FERA’s reverse burden applies only after the Department proves the alleged contravention.

The Enforcement Directorate alleged that a search of the respondent’s residential and business premises on 23 April 1985 yielded ₹1,75,000 and loose sheets recording foreign-exchange transactions.

It relied on statements recorded from the respondent on 23 and 24 April 1985, which he retracted on 26 April 1985.

The Adjudicating Authority found contraventions of Sections 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973 (FERA), imposed penalties of ₹10,00,000 for each contravention, and ordered confiscation of the currency.

The Appellate Tribunal set aside that order; the Union of India appealed under Section 35 of the Foreign Exchange Management Act, 1999, read with Section 54 of FERA.

Whether the alleged recovery of currency and loose sheets, together with the respondent’s retracted statement, established the charged contraventions of Sections 8(1) and 8(2) of FERA.

Whether Sections 71 and 72 of FERA shifted the burden to the respondent or made the loose sheets admissible and sufficient evidence of contravention.

Under Section 71 of FERA, the person proceeded against bears the burden of proving that requisite permission was obtained only after the Department establishes the act alleged to require permission; the provision does not relieve the Department of its initial burden to prove that act.

Section 72 permits presumptions concerning seized documents, including the truth of their contents, only where the document is otherwise admissible in evidence.

Applying CBI v. V.C. Shukla, (1998) 3 SCC 410, the Court held that loose sheets are not books of account and their entries are not admissible under Section 34 of the Indian Evidence Act, 1872.

Under Telstar Travels Pvt. Ltd. v. Enforcement Directorate, (2013) 9 SCC 549, a retracted statement may be relied upon only after the adjudicating authority assesses whether it was voluntary; it must also be corroborated.

The Department did not examine the panch witnesses, and the panchnama itself described conduct by the witnesses that cast doubt on the recovery. The Court therefore found that the recovery proceedings and the contents of the panchnama were not proved.

In any event, possession of the currency alone did not establish that it represented proceeds of foreign-exchange sales; the respondent produced bank and cash-book records explaining his possession of the amount.

Section 72 could not cure the evidentiary defect because the loose sheets were not otherwise admissible under Section 34.

The retracted statement was not shown to be voluntary and lacked independent corroboration.

Since the Department had not first proved that the respondent dealt in foreign currency, the burden under Section 71 did not shift to him.

The appeal was dismissed, with no order as to costs.