....
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....he appellant would have distributed the said amount. In other words, had the said amounts been paid to Basheer, Mohd. Kunju and Kassim, the appellant would have been guilty of the principal contravention of section 9(1)(d). Thus, the charge as framed against the appellant is as if he was abetting himself. The allegation, therefore, is totally misconceived. In view of the above, the charge of contravention of section 9(1)(d), read with section 64(2) as alleged and of which the appellant has been found guilty is totally misconceived and liable to be set aside and so is the penalty imposed therefor. In fact the finding and penalty imposed for this charge are also liable to be set aside for the reasons that the learned Adjudicating Officer has not adjudicated upon this charge before imposing the penalty of Rs. 1 lakh except for making a bald observation that there is abundant evidence by way of corroboration regarding the role of the appellant in having abetted in the compensatory payment racket. He has not indicated any instance of payment of distribution of money which was abetted by the appellant. The observation is, therefore, unfounded. We would next deal with the charge of ....
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.... in the SCN or in the impugned order. The SCN simply assumes that merely because certain persons are in Dubai they are persons resident outside India. In the impugned order this issue has not even been considered. Apparently, the learned Adjudicating Officer has relied on the confessional statement of the appellant after rejecting the retraction thereof on the ground that it was a belated one. Thus, relying on the statement as substantiating the charge he proceeds to discuss corroborative evidence. In our opinion, the adjudicating authority ought to have appreciated that before considering any corroborative evidence it was necessary to examine whether the statement itself makes out a case for contravention as alleged in the statement on which the charge of contravention of section 9(1)(d) is sought to be based and if it does, whether there is sufficient evidence on record to prove those allegations. The appellant says that he 'made payments of Rs. 1,50,000 to A.K. Kassim as arranged by his relative abroad through Shri Manohar Lal of Bombay' and that the said amount was given to him 'in cash at his shop in Bangalore by an unknown person'. Assuming that his statement is true, it i....
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....on of payment of Rs. 50,000 to 'an old lady in Trichur'. It appears from the record that the department did not carry out any investigation in respect of the alleged payment. The learned Adjudicating Officer has found corroboration about the alleged payment to Kassim from Kassim's statement recorded under section 40. However, in his statement Kassim says that he received Rs. 1,50,000 'as arranged by A.M. Manaf, son of his maternal uncle from Qatar.' Obviously, the payment received by him was not sent by any person in Dubai as alleged. It is difficult to appreciate as to how the learned Adjudicating Officer has found Kassim's statement as corroborative of the appellant's admission and that the appellant's admission proves that he received instructions from certain persons in Dubai. We have seen that notwithstanding the retraction, the appellant's original statement is not sufficient to meet all the ingredients of the charge of contravention of section 9(1)(d) and, therefore, merely on that statement it cannot even prima facie be said that he contravened the said provisions. In the circumstances, the question of corroboration does not arise. However, assuming for the sake of ar....
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....reading of the English translation of the seized documents as made by the department. But when we see the original page 5 (which is in Malyalam, though the figures are mentioned in English numbers), we find that there is another entry of Rs. 5,000 against another person who does not figure in the English translation. Normally, this discrepancy would appear to be inadvertent but what is significant is that Kassim's statement in respect of these documents tallies with that of the English translation of the department and not with the original documents. This examination leads to one conclusion only, viz., that Kassim's statement is based on the Chief Enforcement Officer's reading of the English translation of the documents and, thus, it legitimately creates a doubt that Kassim's statement is of his own or as suggested by the department. There is another aspect of the recording of Kassim's statement which supports Shri Singh's submission. It appears from the statement which is in the narrative form that after inquiring about his family and business the Chief Enforcement Officer straightway led him to the evidence of the appellant's statement instead of inquiring from him whether he....
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....t that he made these payments on the behalf of Manaf, particularly when Manf's name does not figure in any of the seized documents. It is significant that Kassim has also deposed about the amount of Rs. 11,000 seized from the appellant. His statement in that regard also suffers from the same defect, viz,. it is based on the evidence supplied to him by the department, it is not independent statement and in no way connected with any of the seized documents. In view of the foregoing discussion, we are of the opinion that Kassim's statement is unworthy of reliance as against the appellant. The allegation of the payment of Rs. 50,000 to a 'lady at Trichur' also suffers from lack of investigation to identify the lady. If the department took a conscious decision not to investigate into that payment apparently as it had already got the evidence of Kassim and Antony, it should have dropped that amount from the charge. The finding is obviously based solely on the appellant's retracted confession, uncorroborated by any other evidence and that too not a confession recorded under section 40 of the Act. In any case, as we have observed earlier, in the absence of the identity of the pers....
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....0 he gave Rs. 10,000 as loan to Stephen and the balance of Rs. 50,000 he spent on medical treatment and repayment of loan taken from different persons. No other evidence, except the statements of the appellant and Joseph Antony and the diary seized from Antony, has been relied on in support of the charge. After perusing the evidence we find that there is no evidence as to who gave the names and address of Antony and the alleged lady at Trichur to the appellant asking him to deliver the said amounts to them. All that is contained in the appellant's statement is that though he did not know the name and address of Manohar Lal's friend in Dubai, he used to get telephonic messages regarding receipt of money in Bangalore and Kerala and its distribution. If the receipt of money was arranged through Manohar Lal of Bombay, there is no question of getting message regarding this amount from Dubai. Manohar Lal's existence has not been fully established. The appellant was not inquired whether Manohar Lal referred to by him is Manohar Mal Himmat Mal Jain whom the department had interrogated. But assuming he is, Manohar Mal completely denied his knowledge about the appellant and any associatio....
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....cy in the statement of the appellant which tends to render it unworthy of reliance. He says that he agreed to make compensatory payments for a commission of Rs. 200 per one lakh rupees. If that be the case, how he distributed the entire amount of Rs. 2,60,000 that he allegedly received, to Kassim, Antony and one lady of Trichur. There is nothing in his statement or in any other documents to show as to how he received or how he used to receive his commission. The same is the position in respect of the amount of Rs. 11 lakhs the whole of which was to be distributed to the specified persons. In view of the examination hereinbefore made, we find it difficult to uphold the finding of contravention of section 9(1)(d) on the part of the appellant. This, however, should not be taken to necessarily mean that Kassim and Antony have not received the money as admitted by them; what we have seen is that the evidence on record does not substantiate the allegation that that money was paid to them by the appellant. Now, we would proceed to consider the finding of contravention of section 9(1)(b) Act. Section 9((b), inter alia, ordains that no person resident in India shall receive, otherw....
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....ectorate AIR 1983 Mad. 53, the High Court considered the provisions of section 5(1)(a)(a) of 1947 which were similar to those of section 9(1)(b) of 1973 Act. The Court observed : "Before it could be found that there is contravention of section 5(1)(a)(a) of the Act, we must know as to who is the person on whose instructions or on whose behalf the amount was received and whether he is resident outside India. (page 5). ****** A person resident outside India has a definite connotation and a mere visitor cannot be taken to be a person resident outside India. (para 6)." [Emphasis supplied] The above observations were followed by the Division Bench of the Madras High Court in the case of A.S.M. Abdual Wahid v. Deputy Director, Enforcement Directorate [1996] 53 ECC 56. In this case the material facts, in brief, were that the appellant's premises were searched by the department on 21-3-1974 and a sum of Rs. 15,000 in Indian currency and two bunches of balance sheets of foreign companies were recovered and seized. The appellant gave a statement wherein he stated that one of his friends met him before his departure from Malaysia and informed him that he would as....
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....neral proposition that a retracted confession should be corroborated before it could be acted upon. There is absolutely nothing to show any circumstantial evidence to corroborate the same. The circumstance leading to the retraction cannot be taken as a corroboration. There is absolutely nothing to show that any corroboration materially was pointed out by the Board besides that the statement that the retraction is invented only as an afterthought and intended for the purpose of denying a charge." (para 6) It is obligatory on the part of the respondent to prove that necessary ingredient for violation of any of the provisions. . . . It is no excuse for the Department to say that it is very difficult to establish that the person who gave instructions was non-resident." (para 7) Similar observations were made by the Division Bench of the Kerala High Court in the case of E.V. Marakkar v. Dy. Director of Enforcement [1987] 21 ECC 164 : "In the present case the appellant is alleged to have contravened section 5(1)(a) of the Foreign Exchange Regulation Act, 1947 and section (1) of FERA, 1973. Section 9(1)(b) is not specifically mentioned in section 71 of the Act. Theref....
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....not be proved and the evidence and the amount involved is common for both the charges, it is not possible for us to uphold the finding of contravention of section 9(1)(b) in respect of the said amount of Rs. 2,60,000. This leaves us for consideration of the finding in respect of the confiscated amount of Rs. 11 lakhs. The only evidence that the appellant received the said amount of Rs. 11 lakhs is the appellant's own confession contained in his statement which was retracted. We have seen that this statement was not recorded under section 40 and, therefore, it, by itself, cannot be an evidence. Moreover, even assuming that the statement can be led in evidence, it cannot be relied on to substantiate the charge of section 9(1)(b) for the reason that there is no corroborative evidence to show that the appellant received the said amount of Rs. 11 lakhs from a person who at the material time was resident outside India. The appellant states that Manohar Lal told him that he (Manohar Lal) received instructions from abroad. Furthermore, there is nothing in the statement to indicate as to who gave the instructions to Manohar Lal so as to ascertain whether the person abroad is a person res....
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....have received the seized amount of Rs. 11 lakhs. He gives the telephone number of Manohar Lal. However, the telephone is found to be that of L. Shah, installed at the premises of Jayanti Lal and one Manohar Mal Himmat Mal Jain was found to be working as his servant. Jayanti Lal and Manohar Mal Jain were interrogated under section 40 and their statements recorded. The evidence of their statements contradicts what is stated by the appellant in his statement. It is seen that the appellant was searched by the police on 24-3-1988 at 10.00 P.M. and the Enforcement Authorities were informed on 25-3-1988 but Jayanti Lal and Manohar Mal Jain were interrogated on 24-3-1988 when they appeared in response to the summons issued under section 40. During their interrogation they were asked about the seizure of Rs. 11 lakhs from the appellant and whether they had given any money to the appellant. Both of them denied any knowledge about the appellant. It is intriguing as to how the department came to know about the seizure on 24-3-1988. It is also significant that the appellant's premises at Bangalore were searched by the Enforcement Officer on 24-3-1988 but nothing incriminating was found. As a re....
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....ellant's own confessional statement in that regard has been contradicted by the statement of Manohar Lal Jain. The department has not even been able to show that Manohar Lal as mentioned by the appellant is the same person as Manohar Mal Himmat Mal Jain. Since Manohar Lal Jain is a domestic servant of Jayanti Lal Bhandari, it is difficult to believe, in the absence of any independent evidence to the contrary, that he was able to carry on hawala activities of the dimension as stated by the appellant, through Jayanti Lal's telephone number without his knowledge. On the other hand, the appellant's defence as put forth is quite plausible. It is submitted on his behalf that he went to Ernakulam to purchase a running business and stayed at Green Shepherd Tourist Home along with his broker, that certain differences arose between the two about the money and he shifted to Pumpa Guest House whereas the broker continued to stay at Green Shepherd Guest House, that out of animosity the broker must have informed the police as he knew that the appellant was having huge cash with him. The department did not carry out any investigation with Green Shepherd Guest House though they were aware that ....
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....f the charge of contravention preferred against him in the impugned show-cause notice. Since the appellant cannot be held guilty of the charges preferred against him, the seized amount of Rs. 11 lakhs cannot be considered to be involved in the contravention of the provisions of the Act as alleged and the order of confiscation of the said amount is liable to be set aside. It is to be noted that the learned Adjudicating Officer ordered the confiscating of the amount of Rs. 11 lakhs as, according to him, it was meant for distribution in his compensatory racket. Shri Singh, therefore, rightly contended that the said Indian currency so remotely connected with a possible contravention of the provisions of the Act cannot be liable for confiscation under section 63. The appellant has claimed that amount of his own and has also reflected the amount in his income-tax returns. It is for the income-tax authorities to take a decision in respect of that amount. Shri Mahendra Singh has taken several other grounds to assail the adjudication order. Dr. Shamsuddin has filed his written reply to Shri Singh's written submission though the reply does not deal with all the contentions. For the vie....