Dam not good
It doesnt help that the laws cant keep up with the computer world, but they have some weird laws out their. They mainly pick on the main ways of doing something legal or illegal on computers.
I take it that this happened in New Zealand?
Im guessing they checked the log of who had been issued a IP address. As for removing your computer gear, if its left in the car they can just pull you over and remove it, but if its in your house they need a warant.
It could be mainly to scare you since they dont know what you where doing with your computer.
Did they inform you indetail about why the dont want you to use the program?
Any way thats just my 2c
Try not to get caught next time