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FEMA - Case Laws
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2025 (4) TMI 1603
Hawala transaction - note book was recovered during the course of search containing the details of the business of hawala on day-to-day basis - scope of retracted statement - HELD THAT:- A note book was recovered during the course of search. It was containing the details of the business of hawala on day-to-day basis. It was then explained for the short figure mentioned therein. That was not the loose sheet but note book which otherwise said to be containing business account of the appellant, therefore the respondent rightly relied on the note-book containing the details of the accounts showing hawala transaction. The details mentioned therein was not pertaining to Automobile business otherwise showcased by the appellant. Apart from the aforesaid, in the statement of Shri Mahendra Jain, he referred to the business of Shri Ramesh B. Doshi which was not only of automobile but even of hawala transactions.
The said statement was not retracted, thus, even if the appellant retracted from his statement and sent a telegram, as reproduced above, does not show complete retraction but acceptance of certain material by the appellant. The note-book said to be containing the accounts of the appellant, as stated by the Counsel for the appellant and otherwise the statement of Shri Mahendra Jain has corroborated the note-book recovered from the appellant, Shri Ramesh B. Doshi. Thus, it is not that there was no material other than the retracted statement to find the case of contravention under section 3(a), (b) and (c) of the Act of 1999.
Appellant has referred several judgments where it has been held that retracted statement may not be relied and we agree with the proposition therefor. It is not required to refer or cite those judgments but would be referring the judgment in the case of Vinod Solanki [2008 (12) TMI 31 - SUPREME COURT] where it was held that retracted statement can also be relied, if it is supported or corroborated by other evidence.
No illegality or error in the impugned order passed by the Special Director to rely on the material to draw his conclusion.
Reliance on the loose sheets - In the instant case we have recorded finding that apart from loose-sheets, note-book was recovered said to be an account book of the appellant containing the business transaction but the figures mentioned therein and explained by the appellant was showing hawala transactions and accordingly ignoring the loose-sheet even the note-book was corroborating the evidence to indicate that appellant Shri Ramesh B. Doshi was involved in hawala transactions.
We are accordingly not required to cite other judgments in reference to loose-sheets and as to whether reliance on it can be placed because we have not placed reliance on the loose-sheets but on the note-book which is admitted by the appellant though showing it to be accounts book. Therefore, we are not citing the judgments for that reason.
Denial of cross-examination - Cross-examination is permitted when the statement of witness arerecorded before the Court or the Authority. It may be in the shape of affidavit but not recorded during the course of the inquiry or investigation. This is as per the provisions of the Evidence Act and in the instant case, no statement was recorded before the Adjudicating Authority so as to permit cross-examination. It is apart from the fact that in the quasi-judicial proceedings, the cross-examination cannot be claimed as a course. It may further be added that in our order, we have not relied on the statement of Shri Abhilash Vasa and Shri AftabAlam, though, if the reliance is placed in reference to their version, a case is further made out against the appellant. Thus, denial of cross-examination in the facts of this case cannot be held to be illegal and accordingly we do not find any error in the impugned order to hold contravention of Section 3(a), (b) and (c) of the Act of 1999.
Penalty imposed - appellant Shri Ramesh B. Doshi was getting commission to facilitate transaction and it was not that his own business other than to receive the commission and appellant was receiving commission of 10 to 15 paise per dollar - HELD THAT:- We are of the opinion that the total penalty imposed upon the appellant, Sh. Ramesh B. Doshi needs to be reduced and accordingly we cause interference in the penalty amount which is substituted by the penalty of Rs.40,00,000/- for contravention of section 3(c) and for Section (a) it is imposed for Rs.60,00,000/- and for section 3(b) it is made to Rs.40,00,000/- on the appellant- Shri Ramesh B. Doshi.
For Shri Mahendra Jain is concerned, he was the employee of Shri Ramesh B. Doshi and was getting salary of Rs.15000/-. The respondent has not placed on record any document to show it to be his business and directly involved in hawala transactions but was working as an employee of Shri Ramesh B. Doshi and thereby their remain no justification to impose heavy penalty on him and accordingly it is substituted it to Rs. 90,000/- for Section 3(c); Rs.1,00,000/- for Section 3(a); and Rs. 90,000/- for Section 3(b) of the Act of 1999.
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2025 (4) TMI 1544
Tribunal exercising its discretion by reducing the pre-deposit of penalty only to 20% - Tribunal has exercised its discretion in the context of second proviso to Section 19(1) of the Act or not? - HELD THAT:- Once the legislature fixes the discretion to any authority, it is to the satisfaction of that authority it should exercise such discretion. Moreover, the words used in the second proviso to Section 19(1) also states that 'the appellate Tribunal is of the opinion'. It means, if the Tribunal forms an opinion that some discretion has to be exercised in a particular case, then only such a discretion has to be used.
Therefore, with regard the question of forming an opinion, it is fully left to the discretion of the Tribunal. Whether such opinion that the Tribunal had formed was based on the merits of case, cannot be gone into by sitting over on appeal by this Court and therefore, ultimately such kind of discretion if it is exercised by the original authority to whom such power of discretion is vested, it normally would not be touched upon by the appellate forums.
Here in the case in hand, in fact the Tribunal has exercised its discretion by reducing the pre-deposit of penalty only to 20%. Therefore, it is a case where the Tribunal, after having formed an opinion based on the facts and circumstances of the case, has reduced the pre-deposit of penalty to only 20%. Hence, it cannot be stated that the Tribunal has not exercised its discretion under Second proviso to Section 19(1) of the Act.
The imposition of penalty is also for the purpose of safeguarding the realization of penalty as, that also has to be taken into account. Therefore, by striking a balance between 'undue hardship' and 'safeguarding the realization of penalty', in between the two, the discretion of the Tribunal has to be exercised. Such a discretion cannot be exercised in the manner expected by the litigant in any lis. Since the discretionary power vested under the second proviso to Section 19(1) of the Act to the Tribunal has been exercised properly in this case, we do not find any reason to interfere with the same.
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2025 (4) TMI 1543
Applicability of provisions of FERA to the appellant, who is not a citizen of India u/s 1(3) of the Act - HELD THAT:- The bare reading of sub clause (III) covers the person other than citizen of India who come and stay in India for taking employment or carrying a business or vocation in India. It can be when he is staying with his or her spouse and spouse being a resident of India, etc.
The definition of “person resident of India” thus covers a person not citizen of India but would fall in the definition in a given circumstances narrated under clause (III).
We are unable to accept the first argument raised by the appellant because under section 1 (3), word “also” has been used to indicate that the act of 1973 would apply to the citizen of India outside India also and branches outside India etc. Section 1(3) does not indicate that it would apply to citizen of India only. The word „only‟ does not exist under the provisions referred to above.
Thus first argument raised by the appellant is summarily rejected.
Applicability of section 8(1) - The restriction on dealing in foreign exchange has been imposed without previous general or special permission of RBI on all the persons other than the authorized dealer in India. No “person resident in India” other than authorized dealer shall outside India purchase or otherwise acquire or borrow or sale the land with any person not being authorized dealer. In the instant case, the appellants are not falling in the definition of “person resident of India” for the reason that no evidence was led by the respondent to prove that during the relevant period involved in this case, the appellant came and stayed for the purpose given under clause (iii) of section 2(p) of the Act of 1973. Accordingly, the counsel for the respondent could not clarify as to how section 8 (1) of the Act of 1973 can apply to the appellant.
The issue aforesaid has not been dealt with by the Special Director, DOE though it has been recorded that on account of the transfer of money by the Standard Chartered Bank, there was a contravention of section 8 (1) of the Act of 1973 but in this case, it could not be proved that appellant was falling in the definition of “person resident of India”. Thus, how section 8 (1) would apply to him.
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2025 (4) TMI 113
Seeking compounding of the offence adjudicated by the adjudicating authority under FEMA and the subsequent demand notice issued by the Assistant Director (PRC), Government of India - HELD THAT:- Compounding cannot be claimed as a matter of right but it is always subject to the legal provisions.
From the chronological sequence of events in this case it appears that the subject transactions took place between 31st February, 2011 and 8th February, 2013. Show cause notice was issued by the adjudicating authority being the Special Director (Enforcement Directorate) on 18th November, 2022.
Application for compounding was filed by the petitioner on 20th January, 2023 but the same was returned on 8th January, 2024 on the ground that the application lacked clarity and all facts and figures were not mentioned therein. The petitioner was given liberty to file fresh compounding application.
In the instant case the offence of the petitioner was a compoundable one. The petitioner, though applied for compounding at the initial stage, but did not proceed with the same after the application of the petitioner was returned for want of proper details.
The petitioner, without raising any objection, participated in the adjudication proceeding. The participation of the petitioner implies that the petitioner did not want to compound the offence and, accordingly, proceeded for adjudication of the same. After the adjudication order was passed and the petitioner has been found guilty of the offences, now prayer has been made to permit the petitioner to proceed with the compounding.
It appears that the petitioner simply tried to test the waters and see as to whether the adjudication order comes in his favour or not. After the adjudication order went against him and penalty amount has been quantified, the petitioner seeks to proceed with the compounding. Had the petitioner been aggrieved he would have been required to prefer an appeal, and for doing so, the petitioner had to deposit the entire amount of penalty. The petitioner is trying his level best not to pay the penalty that has been imposed and delay the proceeding for an indefinite period on the plea of compounding.
The compounding authority does not have the determination or the jurisdiction to cancel/overrule or set at naught the order passed by the adjudicating authority. It is only one order that survives and that is the order of the adjudicating authority. The petitioner took the risk and did not proceed with his application for compounding prior to conclusion of the adjudication proceeding.
The petitioner could have pressed the application for compounding any time prior to conclusion of the adjudication. The FED Master Direction number 4/2015-16 permits compounding even when the adjudication proceeding is ongoing. After the adjudication is complete and offence has been established, the contravener would be bound to comply with the direction passed by the adjudicating authority.
The Act is in place since 1999 and the relevant Rules, Regulations, Circulars are also existing for quite some time. The petitioner has not been able to show a single instance when the authority permitted compounding after conclusion of the adjudication process. The interpretation of the petitioner, if accepted, will lead to an uncertain situation and reaching finality to the proceeding will be a never-ending process.
As the said situation is not contemplated in the Act, there is no time limit prescribed within which an application of compounding can be filed after the order of adjudication has been passed. It will be an open ended process and any person found guilty in the adjudication proceeding, can seek to file an application for compounding any time he chooses. Penal provision of the Act cannot be taken so lightly leaving it in such an indecisive state.
By this way the contravener will remain scot-free and the penal provision of the Act cannot be implemented. The Act will be rendered completely toothless. The same will also give out a very wrong message to the society at large. Tendency to circumvent the law will increase. To avoid such a situation, the legislature has consciously not provided the provision to compound an offence after conclusion of the adjudication process.
The Court is of the opinion that the application made by the petitioner seeking compounding of the offence on conclusion of the adjudication proceeding cannot be allowed and the authority rightly rejected the application filed by the petitioner. The Court is not inclined to exercise jurisdiction in the matter.
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2025 (4) TMI 16
Offence under FERA provisions by failing to ensure that goods exported under the "Repayment of State Rupee Credits" scheme actually reached Russia - Appellants have failed to establish that 500 MTs of Wheat Flour actually reached Russia which was required as per “Scheme of Export of Goods and Services against Repayment of State Credits granted by the erstwhile Soviet Union - Failure to fulfill the specific requirement of the Scheme of Export of goods to Russia under Repayment of State Credits granted by the erstwhile Soviet Union
HELD THAT:- The arguments made by the Appellants that since they had exported the Goods on FOB basis, they had no control over the destination where Goods would be unloaded does not cut ice in the facts of the present matter.
In view of the observation afore, it is clear that after having opted for the said Scheme they could not have agreed to adhere to only few terms of the Scheme and not to other terms. It is obvious that any exporter who did not want to take benefit of the Scheme is also required to realise the export proceeds in Foreign Currency directly from the foreign buyer. If the Exporter chose to realise the export proceeds in the Indian Currency, then he had to ensure that the export is made within the bilateral framework of trade and the exports are made to the buyer in Russia.
Appellants cited the order dated 02.08.2007 of this Tribunal. We observe that the order relates to the maritime agents/shipping lines and not to the exporters. Moreover, the order has failed to take into account the responsibilities which are entailed from trading within the bilateral framework as enunciated under the Scheme of “Export of Goods & Services against Repayment of State Credits granted by erstwhile Soviet Union”.
The Judgment in Contship Container Lines Ltd. vs. D K Lall [2010 (3) TMI 992 - SUPREME COURT] is in the context of the claim of the exporter with regard to the insurance cover if in case there is mis-delivery by the carrier. It is submitted with respect that this Judgment has no bearing in so far as the issue at hand is concerned.
The decisions of the Hon’ble Supreme Court in Nestle India Ltd versus Commissioner of Central Excise, Chandigarh [2009 (2) TMI 22 - SUPREME COURT] and Commissioner of Central Excise, Mumbai versus Burroughs Wellcome (I) Ltd. [2006 (8) TMI 191 - SUPREME COURT] cited by the Appellants is not applicable in view of finding that the impugned order is neither cryptic nor without reasoning. Ld. Special Director (Appeals) has made definite finding of reiteration of the Adjudication Order dated 16.07.2010 and goes on further to state the limited disagreement which resulted in reduction of penalties which shows application of mind.
Thus, we find that the impugned order dated 06.03.2013 cannot be intervened with.
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2025 (3) TMI 1141
Offence under FEMA - appellant was involved and played vital role in preparing the forged documents submitted in the bank and was assisting the exporter in supplementing the goods in the consignments of M/s Prominent Exim - HELD THAT:- The facts on record does not show any material to implicate and prove a case for contravention of the provisions quoted above by the appellant Manoj Arjun Gore. He was Custom Clearance Agent and used to process papers for export of the materials.
The commission for it was to be received by Vinod Chitalia to the extent of 40% of DEPB and was passing it to the appellant to the extent of 15%. The amount received for process of the export documents cannot make out a case for contravention of Section 3(b) and 3(d) of the Act of 1999.
Respondents could not refer to the evidence to show that appellant made contravention to Section 3(b) and 3(d) of the Act of 1999. The penalty of Rs.4,00,000/- and Rs.6,00,000/- has been imposed on the appellant but finding no material to prove contravention of Section 3(b) and 3(d) of the Act of 1999 by the appellant, we cause interference in the impugned order and is set aside qua the appellant. Appeal is allowed with aforesaid.
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2025 (3) TMI 1140
Contraventions of FEMA provisions - liability for the failure to realize and repatriate export proceeds under Section 7 and 8 of FEMA - Whether the appellants can be absolved of liability for the contraventions due to their retirement and the provisions of the Family Arrangement cum Compromise Deed and Indemnity?
HELD THAT:- The Appellants therefore cannot escape the rigours of law with respect to their failure in realization of the pending export proceeds with respect to the 07 GRs totaling USD 3,93,094.63 as mentioned above. We observe that with respect to the 07 GRs for amount of USD 3,93,094.63, the statutory period of six months for realization and repatriation of the full export value of the goods exported had expired between 02.05.2000 to 13.08.2000, that is much before the date of resignation of the two Appellants w.e.f. 01.09.2000.
The pleadings made with respect to the efforts of contacting the buyers through letters, faxes and telephones etc. to be regarded as reasonable steps cannot be accepted as observed in the preceding paragraphs of this Order.
Appellants too have failed to produce material available to corroborate that they had taken effective steps to recover /repatriate the foreign exchange dues.
We therefore, find that the resignation of the two Appellants from M/s Rosecut Diamonds would not absolve them from the charge of contraventions of FEMA r/w Section 42 of FEMA with respect to the 07 GRs totaling USD 3,93,094.63.
Thus, we find that the two Appellants, have contravened Section 7 and 8 of the FEMA, 1999 read with Regulations 8, 9 and 13 of the FEMA Regulations, 2000 read with Section 42(1) of FEMA, 1999 with respect to the 07 GRs of the amount USD 3,93,094.63.]
Penalty imposed for failure to realize and repatriate US $ 10,24,967.32 with respect to 19 GRs - Adjudicating Authority has imposed penalty of Rs, 1,00,00,000/- on Shri Ketan A Shah who was the Partner of the Export Firm throughout the relevant period for the aforementioned contraventions in terms of Section 42 (1) of FEMA. In view of these circumstances and factors, we reduce the penalty imposed on the two Appellants to Rs 10,00,000/- (Rs Ten Lakhs Only) each. Since, Sh. Mehul R Shah and Sh. Ashwin H Shah in Appeals have paid Rs. 5,00,000/- as pre-deposit of the penalty amounts, the amount of pre-deposit made by the two Appellants are to be adjusted against the aforementioned reduced penalty amounts.
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2025 (3) TMI 1037
Guilty of the offence u/s 6(4), 6(5) 8(1), 9(1)(a) and 9(1)(f)(i) of Foreign Exchange Regulation Act, 1973 - fine imposed - Court [2014 (9) TMI 1085 - DELHI HIGH COURT] is of the view that the AO dated 24th March, 2004, and the impugned order of the AT to the extent they hold the appellant liable for contravention of Section 8(1) of FERA, cannot be sustained in law - HELD THAT:- We are not inclined to interfere with the impugned judgment and order of the High Court; hence, the special leave petition is dismissed.
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2025 (3) TMI 686
Denial of principles of natural justice - absence of cross-examination of the Departmental Officers - Special Director, Enforcement Directorate had denied the request to seek the cross-examination of Officer who recorded the statement of the Appellant under the provision of Custom Act, 1962 and Officer who recorded the statement of co-noticees under the provisions of FERA.
HELD THAT:- We are unable to accept the contentions of the Appellant as the proceedings under Customs Act are factually different from the present proceedings under FERA.
Appellants have been unable to prove how the cross-examination of theDepartmental Officials would have changed the outcome of the case, or by being denied the opportunity to cross-examine, they were adversely impacted during the Adjudication proceedings. We further observe that the Appellants have been unable to prove how the denial of the opportunity to cross-examine the Department Officers had caused prejudice to the Appellants in the presentcase.
Absence of cross-examination of the Departmental Officers has not caused any prejudice to the Appellants in the present matter and not allowing the cross-examination was not fatal to the adjudication proceedings. We therefore find the impugned Interlocutory Orders to be maintainable and sustainable.
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2025 (3) TMI 336
Breach of the principles of natural justice - denial of request to seek the cross-examination of Officer who recorded the statement of the Appellant under the provisions of Customs Act, 1962 and Officer who recorded the statement of co-noticees under the provisions of FERA.
HELD THAT:- We observe that the tool of cross-examination is used so as to establish the truth, on the basis of certain reasonable grounds available with the petitioners. It does appear far-fetched that coercion while recording the statement can be established through such tool in the absence of any other reasonable ground to make a such assertion.
It is unlikely that the Departmental Officers would have admitted that the statements were recorded under coercion, duress or inducement. In any case, the Appellants have failed to specify either before the Ld. Special Director or in the Appeals before us as to how exactly the prejudice is being caused to their respective interest by denial of cross-examination other than the ground mentioned in the Appeal.
We find support from the three Judge Bench judgment of the Hon’ble Supreme Court in State of U.P. v. Sudhir Kumar Singh [2020 (10) TMI 746 - SUPREME COURT]
We also note that the list of relied upon documents to the Show Cause Notice dated 17.05.2002 has 61 serialised items which comprise of statements, retractions, letters, Bank Account opening forms, directives, postal covers, copies of invoices, summons, agreement and copies of Shipping Bills. It is on record that the Ld. Special Director issued directions to furnish the copies of relied upon documents to the Appellants.
Appellants have not even examined the merit of the documents which have been relied upon in the Show Cause Notice dated 17.05.2002 and have raised the issue of cross- examination without demonstrating the necessity for it.
Thus, we find that the two interlocutory orders cannot be intervened with. We therefore, dismiss the Appeals.
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2025 (3) TMI 66
Penalty imposed for contraventions u/s 8(3) and 8(4) of FERA -person “guilty” of offences under the FERA Act - HELD THAT:- Proceedings under the FERA Act are not criminal proceedings but are adjudicatory in nature. Appellant Tribunal for Foreign Exchange is an adjudicatory body, which performs quasi-judicial functions and act as administrators and adjudicators. They are not ‘courts’. While it is very much within their powers, to impose penalties for non-compliance of provisions of FERA, however, it does not lie within their domain to pronounce a person “guilty” of offences under the FERA Act.
Pronouncing a person “guilty” has serious consequences and to adjudicate and give a finding of ‘guilty’ lies within the exclusive domain of the competent courts of jurisdiction.
In this view of the matter, the penalty imposed by the Appellant Tribunal for Foreign Exchange on the appellants is upheld, however, the word “guilty” used in the entire order 02.06.2016 against the appellants is to be considered as “redacted”.
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2025 (2) TMI 686
Penalty imposed on the Respondent for contravention of Section 3(c) of FEMA - Order passed on the facts that the officials of Police Station Rahon, Distt. Shaheed Bhagat Singh Nagar, Punjab intimated the ED Office that they had seized an amount involved in Hawala transaction from two persons - Investigation was initiated by the Enforcement Directorate under the provisions of FEMA - Special Director (Appeals) has held that the statement was retracted by the Respondent at the first possible opportunity.
HELD THAT:- In response to the notice under Section 17(4) of the FEMA Act, Sh. S.L. Chopra & Sh. Ravi Chopra, Advocate and Shri Pankaj Yadav, Legal Consultant of Enforcement Directorate appeared for hearing. The appellant's AR referred to the fact that the statement was retracted by the appellant at first possible opportunity. Also, it is seen from the records and submission of the appellant that the purchase of the car could not be completed, hence, no documentary evidence could be submitted. Further, for the source of money, the Appellant has filed CA certified copy of Cash book, which explains the source of cash.
Also, it is seen from the order that no proper investigation has been made by the Adjudicating Officer to establish clear chain of events or link between persons involved and no effort has been made to trace or record a statement of Shri Rocky Singh or trace the trail of money. In the absence of any proof or sound basis for levy of penalty or clear chain of events, allowing the appeal and directing the respondent to waive off the penalty and release the confiscated amount within 30 days of this order.
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2025 (2) TMI 317
Seizure order made under FEMA - remitting foreign exchange within a short span of few months, no import took place against those outward remittances - Commissioner set aside seizure order - HELD THAT:- We find that an elaborate order has been passed by the Commissioner/Competent Authority after considering all the issues. It not only considered legal but factual issues raised by the parties.
If the case in hand is taken in chronological order, it started at the instance of M/s Sunshine Global Importers said to have been managed by one Ramash Babu Srinivasan. The bank account in the name of the company was opened along with the Certificate of Importer Exporter Code, Service Tax Registration Certificate, Pan Card, E-tax Payment, etc. It was with 'Yes Bank' and even before the Indusind Bank where the account opening form application along with Pan Card was submitted for registration of MSME by the Govt. of Tamil Nadu. The amount of Rs.112.27 Crores was remitted from the account of M/s Sunshine Global Importers.
The starting point of the investigation should have been the bank accounts of the aforesaid company to find out as to from where a sum of Rs.112.27 Crores was deposited. It has to find out the source behind the deposit. However, instead of finding out the source to deposit Rs.112.27 Cores in the account of M/s Sunshine Global Importers, the appellant had tried to collect the evidence from the company from where the money was transmitted leaving the first point of investigation.
Appellant even failed to make serious investigation to find out the person holding five companies in Hong Kong in whose accounts the remittance of Rs.112.27 Crores was made.
It is despite expiry of long period and, in fact, this Tribunal had provided additional time to the appellant to complete the investigation. They could not complete the investigation though period for it was got curtailed on account of the order passed by the Division Bench of Delhi High Court preponing the date of hearing of the appeal with a direction that the appeal should be heard without adjournment on 04.11.2024 though 5th December, 2024 was the date fixed by the Tribunal.
What we find is that the appellant failed to collect the material to make out a case for contravention of Section 4 of the Act of 1999. The case could not have been taken against the respondents based on the statements of few persons without corroborative evidence and that too relying on the statement of Sawan Bohra who retracted his statement. The statement of Bharat Kumar has also been recorded but without any corroboratory evidence. In fact, M/s J.G. Group have been referred without showing it to be a legal entity in that name. Thus, we find that till date, the appellant has failed to collect the evidence to the extent required for making out a case against the appellant for the contravention of Section 4 of the Act of 1999. Thus, we find no reason to cause interference in the order. The appeal is accordingly dismissed.
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2025 (2) TMI 17
Maintainability of the writ petition due to the availability of appeal remedy under Section 19 (1) and Section 35 of FEMA - Delay in issuance of SCN - Violation of Foreign Exchange Management Act (FEMA) and Transfer or Issue of Security by a Person Resident Outside India, Regulations 2000 - contravention of provisions of Section 6 (3) (b) r/w Section 47 of the Foreign Exchange Management Act, 1999 r/w Regulations 3, 4 and 5 and para-3 and para 9(1) (B) (i) of Schedule 1 of TISPRO Regulations 2000 and annexure – B to para 2 of schedule – 1 of TISPRO Regulations 2000 r/w consolidated FDI Policies dated 01.04.2010 and 01.10.2010 - violation of principles of natural justice.
HELD THAT:- Merely, because a Subordinate Officer of 3rd respondent has sworn affidavit and filed it on behalf of the second respondent also in some of the writ petitions, it cannot be concluded that the second respondent has made up his mind. Further under the scheme of the Act, the order passed by the second respondent is not final and the same is subject to the appeal before the Appellate Tribunal under Section 19(1) and also subject to further appeal before this Court under Section 35 of FEMA.
In view of the appellate remedy available before Tribunal as well as before this Court, it cannot be said that relegating the party to submit his explanation before the second respondent would violate natural justice principles. First of all, the second respondent has not signed the counter affidavit and in some of the cases, counter affidavit was filed only for respondents 1 and 3 and no counter affidavit was filed on behalf of the second respondent. In some of the writ petitions, the counter affidavit was sworn by one of the Subordinate Officers in the Cadre of Assistant Director working in the office of the third respondent and the same is not binding on the Superior Officer namely the second respondent. Therefore, the arguments advanced on behalf of the petitioners is not impressive that the second respondent has already made up his mind regarding the delay in issuing show cause notice and the contravention of provisions of FEMA and accordingly, the arguments regarding violation of natural justice principles is also rejected.
The impugned show cause notice has been issued to petitioners by directing them to offer an explanation why adjudicatory proceedings shall not be initiated against them. After considering the explanation offered by the petitioner, the second respondent will decide whether to initiate the adjudicatory proceedings under Section 16 or not. In case he decides to go ahead with adjudication process, the petitioner shall be given reasonable opportunity to put forth his case. Any final order passed by the adjudicating authority under Section 16 is liable to be questioned by filing an appeal under Section 19 of FEMA - the petitioners are not only entitled to file one appeal, the petitioners are also entitled to file further appeal or second appeal before this Court under Section 35 of FEMA, if the petitioners are able to make out a question of law out of the order passed by the Appellate Tribunal.
The preliminary objection raised by the learned Additional Solicitor General regarding maintainability of the writ petitions upheld.
Delay in issuance of SCN - HELD THAT:- The maximum period of five years of limitation for the revisional authority to exercise its jurisdiction was fixed by taking into consideration the scheme of the said Act. Therefore, the maximum period of five years fixed as a reasonable period in the said case law cannot be made applicable as a general rule to all the cases - the reasonable necessary delay in issuing show cause notice depends on facts and circumstances of the case and the said factual aspect can also be raised by the petitioners before the second respondent.
Conclusion - i) The omission of Section 6(3)(b) of FEMA does not invalidate the show cause notice, as the omission is considered a repeal, preserving the provision's applicability to past actions. ii) The delay in initiating proceedings is a factual issue to be addressed by the adjudicating authority, not in writ jurisdiction. iii) The writ petitions were dismissed due to the availability of effective alternative remedies, with the Court emphasizing the importance of exhausting statutory appeals.
Petition dismissed.
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2025 (1) TMI 1451
Validity of order of the Additional Director of Enforcement dropping charges under the Foreign Exchange Management Act, 1999 (FEMA) - case against the appellants under FEMA, 1999 was initiated based on a Show-Cause Notice issued by the DRI under the Customs Act, 1962 - in SCN, it was alleged that both the respondent companies had evaded Customs Duty by suppressing and mis-stating the actual transaction value of the export goods -
HELD THAT:- We find force in the argument of the respondents that the allegations against the appellants in this case drew sustenance primarily from the allegations contained in the SCN issued by the DRI under the Customs Act, 1962 which now stands entirely nullified.
Also find considerable substance in the contention of the appellant that the Fe content declared was based on the report of the government accredited lab (GAL). Indeed, it is acknowledged by the appellant Directorate itself in the appeal memo, that the price of the iron ore exported was raised by the appellants based on the certificate of Quality Services and Solutions, Goa, a government-accredited lab. Further, the detailed procedure for valuation has been explained in para- 61 of the order of the Ld. Commissioner of Customs.
Once the prescribed procedure for independent certification by Govt. Lab and samples being drawn in the presence of Customs and being sent to Govt. lab for sample testing has been followed, do not see how the charge of manipulation of Fe content can be sustained unless the findings of the labs are challenged as perverse.
In this regard, we have also taken note of the judgment of Reliance Cellulose Products Ltd. [1997 (7) TMI 652 - SUPREME COURT] cited by the appellants wherein it was held that unless a government lab report is challenged and demonstrated as being palpably wrong, the same cannot be brushed aside.
Even from the Income-tax point of view, the variation in price at which export was made by the appellants and the arm's length price assessed was found to be within the tolerance range.
It is not considered necessary to go into other issues such as cherry picking of few transactions out of many (2 out of 7 in case of Appellant No.1 and 5 out of 42 in case of Respondent No.2); existence of instances where Fe content declared by the Indian companies was more than that declared by the foreign entity on further sale; day to day fluctuations in international iron ore prices, the difference arising out the transactions being expressed in wet or dry metric tons; difference in of method of drawal of samples, testing technology and methodology; the legal tenability of challenging the impugned order before this Appellate Tribunal when the customs's Case, which formed the sole basis of the case under FEMA stands quashed etc, are not gone into on the merits.
We do not find any reason to interfere with the order of the learned adjudicating authority which has been impugned in the present appeals filed by the Directorate. Accordingly, all the three appeals are hereby dismissed.
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2025 (1) TMI 947
Contravention under FERA Act - Failure to recover the export dues within the stipulated period of six months from the date of the export therefore it contravened Section 18(2) r/w Section 18(3) of the Act, 1973 was made - Penalty imposed - HELD THAT:- Considering status of the appellant, an export proceeds agent prepared the document by charging Rs. 750 per export documents. He is not shown to be part of the M/s Sparkle Gems Industries (P) Ltd. Bombay yet penalty of Rs. 50 lakhs have been imposed on him while imposing penalty of 85 Lakhs on the company.
No material to allege contravention of Section 18(2) and Section 18(3) of the Act of 1973 by the appellant. The respondents have failed to show appellant’s involvement in contravention of the presence of the Act of 1973. A scratchy order has been passed against the appellant in ignorance of his position which cannot be considered to be of the nature where contravention of Section 18(2) and Section 18(3) of the Act of 1973 could have been alleged against him.
We cause interference of the impugned order quo the appellant and accordingly, the impugned order is set aside against the appellant. The appeal is allowed with the aforesaid. The appellant has deposited 0% of the amount towards pre-deposit. The respondents would release the amount aforesaid in favour of the appellant.
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2025 (1) TMI 897
Offence under FERA - appellant company got involved in acquisition of foreign exchange and its borrowing without permission of Authorised Dealer or of the Reserve Bank of India - penalty imposed on contravention of section 8(1) - element of acquisition and transfer of the foreign exchange of US$ 28,26,433.26 coupled with the allegations of borrowing of foreign exchange amounting to US$ 3,33,025 and £7,068.38
HELD THAT:- The draft of US$ 333025 and £ 3270.20 and £ 3798.18 were utilized for payment of customs duty. However, the earlier draft was received from M/s Tata Industries USA and other two drafts from M/s Tata Ltd. London and Sh. Raj Kadan of M/s Tata Inc. who played vital role in arranging the remittances. It is also a case that the appellant company acquired and transferred foreign exchange of US$ 28,26,433.26. The authority thus passed the impugned order holding the contravention.
We do not find any error in findings and otherwise the judgment cited by the appellant would not support a case of civil nature but can be handful in prosecution or criminal case. In substance, we find contravention in Section 8(1) of the Act of 1973 for arranging and transferring foreign exchange.
Penalty imposed on the appellant company u/s 8(1) of the Act of 1973 for acquiring and transferring of foreign exchange with separate penalty for violation of Section 8(1) of the Act of 1973 towards the borrowing of foreign exchange of US Dollars and Sterling Pounds - The appellant company has already deposited 25% of the penalty amount to satisfy the condition of pre-deposit. It was in pursuance to the order of the Calcutta High Court. We find this case to be old by more than 20 years and looking at all the facts, we find a case to make penalty proportionate. It is looking to appeal, evidence available on record and the peculiarity of the facts and thereby we cause interference in the penalty and reduce it to 25% of the amount of penalty imposed by the authority. The amount aforesaid has already been satisfied by the appellant company. Hence the present appeal is partly allowed and disposed of with the aforesaid.
Separate Penalty imposed on the appellant for alleged contravention of Section 8(1) of the Act of 1973 for different amount - It is for acquisition and also for borrowing. The respondents have, however, failed to show any role of the appellant, Mr. Ishaat Hussain to implicate him as one of the violators of the provisions. He has not been shown to be incharge of the Company or was monitoring the affairs of the company for purchase of the aircraft. The respondents have implicated him for the sake of it without clarifying his role. In the light of aforesaid, we find a case in his favour to cause interference in the impugned order qua Mr. Ishaat Hussain and accordingly the impugned order is set aside qua the appellant. The appeal is disposed of with the aforesaid.
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2025 (1) TMI 852
Review applications filed for waiver of pre-deposit of penalties under FERA - Whether the appellants' failure to comply with the deposit order justifies the dismissal of their appeals?
HELD THAT:- Order of this Tribunal has directed deposit of 15 percent of the penalty. The interpretation given in the Review Petition cannot be sustained, in view of the unambiguity in the Adjudication Order.
We find that the two Review Petitions fail to meet the conditions of the relevant afore cited provisions of the CPC as well as do not fall within the principles which have been culled out in the Judgment relating to Kamal Sengupta [2008 (6) TMI 578 - SUPREME COURT] after having failed to obtain favorable orders from the Hon’ble High Court of Punjab & Haryana and from the Hon’ble Supreme Court, then there is no question of filing the reviews of the Order which has been affirmed by these higher Judicial Fora, as has been held in the Judgment relating to Ram Kishor Gupta [2003 (1) TMI 767 - SUPREME COURT]
No merit in the Review Applications filed by the Review Petitioners. We therefore dismiss the Review Petitions filed.
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2025 (1) TMI 851
Offence under FEMA - Applied for rebate of Central Excise Duty by producing 15 fake shipping bills, related applications for removal of excisable goods for export (ARE-1s) and other related shipping documents, and fraudulently availed rebate of Central Excise Duty - effect of immunity granted by Settlement Commission under the Customs Act, 1962
HELD THAT:- Oder of Customs and Central Excise Settlement Commission is categorical that no immunity was either sought or provided to the Appellant under FEMA,1999. The immunities so granted under other Acts won’t have an impact on the proceedings under FEMA.
As held in Vinod Chitalia [2012 (5) TMI 157 - BOMBAY HIGH COURT] that the orders of the Settlement Commission are conclusive of the matters stated therein and cannot be challenged in any other proceeding. The findings of the Settlement Commission in the present case inter alia are that remittance against the exports were received in advance without any actual export of goods, that all the export documents bear the signatures of the appellant and the exports proceeds were also realized by the appellant. There was no written arrangement between the appellant and the Mundra Brothers with reference to the export of goods. These findings have, therefore, become conclusive in light of the Ld. Settlement Commission’s order.
Whether significant delay was caused as Respondent took almost six years from the date of receiving information from the Excise Department to lodge a Complaint against the Appellant? -The present case, as already noted, is one of FEMA,1999. The penalties prescribed for contravention under FEMA, 1999 are in the nature of technical and procedural lapses. The liability for contravention under FEMA is of a civil nature unlike the erstwhile FERA which it replaced, and also unlike the PMLA, 2002. As such, the ratio of the cases cited by the appellant would not apply to the present case.
It is evident from the order of settlement before the Settlement Commission that the remittance against the said exports were received in advance without any actual export of goods. Also, all the export documents bear the signature of the Appellant, the export proceeds were realized by the Appellant and there is lack of any written arrangement between the Appellant and the Mundra brothers w.r.t export of goods.
As a result, the Appellant being the proprietor of M/s Siddha Exports, and the exports having been made in the name of the said concern, was responsible to ensure the realization of the export proceeds and cannot evade responsibility for the lapses. The Appellant cannot avoid responsibility for the contraventions of Section 7 of FEMA,1999 r/w Regulation 16 (Advance Payment of Exports of the Foreign Exchange Management (Export of goods and services) Regulation,2000, by not making shipment within one year from the date of receipt of advance remittances amounting to US $ 10,54,310.36 9 (equivalent to Rs. 4,81,29,268).
Lack of mens rea - Penalty was clearly imposable in the present case and the appellant cannot escape his liability by laying the blame solely at the door of the Mundra brothers. We do find several mitigating factors in the case.
It is not in dispute that to all appearances, all the documentation had been completed as if the export had genuinely been made and the proceeds therefrom had been realized. It is only later that the appellant came to know that the documents had been forged and no export were actually made by the Mundra Brothers. Upon coming to know he approach the Ld. Settlement Commission the order of the Settlement Commission indicates that the applicant (the appellant herein) had made a full disclosure of its duty liability and had also subsequently paid the liabilities as directed by Ld. Settlement Commission.
Nothing has been brought had record to indicate that the appellant acted in active collusion with the Mundra Brothers in forging the documents and falsely claiming that exports had been made when no exports had actually been made to his knowledge.
Ends of justice would met if the amount of penalty levied is reduced to Rs. 5 Lakhs. It is ordered accordingly.
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2025 (1) TMI 742
Offence u/s 8(1) and 8(2) of FERA - dealing in foreign exchange without the necessary permissions from the Reserve Bank of India (RBI) - recovery of the currency - appellant's penalized by imposing heavy penalty of Rs. 80 lakhs though the worth of the foreign currency as on the date of the recovery was not more than 8 lakhs - as argued foreign currency said to have been recovered from their sister's house
HELD THAT:- We find no such argument by the appellant before the Special Director, Enforcement rather in the statements made by the appellants, they literally admitted possession of the foreign currency. It was later on qualified to be at the instance of Sudhakar Verma.
The careful reading of their statement would however reveal that the foreign currency was recovered from the house in the name of Mrs. Madhu who is none else but the wife of appellant Ashok Kumar. The appellant Manoj Kumar in his statement admitted that seized foreign currency was purchased by them 6 to 7 days prior to the seizure from a person who deals in it. The other appellant Ashok Kumar also admitted that the foreign currency was seized from his own premises, but refused to make further statement.
Special Director found violation of section 8(1)and 8 (2) by the appellants and accordingly imposed penalty of Rs. 80 lakhs on each appellant under section 50 of the FERA, 1973.
If we go further deep into the matter, the documents seized from the appellants shows their involvement in the sale and purchase of the foreign currency without special or general permission of the RBI.
No error in the impugned order for recording contravention of section 8 (1) and 8 (2) of the Act of 1973 at the instance of the appellants.
Whether penalty imposed on each appellant said to be excessive? - As we find penalty of Rs. 80 lakhs to be excessive. It is even after taking into consideration the documents recovered from the appellant showing their involvement in dealing with the foreign currency without prior or special permission of the Reserve Bank of India.
We are inclined to reduce the amount of penalty from 80 lacs to 8 lakhs on each appellant to rationalize the quantum of penalty.
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