REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  7407       OF 2008 (Arising out of SLP (C) No. 3537 of 2008)

VINOD SOLANKI … APPELLANT

Versus

UNION OF INDIA & ANR. … RESPONDENTS

J U D G M E N T

S.B. Sinha, J.

1. Leave granted.

2. What would be the effect of a retracted confession for the purpose

of  levy of  penalty  under  Foreign  Exchange  Regulation  Act,  1973 (for

short, “the Act”) is the question involved in this appeal which arises out

of a judgment and order dated 30.11.2007 passed by the High Court of

Judicature at Bombay in FERA Appeal No. 85 of 2007.

3. On or about 25.10.1994, the office premises of the appellant was

searched.  Recovery of Indian currency amounting to Rs. 2,65,000/- was

made.   He was thereafter detained.  On the next two succeeding dates,

i.e.,  on  26.10.1994  and  27.10.1994,  he  allegedly  made two statements

before the Authorities under the Act, disclosing that all the transactions in

the name of M/s Sun Enterprises, Ahmedabad and M/s Suraj Enterprises,

Bombay relating to import of goods had been made by him and no import

of goods had taken place in the name of the said firms.  He is stated to

have  confessed  that  he  was  responsible  for  remittance  of  the  foreign

exchange worth US Dollars 11,400 and US Dollars 22,830.  In view of

the said purported confession, he was arrested for alleged violation of the

provisions of Section 8(3) and Section 9(1)(a) of the Act.   We are not

concerned with the rest of the statements.

4. He  was  produced  before  the  learned  Chief  Metropolitan

Magistrate,  Bombay on 28.10.1994.  Before the said court,  he filed an

application retracting his confession, stating:

“That from 26-10-94 evening till today when I am being produced before this Hon’ble Court,  I was illegally detained in the office of the Enforcement Directorate,  and  during  my illegal  detention  my involuntary, untrue and false statements have been recorded  by force,  coercion,  threat  and  coercion and also threatened to detain under COFEPOSA if I will not write the statements as per their say and hence I retract my said statements as the same are not my true and voluntary statements.

2

I further state that Indian currency seized from me was  my  legitimate  business  money  and  had nothing  to  do  with  alleged  FERA  violation.   I further  say  that  I  have  no  connection  with  any alleged  import  transactions,  opening  of  bank accounts, or floating of company by name of M/s Sun Enterprises, export control, Bill of Entry and other  documents  or  alleged  remittances.   I  have not been furnished copy of Panchnama, though my signatures  have  been  taken  in  token  of  having furnished the copy of the same.   

I  hereby  rebut  the  false  averments  made  in  the remand application, Panchnama and in my alleged statements and hereby retract the same as the facts stated therein are not true and voluntary.

I pray that my application may be taken on record and copy of the same is annexed for the officer of the Dept.”

5. Respondents, however, initiated a proceeding under Section 8(3) of

the Act.   A show cause  notice  was  issued on  or  about  25.4.1995,  the

operative part whereof reads as under:-

“NOW  THEREFORE,  the  said  Shri  Vinod  M Solanki  is  hereby  required  to  show  cause  in writing (IN DUPLICATE) within 30 days from the date  of  receipt  of  this  memorandum,  why Adjudication  Proceedings  as  contemplated  in Section  51  of  the  Foreign  Exchange  Regulation Act, 1973 (46 of 1973) should not be held against him for the said contravention of Section 8(3) and 9(1)  of  the  Foreign  Exchange  Regulation  Act, 1973.

IN ISSUING this memorandum, reliance is placed inter alia on the list of documents as per Annexure ‘A’  the  original  of  the  said  documents  will,  on

3

demand,  be  made available  for  inspection  to  the party  or  his  lawyer  or  other  authorized representative at the office of the Deputy Director, Enforcement  Directorate,  Mittal  Chambers,  2nd Floor,  Nariman  Point  Bombay –  400  021  in  his office  by  prior  appointment  with  him  on  any working day.”

6. Pursuant  to  or  in  furtherance  thereof  cause  was  shown  by  the

appellant, inter alia, contending that no reliance should be placed on the

retracted  confessional  statement  unless  the  same  was  corroborated

substantially in material particulars by some independent evidence.  

7. By reason of an order dated 19.3.1996, the appropriate authority,

inter  alia,  relying  on  or  on  the  basis  of  the  confession  made  by  him

imposed a consolidated penalty of Rs. 10 lakhs, stating:

“11. I  have  independently  gone  through  the evidence  on  record  too  based  on  which  the impugned show cause notice has been issued.  The notice  has  abundantly  and  clearly  explained  the documents seized from him.  He has also admitted to the offence in his statements recorded u/s 40 of FERA, which to date, stand.  These confessional statements are amply corroborated by the material evidence  seized  from  him  which  is  disclosed above.   By not  contesting  the  charges,  either  in reply to the Show-cause Notice or during Personal hearings fixed, these further stand uncontested and thus confirmed and admitted by the notice.

12. I  have,  therefore,  no  hesitation  in confirming  the  charges  in  impugned  SCN again the  notice  and  accordingly  hold  him  guilty  of contravention of Sec.  8(3) to the extent of US $

4

34,230/- in as much as he failed to utilize the said Foreign exchange for the purpose it was released to  him.   Further,  he  is  also  held  guilty  of contravention of charge u/s. 9(1)(a) for the same amount  in  as  much he  deposited  it  in  a  Foreign bank  account  without  the  General  or  Special exemption from the Reserve Bank of India.”

8. Appellant  preferred  an  appeal  thereagainst  before  the  Foreign

Exchange  Regulation  and  Appellate  Board  which  on  repeal  of  FERA

stood  transferred  to  the  Appellate  Tribunal  for  Foreign  Exchange  (for

short,  “the  Tribunal”)  under  the  provisions  of  Foreign  Exchange

Management Act, 1999.  The Tribunal despite noticing the contentions

raised on behalf of the appellant that no enquiry had been made by the

Department (1) from the bank in which the transactions in question had

taken place; (2) as regards the date on which the application was signed

and by whom the foreign exchange had been acquired; (3) whether the

appellant had acquired the said foreign exchange from authorized dealer

on the  basis  of  any forged import  documents;  (4)  whether  the  alleged

documents were not produced by him before any authorized dealer; and

(5) whether the impugned order was based on the confessional statement

which was retracted on first available opportunity when he was produced

before  the  Chief  Metropolitan  Magistrate,  Mumbai  for  remand  on

28.10.1994,  dismissed the appeal, stating:  

5

“10. In  the  present  appeal  the  confessional statement  of  the  appellant  is  acceptable  in evidence.   The  appellant  has  not  brought  out anything to displace his confessional statement to prove  its  untruthfulness  or  involuntary  nature. Along  with  his  confessional  statements,  there  is seized  documentary  evidence  coupled  with attendant  circumstantial  evidence  to  demonstrate and prove the charges against the appellant.”

9. In arriving at the said finding, the Tribunal placed the onus of proof

upon  appellant  that  the  confession  was  obtained  from him by  threat,

coercion  or  force.   The  Tribunal  held  that  retraction  alone  would  not

make  the  confession  inadmissible  and  as  even  retracted  confessional

statement may be sufficient to hold the proceedee guilty of violation of

the provisions of the Act, imposition of penalty was legally permissible.   

It was furthermore held:  

“18. The  charges  under  Section  8(3)  is  proved against  the appellant  for having acquired foreign exchange  by  forging  import  documents  and remitting it abroad to foreign nationals particularly when  import  documents  relating  to  bogus  firms along  with  stamps  were  recovered  from  his custody.   The  appellant  has  not  been  able  to explain why the names of persons Milan and Anil Verma  were  told  by  him to  the  officers  of  ED which,  on  enquiry  were  found  to  be  wrong  and what  benefit  could  be  given  to  him  out  of  his wrong  assertion  made  by  him  to  Enforcement Officers.

19. According to confessional  statement of the appellant,  bogus  trading  firms  were  established

6

and  run  by  him  where  he  used  to  take  foreign exchange for remittance to foreign country for the purposes  of  import  of  goods  but  no import  took place  despite  the  fact  that  the  foreign  exchange was  remitted  to  Hongkong.   On  the  basis  of aforesaid  discussion  we  are  of  the  considered opinion  that  the  remittance  of  foreign  exchange was taken by the appellant for purposes of import of  goods  but  no import  of  goods  was made and foreign  exchange  was  credited  on  the  bank account  of  foreign  national  abroad  where contravention  of  Section  8(3)  and  9(1)(a)  of  the Foreign  Exchange  1973  is  clearly  made  out. Looking  towards  this  situation,  we  are  of  the considered  opinion  that  the  impugned  order withstands  judicial  scrutiny  and  is  liable  to  be confirmed and upheld where the appeal is liable to be dismissed.”

10. Aggrieved by and dissatisfied therewith, the appellant preferred an

appeal  before  the  High  Court.   Concurring  with  the  judgment  of  the

Tribunal, the High Court, opined:

“The  burden  is  on  the  person  retracting  the confessional statement to lead some evidence as to why the confessional statement has to be rejected. No evidence on that count was led.  Coupled with the  confessional  statement  wherein  some  facts were recorded which was personal to the appellant alone,  there  were  other  documentary  evidence coupled with the attendant circumstantial as noted by  the  tribunal  to  demonstrate  and  prove  the charges against the appellant.”

Appellant is, thus, before us.

7

11. Mr. Tarun Gulati, the learned counsel appearing on behalf of the

appellant would, inter alia, submit:

i. The courts below have wrongly placed the burden of proof

on the appellant.

ii. As the provisions of Section 24 of the Indian Evidence Act

are attracted also in the matter of confession made before the

authorities under the Act, the findings arrived at, inter alia,

relying on or on the basis of the purported confession made

by appellant were wholly illegal and without jurisdiction.

12. Mr.P.V. Shetty, learned Senior Counsel appearing on behalf of the

respondents, on the other hand, would contend:

i. The burden of proof has rightly been placed on the appellant

as he, in view of Section 106 of the Indian Evidence Act, had

special  knowledge  as  to  how  he  had  entered  into  the

transactions of import and on whose behalf.

ii. The  very  fact  that  the  appellant  had  given  details  of  the

transactions is a clear pointer to the fact that only he and he

8

alone  knew thereabout  and  in  that  view  of  the  matter  no

illegality can be said to have been committed in placing the

burden of proof on him.

iii. The authorities under the Act having the power of carrying

out search and seizure as also issuance of summons on any

person  and  as  the  person  so  summoned  has  a  statutory

obligation to make a true statement, confession made by him

would  not  be  hit  by  the  provisions  of  Section  25  of  the

Indian Evidence Act inasmuch as when such a statement was

made by him he was not an accused and the officer under the

Act was not a police officer.  

13. Section  8 of  the  Act  imposes  restrictions  on dealings  in  foreign

exchange.   Foreign  exchange  can  be  acquired  only  from  a  dealer

authorized by the Reserve Bank of India. Sub-section (2) of Section 8 of

the Act prohibits entering into any transaction providing for conversion

of Indian currency into foreign currency or foreign currency into Indian

currency  at  rates  of  exchange  other  than  the  ones  for  the  time  being

authorized by the Reserve Bank of India without its previous general or

special permission.  Sub-section (3) of Section 8, and Section 9(1)(a)  of

the Act which are material for our purpose, read as under:

9

“8. Restrictions  on  dealings  in  foreign exchange.-  

(1)…………

(2)………… (3) Where any foreign exchange is acquired by any person,  other  than  an authorized  dealer  or  a money-changer,  for  any  particular  purpose,  or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not  use  the  foreign  exchange  so  acquired otherwise than for that purpose or, as the case may be, fail to comply with any condition to which the permission  granted  to  him is  subject,  and where any  foreign  exchange  so  acquired  cannot  be  so used or  the conditions  cannot  be complied with, the said person shall, within a period of thirty days from the  date  on  which  he  comes  to  know that such foreign  exchange  cannot  be so  used  or  the conditions  cannot  be  complied  with,  sell  the foreign exchange to an authorized dealer  or to a money-changer.”

9. Restrictions  on  payments.-  (1)  Save  as may be  provided in  and in  accordance  with  any general or special exemption from the provisions of  this  sub-section  which  may  be  granted conditionally  or  unconditionally  by  the  Reserve Bank, no person in, or resident in, India shall-  

(a) make any payment to or for the credit of any person resident outside India”

14. As  indicated  heretobefore,  the  courts  below  proceeded  on  the

premise that a confession was made by appellant, although retracted later,

that he had acquired foreign exchange during the period 1993-94 on the

basis of forged import documents whereafter he got the same transferred

10

to  his  bank  account  Nos.  564-000-4888-5  and  No.  96300-1254-9  in

Standard  Chartered  Bank,  Asian  House  VI  Branch  and  American  E.

Bank,  Central  Branch,  at  Hongkong  and  misutilized  the  said  foreign

exchange and failed to import any rough diamonds for which purpose the

same was acquired.   

15. The  questions  which  would  arise  for  our  consideration  are:  (1)

whether the appellant had made bald statement at the time of retraction

alleging threat and coercion so as to shift the burden of proof from him to

the Enforcement Directorate; and (2) whether consolidated penalty could

have been imposed only on the basis of such retracted confession.   

16. Indisputably, a confession made by an accused would come within

the purview of Section 24 of the Indian Evidence Act, 1872, which reads

as under:

“24. Confession caused by inducement, threat or  promise,  when  irrelevant  in  criminal proceeding.-  A  confession  made  by  an  accused person is irrelevant in a criminal proceeding, if the making of the confession appears to the Court to have  been  caused  by  any  inducement,  threat  or promise, having reference to the charge against the accused  person,  proceeding  from  a  person  in authority  and  sufficient  in  the  opinion  of  the Court, to give the accused person grounds, which would  appear  to  him  reasonable,  for  supposing that by making it he would gain any advantage or avoid any evil of a temporal nature in reference to the proceedings against him.”

11

17. The proceeding under the Act is quasi criminal in nature.  Section

50  of  the  Act  is  a  penal  provision  prescribing  that  in  the  event  of

contravention of any of the provisions of the Act or of any rule, direction

or order made thereunder, a penalty not exceeding five times the amount

or value involved in any such contravention may be imposed.   

18. Section 71 of the Act provides for burden of proof in certain cases.

Sub-section (2) of Section 71 provides that the burden of proving that the

foreign exchange acquired by such person has been used for the purpose

for which permission to acquire it was granted shall be on such person.   

19. The Act is a special Act, which confers various powers upon the

authorities prescribed therein. Even the salutory principles of mens rea

and  actus  reus  in  a  proceeding  under  the  Act  may not  be  held  to  be

applicable.   It  is  now  a  well  settled  principle  that  presumption  of

innocence as contained in Article 14(2) of the International Covenant on

Civil and Political Rights is a human right although per se it may not be

treated to be a fundamental right within the meaning of Article 21 of the

Constitution of India.   

12

[See Article 11(1) of the Universal Declaration of Human Rights (1948)

and Article 6.2 of the European Convention for the protection of Human

Rights  and  Fundamental  Freedoms  (1950)  and  Article  14.2  of  the

International Covenant on Civil and Political Rights (1966)]

20. Sub-section (2) of Section 71 places the burden of proof upon an

accused  or  a  proceedee  only  when  the  foreign  exchange  acquired  has

been used for the purpose for which permission to acquire it was granted

and not for mere possession thereof.  The Parliament, therefore, advisedly

did  not  make  any  provision  placing  the  burden  of  proof  on  the

accused/proceedee.

21. The  Act,  thus,  does  not  provide  for  a  ‘reverse  burden’.   No

presumption of commission of an offence is raised under the Act.  Even

in  a  case  where  the  law provides  for  a burden on the accused having

regard to the aforementioned presumption of innocence as a human right,

this Court in Noor Aga vs. State of Punjab &Anr. [2008 (9) SCALE 681]

held as under:

“114.  Only  when  these  things  are  established,  a statement  made  by  an  accused  would  become relevant in a prosecution under the Act. Only then, it can be used for the purpose of proving the truth of the facts contained therein. It deals with another category  of  case  which  provides  for  a  further clarification.  Clause  (a)  of  Sub-section  (1)  of Section 138B deals with one type of persons and Clause  (b)  deals  with  another.  The  Legislature might have in mind its experience that sometimes

13

witnesses do not  support  the prosecution case as for example panch witnesses and only in such an event an additional opportunity is afforded to the prosecution  to  criticize  the  said  witness  and  to invite a finding from the court not to rely on the assurance of the court on the basis of the statement recorded by the Customs Department and for that purpose it is envisaged that a person may be such whose statement  was recorded but  while  he was examined before the court, it arrived at an opinion that is statement should be admitted in evidence in the interest of justice which was evidently to make that situation and to confirm the witness who is the author of such statement but does not support the prosecution although he made a statement in terms of  Section  108 of  the  Customs Act.  We are  not concerned  with  such  category  of  witnesses. Confessional  statement  of  an  accused,  therefore, cannot  be  made  use  of  in  any  manner  under Section 138B of the Customs Act. Even otherwise such  an  evidence  is  considered  to  be  of  weak nature.”

{See also  Alok Nath Dutta  vs.  State of West Bengal [2006 (13)

SCALE 467] and Babubhai Udesinh Parmar vs. State of Gujarat [(2006)

12 SCC 268]}

22. It  is  a  trite  law  that  evidences  brought  on  record  by  way  of

confession which stood retracted must be substantially corroborated by

other  independent  and  cogent  evidences,  which  would  lend  adequate

assurance to the court  that it  may seek to rely thereupon.  We are not

oblivious  of  some  decisions  of  this  Court  wherein  reliance  has  been

placed for  supporting  such contention  but  we must  also  notice  that  in

14

some  of  the  cases  retracted  confession  has  been  used  as  a  piece  of

corroborative  evidence  and  not  as  the  evidence  on  the  basis  whereof

alone a judgment of conviction and sentence has been recorded.  {See

Pon  Adithan  v.  Deputy  Director,  Narcotics  Control  Bureau,  Madras

[(1999) 6 SCC 1]}

23. The  question  came  up  for  consideration  before  a  Constitution

Bench  of  this  Court  in  Shanti  Prasad  Jain  vs.  The  Director  of

Enforcement [(1963) 2 SCR 297], wherein, inter alia, it was held that the

initial burden would be on the Department.

24. It is interesting to note that both the learned counsel have placed

strong reliance upon a decision of this Court in K.T.M.S. Mohd. & Anr.

Vs.  Union  of  India  [(1992)  3  SCC 178].   This  Court  therein  made  a

distinction between the provisions of the FERA and the Income Tax Act,

opining:

“31.  Leave  apart,  even  if  the  officers  of  the Enforcement  intend  to  take  action  against  the deponent  of  a  statement  on  the  basis  of  his inculpatory  statement  which  has  been subsequently  repudiated,  the  officer  concerned must  take  both  the  statements  together,  give  a finding  about  the  nature  of  the  repudiation  and then act upon the earlier inculpatory one. If on the other  hand,  the  officer  concerned  bisect  the  two statements  and  make  use  of  the  inculpatory statement alone conveniently bypassing the other

15

such  a  stand  cannot  be  a  legally  permissible because  admissibility,  reliability  and  the evidentiary  value  of  the  statement  of  the inculpatory statement depend on the bench mark of  the  provisions  of  the  Evidence  Act  and  the general criminal law.”

Holding in categorical terms that Section 24 of the Indian Evidence

Act shall apply, it was held:  

“But suffice to say that the core of all the decisions of  this  Court  is  to  the  effect  that  the  voluntary nature  of  any  statement  made  either  before  the Custom Authorities or the officers of Enforcement under  the  relevant  provisions  of  the  respective Acts is a sine qua non to act on it for any purpose and if the statement appears to have been obtained by  any  inducement,  threat,  coercion  or  by  any improper  means  that  statement  must  be  rejected brevi manu. At the same time, it is to be noted that merely because a statement is retracted, it  cannot be recorded as involuntary or unlawfully obtained. It  is  only  for  the  maker  of  the  statement  who alleges  inducement,  threat,  promise  etc.  to establish  that  such  improper  means  has  been adopted.  However,  even  if  the  maker  of  the statement  fails  to  establish  his  allegations  of inducement,  threat  etc.  against  the  officer  who recorded the statement, the authority while acting on the inculpatory statement  of the maker is  not completely relieved of  his  obligations  in at  least subjectively  applying  its  mind to  the  subsequent retraction  to  hold  that  the  inculpatory  statement was  not  extorted.  It  thus  boils  down  that  the authority or any Court intending to act  upon the inculpatory  statement  as  a  voluntary  one  should apply its mind to the retraction and reject the same in writing. It is only on this principle of law, this Court in several decisions has ruled that even in passing  a  detention  order  on  the  basis  of  an

16

inculpatory statement of a detenu who has violated the provisions  of  the FERA or  the Customs Act etc.  the  detaining  authority  should  consider  the subsequent retraction and record its opinion before accepting the inculpatory statement lest the order will be vitiated.”

(emphasis supplied)

25. Submission  of  Mr.  P.V.  Shetty  that  appellant  had  special

knowledge and that burden of proof would be on him in terms of Section

106 of the Indian Evidence Act, in a situation of this nature, cannot be

held  to  have  any  substance.   The  initial  burden  to  prove  that  the

confession  was voluntary in nature would be on the Department.   The

special or peculiar knowledge of the person proceeded against would not

relieve  the  prosecution  or  the  Department  altogether  of  the  burden  of

producing some evidence in respect  of that  fact  in issue.   It  may only

alleviate that burden to discharge and very slight evidence may suffice.

This  Court  in  Collector  of  Customs, Madras  & ors.  Vs.  D. Bhoormall

[(1974) 2 SCC 544)] while examining the provisions of Sections 167(8)

and 178A of the Sea Customs Act, held:

“33.  Another  point  to  be  noted  is  that  the incidence, extent and nature of the burden of proof for  proceedings  for  confiscation  under  the  first part of the entry in the 3rd column of Clause (8) of Section  167,  may  not  be  the  same  as  in proceedings when the imposition of the other kind of  penalty  under  the  second  part  of  the  entry  is contemplated.  We  have  already  alluded  to  this aspect  of  the  matter.  It  will  be  sufficient  to

17

reiterate  that  the  penalty  of  confiscation  is  a penalty in rem which is enforced against the goods and the second kind of penalty is one in personam which is enforced against the person concerned in the  smuggling  of  the  goods.  In  the  case  of  the former,  therefore,  it  is  not  necessary  for  the Customs  authorities  to  prove  that  any  particular person is  concerned with their  illicit  importation or  exportation.  It  is  enough  if  the  Department furnishes  prima  facie  proof  of  the  goods  being smuggled stocks.  In the case of the latter penalty, the  Department  has  to  prove  further  that  the person  proceeded  against  was  concerned  in  the smuggling.”

(Emphasis supplied)

26. Yet  again  in  Romesh  Chandra  Mehta  vs.  State  of  West  Bengal

[(1969) 2 SCR 461] although this  Court  held that  any statement made

under  Sections  107  and  108  of  the  Customs  Act  by  a  person  against

whom an enquiry is made by a Customs Officer is not a statement made

by a  person accused  of  an  offence,   but  as  indicated  hereinbefore,  he

being an officer concerned or the person in authority, Section 24 of the

Indian Evidence Act would be attracted.   

27. Reliance has been placed by the Tribunal on the decision of this

Court  in  State  (NCT  of  Delhi)  vs.  Navjot  Sandhu  alias  Afsan  Guru

[(2005) 11 SCC 600], commonly known as the ‘Parliament Attack case.’

Therein also this Court held:

18

“We start with the confessions. Under the general law of the land as reflected in the Indian Evidence Act, no confession made to a police officer can be proved against an accused. 'Confessions'-which is a terminology used in criminal law is a species of 'admissions' as defined in Section 17 of the Indian Evidence Act. An admission is a statement-oral or documentary which enables the court to draw an inference as to any fact in issue or relevant fact. It is  trite  to  say  that  every  confession  must necessarily be an admission, but, every admission does  not  necessarily  amount  to  a  confession. While Sections 17 to 23 deals with admissions, the law as to confessions is embodied in Sections  24 to 30 of the Evidence Act. Section 25 bars proof of a confession made to a police officer. Section  26 goes  a  step  further  and  prohibits  proof  of confession made by any person while he is in the custody of a police officer, unless it be made in the immediate  presence  of  a  Magistrate.  Section  24 lays down the obvious rule that a confession made under any inducement, threat or promise becomes irrelevant  in  a  criminal  proceeding.  Such inducement, threat or promise need not be proved to the hilt. If it appears to the court that the making of the confession was caused by any inducement, threat  or  promise  proceeding  from  a  person  in authority, the confession is liable to be excluded from evidence.  The expression 'appears' connotes that the Court need not go to the extent of holding that the threat etc. has in fact been proved. If the facts  and  circumstances  emerging  from  the evidence adduced make it reasonably probable that the  confession  could  be  the  result  of  threat, inducement or pressure, the court will refrain from acting  on  such  confession,  even  if  it  be  a confession made to a Magistrate or a person other than police officer.”

(emphasis supplied)

19

28. In  Mirah  Exports  Pvt.  Ltd.  Vs.  Collector  of  Customs [(1998)  3

SCC 292] while considering a question of undervaluation under Section

14 of the Customs Act, 1962, this Court held that the burden of proving a

charge of undervaluation lies upon the revenue, stating:

“13.  The  legal  position  is  well  settled  that  the burden of proving a charge of under-valuation lies upon  Revenue  and  Revenue  has  to  produce  the necessary  evidence  to  prove  the  said  charge ‘Ordinarily the Court should proceed on the basis that  the apparent  tenor of  the  agreements  reflect the real state of affairs’ and what is to be examined is ‘whether the revenue has succeeded in showing that the apparent is not the real and that the price shown in the invoices does not reflect the true sale price.’”

29. Recently,  in  Commissioner  of  Customs,  Mumbai  vs.  J.D.

Orgochem  Ltd. [2008  (6)  SCALE  669]  in  regard  to  a  case  of

determination of transactional value, it was held:

“11. Upon  whom  the  onus  of  proof  lies  to establish the transaction value must be considered having regard to phraseology used in the Act and the Rules framed thereunder.”

30. We may at this stage notice some decisions whereupon Mr. P.V.

Shetty has placed strong reliance.   

20

31. In  K.I.  Pavunny  vs.  Assistant  Collector  (HQ),  Central  Excise

Collectorate, Cochin [(1997) 3 SCC 721}, a finding of fact was arrived at

that  the  confession  was  voluntary  in  nature.   Reliance  therein  for  the

purpose of arriving at the guilt of the accused was not only placed on the

statement given under Section 108 of the Customs Act, 1962 but also on

the deposition of evidence of P.Ws. 2, 3 and 5.

32. In  Assistant Collector of Central Excise, Rajamundry  vs.  Duncan

Agro Industries Ltd. & ors. [(2000) 7 SCC 53], this Court opined that an

authority under the Act while recording a statement need not follow the

safeguards provided in Section 164 of the Code of Criminal Procedure,

1973.  Therein also, it was held:

“The  inculpatory  statement  made  by any  person under Section 108 is to non-police personnel and hence it has no tinge of inadmissibility in evidence if it was made when the person concerned was not then  in  police  custody.   Nonetheless  the  caution contained in law is that such a statement should be scrutinized  by  the  court  in  the  same  manner  as confession made by an accused person to any non- police personnel. The court has to be satisfied in such cases, that any inculpatory statement made by an accused person to a gazetted officer must also pass  the  tests  prescribed  in  Section  24  of  the Evidence Act.  If such a statement is impaired by any  of  the  vitiating  premises  enumerated  in Section 24 that statement becomes useless in any criminal proceedings.”

(emphasis supplied)

21

Yet again it was observed:

“We hold  that  a statement  recorded  by Customs Officers under Section 108 of the Customs Act is admissible  in  evidence.   The  court  has  to  test whether  the  inculpating  portions  were  made voluntarily or whether it is vitiated on account of any of the premises envisaged in Section 24 of the Evidence Act.”

33. In  Gulam Hussain  Shaikh  Chougule  vs.  S.  Reynolds,  Supdt.  Of

Customs, Marmgoa [(2002) 1 SCC 155], this Court refused to exercise its

discretionary jurisdiction under Article 136 of the Constitution of India

opining  that  the  confession  was  rightly  held  by the  High Court  to  be

voluntary in nature.   

34. A person accused of commission of an offence is not expected to

prove  to  the  hilt  that  confession  had  been  obtained  from him by any

inducement, threat or promise by a person in authority.  The burden is on

the prosecution to show that the confession is voluntary in nature and not

obtained as an outcome of threat,  etc. if  the same is to be relied upon

solely for the purpose of securing a conviction.  With a view to arrive at a

finding as  regards  the voluntary nature  of  statement  or  otherwise  of  a

confession which has since been retracted, the Court must bear in mind

the attending circumstances which would include the time of retraction,

the nature thereof, the manner in which such retraction has been made

22

and other relevant factors.  Law does not say that the accused has to prove

that retraction of confession made by him was because of threat, coercion,

etc. but the requirement is that it may appear to the court as such.  

35. In  the  instant  case,  the  Investigating  Officers  did  not  examine

themselves.  The authorities under the Act as also the Tribunal did not

arrive at a finding upon application of their  mind to the retraction and

rejected  the  same  upon  assigning  cogent  and  valid  reasons  therefor.

Whereas mere retraction of a confession may not be sufficient to make

the confessional statement irrelevant for the purpose of a proceeding in a

criminal  case  or  a  quasi  criminal  case  but  there  cannot  be  any doubt

whatsoever that the court is obligated to take into consideration the pros

and cons of both the confession and retraction made by the accused.  It is

one thing  to  say that  a retracted confession  is  used as a corroborative

piece of evidence to record a finding of guilt but it is another thing to say

that  such  a  finding is  arrived  at  only on the  basis  of  such confession

although retracted at a later stage.   

36. Appellant  is  said  to  have  been  arrested  on  27.10.1994;  he  was

produced  before  the  learned  Chief  Metropolitan  Magistrate  on

28.10.1994.  He  retracted  his  confession  and  categorically  stated  the

manner in which such confession was purported to have been obtained.

23

According  to  him,  he  had  no  connection  with  any  alleged  import

transactions, opening of bank accounts, or floating of company by name

of M/s Sun Enterprises, export control, Bill of Entry and other documents

or alleged remittances. He stated that confessions were not only untrue

but also involuntary.   

37. The allegation that he was detained in the Office of Enforcement

Department  for  two  days  and  two  nights  had  not  been  refuted.   No

attempt has been made to controvert the statements made by appellant in

his application filed on 28.10.1994 before the learned Chief Metropolitan

Magistrate.  Furthermore, the Tribunal as also the Authorities misdirected

themselves in law insofar as they failed to pose unto themselves a correct

question.  The Tribunal proceeded on the basis that issuance and services

of a show cause notice subserves the requirements of law only because by

reason thereof an opportunity was  afforded to the proceedee to submit its

explanation.  The Tribunal ought to have based its decision on applying

the correct principles of law.  The statement made by the appellant before

the learned Chief Metropolitan Magistrate was not a bald statement. The

inference that burden of proof that he had made those statements under

threat and coercion was solely on the proceedee does not rest on any legal

principle. The question of the appellant’s failure to discharge the burden

would arise only when the burden was on him.  If the burden was on the

24

revenue,  it  was  for  it  to  prove  the  said  fact.   The  Tribunal  on  its

independent examination of the factual  matrix placed before it  did  not

arrive  at  any  finding  that  the  confession  being  free  from  any  threat,

inducement or force could not attract the provisions of Section 24 of the

Indian Evidence Act.  

38. In  Mohtesham  Mohd.  Ismail  vs.  Spl.  Director,  Enforcement

Directorate & Anr. [(2007) 8 SCC 254], this Court held:

“15. Apart therefrom the High Court was bound to take into consideration the factum of retraction of the confession by the appellant. It is now a well- settled principle of law that a confession of a co- accused  person  cannot  be  treated  as  substantive evidence  and  can  be  pressed  into  service  only when the court is inclined to accept other evidence and feels the necessity of seeking for an assurance in support of the conclusion deducible therefrom. [See Haricharan Kurmi etc. v.  State of Bihar AIR 1964 SC 1184;  Haroom Haji Abdulla v.  State of Maharashtra  AIR  1968  SCC  832;  and  Prakash Kumar v. State of Gujarat (2007) 4 SCC 266].

16.  We  may,  however,  notice  that  recently  in Francis  Stanly  @  Stalin v.  Intelligence  Officer, Narcotic  Control  Bureau,  Thiruvanthapuram (2006)  13  SCC 210,  this  Court  has  emphasized that confession only if found to be voluntary and free from pressure, can be accepted. A confession purported to have been made before an authority would require a closure scrutiny. It is furthermore now  well-settled  that  the  court  must  seek corroboration  of  the  purported  confession  from independent sources.”

25

39. There is another aspect of the matter which cannot be lost sight of.

The allegations made in the show cause notice form the foundation of the

case.   Appellant  was  asked  to  show  cause  inter  alia  alleging  that  he

instead of utilizing the foreign exchange acquired on the basis of forged

documents, for import of rough diamonds, got the same, after remitting

abroad, credited in the foreign bank account Nos. 564-000-4888-5 and

96300-1254-9 in Standard Chartered Bank, Asian House VI Branch and

American  E Bank,  Central  Branch  at  Hongkong,  being  maintained  by

foreign nationals.  Apart from the fact that no enquiry in that behalf had

been directed, the Tribunal itself held:

“14. On  the  basis  of  above  discussion  it established  that  the  appellant  was  the  brain working  behind  the  subject  import  transactions where  non-existent  firms were  established  under his  guidance,  for  which  foreign  exchange  was acquired  and  remitted  without  corresponding import of goods particularly when the name of his co-brother, Harshad Godalia was disclosed by the appellant himself during his statement along with bank  accounts  of  foreign  nationals  to  whom the foreign exchange was remitted to Hongkong.”

The finding that he was the brain behind and not involved in the

actual transaction, therefore, does not meet the requirements of law.

26

40. In  Commissioner  of  Central  Excise,  Bangalore  vs.  Brindavan

Beverages (P) Ltd. & Ors. [(2007) 5 SCC 388], this Court held as under:  

“12. Per  contra,  learned  Counsel  for  the respondents submitted that there is no material that the  respondents  had  ever  been  parties  to  the  so called arrangement, even if it  is accepted for the sake  of  arguments  but  not  conceded,  that  such arrangement  was  in  reality  made.  There  was  no material  brought  on  record  to  show  that  the respondents had any role to play in such matters as alleged. Even the show cause notice did not refer to  any  particular  material  to  come  to  such  a conclusion. Therefore, the Commissioner and the CEGAT  were  justified  in  holding  that  the respondents were entitled to the benefits.

13. We find that in the show cause notice there was  nothing  specific  as  to  the  role  of  the respondents,  if  any. The arrangements  as alleged have not been shown to be within the knowledge or  at  the  behest  or  with  the  connivance  of  the respondents.  Independent  arrangements  were entered into by the respondents with the franchise holder (sic franchiser).  On a perusal of the show cause notice the stand of the respondents clearly gets established.

14. There  is  no  allegation  of  the  respondents being parties to any arrangement. In any event, no material in that regard was placed on record. The show cause notice is the foundation on which the department  has  to  build  up  its  case.  If  the allegations  in  the  show  cause  notice  are  not specific and are on the contrary vague, lack details and/or unintelligible that is sufficient to hold that the  noticee  was  not  given  proper  opportunity  to meet the allegations  indicated in the show cause notice. In the instant case, what the appellant has tried  to  highlight  is  the  alleged  connection

27

between  the  various  concerns.  That  is  not sufficient  to  proceed  against  the  respondents unless  it  is  shown  that  they  were  parties  to  the arrangements,  if  any.  As  no  sufficient  material much less any material has been placed on record to  substantiate  the  stand  of  the  appellant,  the conclusions  of  the Commissioner as  affirmed by the CEGAT cannot be faulted.”

41. For  the  reasons  aforementioned,  the  order  of  the  Tribunal  and

consequently  the  impugned  judgment  and  order  cannot  be  sustained.

They are set aside accordingly. This appeal is allowed.  The amount of

Rs.  2,65,000/-  which  is  with  the  Department  shall  be  refunded  to  the

appellant within four weeks from date.  In the facts and circumstances of

the case, there shall be no order as to costs.

.……………….……….J. [S.B. Sinha]

……………….……..…J.     [Cyriac Joseph]

New Delhi; December 18, 2008

28