TaxTMI 
TaxTMI 
TaxTMI 
1989 (2) TMI 424
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..... 2 is its managing director. They are engaged in the manufacture of certain pharmaceutical patents and life saving drugs. The officers of the customs searched the premises of one, Shri M.M. Hoosein at Flat No. 142, Casa Blanka, Colaba, Bombay on 7-3-1976 and recovered an envelope containing some papers. The officers of the Enforcement Directorate were also associated with the search and investigation. The statement of the wife of said Shri Hoosein was recorded on the same day wherein she, inter alia, disclosed that the said envelope was given to her by her friend, Mrs. Pearl N. Mathias, the wife of appellant No. 2 for safe custody in December 1975. As a follow-up action, the business premises of appellant No. 1 and the residential premises of appellant No. 2 were also searched resulting in the recovery and seizure of about 38 files. Said Mrs. Pearl N. Mathias in her statement recoded on the same day admitted to have deposited the said envelope' with the documents with her friend Mrs. Nasreen Moiz Hossein and she also identified the said documents recovered from the latter's residence. Further investigations were carried out and the statement of appellant No. 2 was recorded....
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....l permission of the RBI; (iv) No. T-4/6-B/78 (SCN-IV) dated 8-9-1978 for alleged contravention of sections 8(1) and 9(l)(d) of the Act on the ground that in the year 1974 the said appellant purchased/ otherwise acquired/borrowed foreign exchange amounting to DM 454.80 from a person not being an authorised dealer in foreign exchange in India and made payments of the said foreign exchange to a person resident outside India without the general or special permission of the RBI. 4. In reply to the aforesaid notices, the appellants demanded a personal hearing and during the adjudication proceedings, they were duly represented by, a counsel. After considering the available material and the contentions raised on behalf of the parties, the Adjudicating Officer passed the impugned order. The appellants were completely absolved of the charges under SCN-III and IV above and also partly under SCN-I and II - with regard to the alleged contravention of section 4(2) of the 1947 Act and section 8(2) of the 1973 Act respectively. However, they were held guilty of the charge for contravention of section 4(1) of 1947 Act and section 8(1) of the 1973 Act for having acquired the foreign exchange in r....
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....4(2), 5(1)(b) and 10(1) of the 1947 Act as also the charge for contravention of sections 8(2) and 9(1)(d) of the 1973 Act for total absence of evidence, had no justification to hold them liable for the alleged charge of 'having otherwise acquired, any foreign exchange in terms of section 8(1) of the 1973 Act or section 4(1) of the 1947 Act either; that the whole approach of the Adjudicating Officer is palpably wrong and unjustified in treating the total value of the rupee licences issued to the appellants during the aforesaid period between 1965-1976 as the value of the foreign exchange allegedly acquired by the appellants; that there is no evidence that the appellants had actually imported the goods from Hungary in the aforesaid 'switch deal' for the total value of the said import licences; that the value of the actual import of these equipments comes to Rs. 3,40,482 only; that admittedly the value of these imports was loaded by 40, per cent by the Hungarian supplier over and above the price as payable to the West German supplier; that, therefore, the theory of conversion of the full value of the import licences is absolutely without basis and unsustainable that since ....
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....the actual amount of imports effected and not to value of the import licences issued from time-to-time. 8. We have carefully considered the aforesaid contentions of the parties and minutely gone through the material available on record. It is not in dispute that the goods were imported by the appellants directly from Hungary against rupee licences although initially the raw materials were prepared and sent by the appellant's foreign principals to the Hungarian supplier. There is no evidence whatsoever to show that the appellants actually converted the Indian currency into foreign currency or permitted their Hungarian supplier to remit any particular amount of foreign exchange to the West German principals on their behalf. 'Switch deals' are normally the commercial deals where the goods are switched from one country to another country and do not necessarily or ex facie involve any conversion of Indian currency into foreign currency or vice versa so as to be violative of section 8(1). There are seven documents relied upon or otherwise mentioned in support of the findings against the appellant. The same are as under: 1. Letter dated 1-12-1970 of File A. 1 page 61 (p. 67....
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.... that the calculations given in that letter pertains to the imports to be made against composite licences which entitle the appellant to import from hard currency area within the prescribed limit. The appellant's statement recorded before the Enforcement Officers on different dates appears at p. 25-42/c of the paper book wherein he explained the actual mode of imports and all the facts pertaining to the import made by the appellant-company. A careful reading of the detailed statement recorded in question-answer form would give a true picture of how the whole thing went about. No effort appears to have been made to find out the exact nature and quantum of the imports actually made and the amount of foreign exchange, if any, alleged to have been acquired by the appellant to facilitate their imports in question. 9. The adjudicating authority while accepting that actually an amount of Rs. 67,110 only was paid by the appellant's foreign principals to Indian company through authorised channel being 50 per cent of the extra burden agreed to be borne by them, has surmised that the facts so admitted do not give the entire picture of the transaction. While referring to the appellant....
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.... have not been able to pinpoint anything therein to suggest that the appellant had unlawfully acquired any foreign exchange to facilitate imports. It is not in dispute that the goods actually imported were certified as goods from Hungary as the country of origin and the documents pertaining to these imports were duly admitted and cleared by the customs authorities. The payment arrangement between the Hungarian supplier and the appellant's principal in W. Germany was a matter between them and it is not at all possible to say as to what were the terms of payment between the two. The only evidence on record is that the Hungarian supplier had put up 40 per cent mark-up on the price of goods as initially quoted by the appellant's foreign principals and subsequently by mutual discussion and persuasion their foreign principals agreed to bear 50 per cent of the premium paid to the intermediaries and actually remitted the aforesaid sum of Rs. 67,110 in Indian currency through normal banking channel to the appellant. 11. Section 8(1) reads as under: "8. Restrictions on dealing in foreign exchange.--(1) Except with the previous general or special permission of the Reserve Bank....
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.... foreign exchange and not against acquisition of goods which might have been purchased by some other person on payment of foreign exchange and then delivered to the charged person. 12. The same connotation of the expression has also been made clear in the well-known decision of the Bombay High Court in Pandharinath Kishtiah Renguntawar v. Dy. Director of Enforcement 51 ECC 163. The learned counsel for the appellant has vehemently contended that the general approach of the adjudicating authority in this behalf is mistaken and legally unsustainable in the absence of any evidence to show that the appellant had actually received any foreign exchange by conversion from Indian money or the rate at which such currency was converted, the time of such taking or any other particulars for that matter and, therefore, the adverse finding against his client is quite baseless. The logic of the impugned order is that the goods imported by the appellants were actually manufactured by their principals in West Germany; that payment for such goods necessarily had to be made in foreign exchange; that appellants having only rupee-licences could not import the goods from hard currency area on the basis ....
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....mport/export regulations. In the present instance, however, there is no suggestion of any such violation either. 14. It is well settled that the adjudication proceedings under the Act are of a quasi-criminal nature. The charge against the appellants has to be proved on the basis of the established facts in regard to his involvement in the alleged activity. No such finding can be based on mere suspicion, conjuncture or inverted logic. It will be a travesty of the logical process if a man is held to have acquired any foreign exchange simply on the ground that he acquired certain goods manufactured by a country in the hard currency area through a supplier from soft currency area who has accepted payment for the same as per the mutual agreement in Indian rupees. It is possible that the payment to the original manufacturer might have been made in a foreign currency-particularly when there is nothing to show that such a person (the appellant) was a party to such arrangement of conversion of Indian currency into foreign currency in which the payment might have made by the Hungarian supplier to the West German manufacturer. There are various channels of monetary remittances between differ....
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....the Supreme Court made in Collector of Customs v. D. Bhoormull AIR 1974 SC 859: "...E1 Dorado "of absolute proof being unattainable the law accepts for it probability as a working substitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus legal proof is not necessarily perfect proof; often it is nothing more than a prudent man's estimate as to the probabilities of the case."(p. 864) The above observation was apparently made by the Hon'ble Court to fill only that gap in the quantum of evidence produced in support of the guilt of a person which necessarily remains unsupplied because of the facts being in the exclusive knowledge of the charged person and could not be brought on record but for his speaking in regard to those facts. In that case, the observation pertains to the principle underlying section 106 of the Evidence Act which stipulates that the burden to establish the facts within the exclusive knowledge of a person rests on him and if he fails ....