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, 2

nd

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.

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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

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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.”

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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.

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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

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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

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