TMI Blog2012 (5) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant. - FERA APPEAL NO.8 OF 2012 - - - Dated:- 28-3-2012 - DR.D.Y.CHANDRACHUD AND M.S.SANKLECHA, JJ. Mr.B.Sheshgopalan with Mr.Girish Agrawal for the Appellant. Mr.R.V.Desai, Senior Advocate with Mr.M.S.Bhardwaj for the Respondent. ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD, J.) : This appeal under Section 35 of the Foreign Exchange Management Act, 1999 ( the FEMA ), is directed against an order of the Appellate Tribunal for Foreign Exchange, dated 27 April 2010. By the impugned order, the Tribunal has sustained the findings of the Special Director in the Enforcement Directorate, holding that the Appellant violated the provisions of Section 3(b) and Section 3(d) of the Act. The penalty which was imposed on the Appellant by the Adjudicating Officer in the amount of Rs.2 crores under the first notice to show cause and in the amount of Rs.3 lakhs under the second notice has been sustained. 2. The Special Director in the Directorate of Enforcement issued two notices to show cause on 5 August 2008. The Appellant was the Fifth Noticee in respect of both the notices to show cause. The show cause notices were also addressed inter alia to a Company by the name of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dismissing the appeal of the Appellant when the previous division bench of the Tribunal on the same set of identical facts of the case allowed the appeals filed by the main noticees and beneficiaries; (d) Whether in the facts and circumstances of the case, whether the earlier order of the Tribunal on the same set of identical facts is binding precedent on the subsequent coordinate bench; and (g) Whether in the facts and circumstances of the case the order of the Tribunal is non application of mind when neither the Appellant nor any one named the Appellant as the person who dealt with any financial transaction against the alleged exports and the same is condition precedent statutorily to dismiss the appeal. 7. The submissions which have been urged on behalf of the Appellant are that (i) The order passed by the Adjudicating Officer was questioned in appeal before the Tribunal by the conoticee, APL, and inter alia by its Chairman and Managing Director (Ajit Kamath), Deputy Managing Director (Manoj Jain) and Executive Director (Rajendra Kaimal). By a decision dated 31 August 2009, the Tribunal allowed the appeal, coming to the conclusion that the retracted statement of Manoj J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Tribunal held, that even a retracted statement can be relied upon. So long as the Tribunal comes to the conclusion that the statement is voluntary and true, the Tribunal would be within its jurisdiction in relying upon the statement; (iii) The Tribunal has elaborately considered the entirety of the material on the record and has come to the conclusion that the charge against the Appellant has been established. The appeal before this Court under Section 35 is on questions of law and the Court would not be justified in reappreciating the evidence; (iv) The adjudicating authority has indicated sufficient reasons for establishing both the violations of Sections 3(b) and 3(d) of the FEMA. 9. We have heard Counsel and with their assistance have perused the record. 10. The Tribunal in the present case was called upon to decide the appeal filed by the Appellant holding him in breach of the provisions of Sections 3(b) and 3(d) of the FEMA and subjecting him to the award of a penalty. In an earlier proceeding before the Tribunal which culminated in an order dated 31 August 2009, APL and among others, its Managing Director, Deputy Managing Director and Executive Director were held n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were made in regard to the genuineness of the Bills with the Customs Department which confirmed that the shipping bills of APL were not found in the system and no export had taken place with the approval of the Customs Department. These transactions came to light when the Customs authorities detained certain consignments of APL where goods of a negligible value were sought to be exported against a declaration of high value drugs; (ii) The Shipping Lines which were mentioned in the shipping bills denied during the course of the adjudication to have worked as shipping and forwarding agents of APL; (iii) The Clearing Agents named in the shipping bills have similarly denied that the bills of APL were processed by them; (iv) The Appellant, Vinod Chitalia, provided APL with fictitious purchase bills in the name of a Company by the name of Nikita Pharma Chem Pvt. Ltd. The aforesaid Company was under the control of the Appellant. Naresh Solanki, who was a Director of the Company in fact, stated that he was merely drawing a salary of Rs.8,000/per month; that he was a Director only on paper and was an employee of the Appellant. He would obey orders of the Appellant by signing of bla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, it has been duly established that in respect of 261 shipping bills, no export took place at all whereas in the case of 14 shipping bills, export had taken place, but by substitution of the goods declared for goods of a much lower value. The Customs authorities confirmed that the shipping bills were not filed with them. The clearing agents and the shipping lines confirmed that they have not acted for APL. Fictitious purchase bills were issued in the name of Nikita Pharma Chem Pvt. Ltd., a dummy Company which was wholly under the control of the Appellant. Payments amounting to Rs. 75.39 crores were received in respect of fictitious export transactions. A. Observation made in the order of Settlement Commission dated 7 June 2006 in respect of an application for settlement made by the Appellant in respect of breach of the Customs Act, 1962: 14. In respect of the same series of actions as in the present case, the Customs Department had issued show cause notices to APL, its Directors and the Appellant herein. Notices were issued under the Customs Act, 1962 demanding customs duty from APL, while penalty was proposed to be imposed upon the Directors of APL and the Appellant herein. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the three Directors worked as a team and had knowingly engaged Shri. Vinod Chaitalia (Coapplicant No.6) for undertaking fraudulent export transactions who was under obligation to pay a loan of Rs.75 lacs which he could not pay and instead sought to offset the same from duty evasion and illegal availment of export benefits by fabricating documents etc. Shri. Vinod Chitalia provided them contacts with a Singapore based consignee M/s. Global Pharma under the control of one Shri. Manish Atmaramani. He also arranged for freight forwarding and customs clearance work through Shri. Manoj Gore who was earlier engaged by Shri Vinod Chitalia for imports by his own firm M/s. Vintage Pharmaceuticals and in the recent past for export of substituted goods of M/s. Prominent Exim Pvt. Ltd. and some other exporting firms. The drug paracetamol was carefully chosen as in case the consignment was checked, a plea of mix up of wrong drugs could be made . Penalty :The Bench observes that the applicant and the coapplicants had sought to smuggle out of the country low value useless goods in place of high valued drugs and thereby take DEPB and other export benefits not otherwise legally due besides soili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immunity is only from penalty under the Customs Act and not in respect of any other Act including the FEMA. Further Section 127J of the Customs Act 1962 states that an order of the Settlement Commission shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any proceeding under this Act or any other law for the time being in force. Therefore the orders of the Settlement Commission are considered to be conclusive of the matters stated therein and cannot be challenged in any other proceeding under any other law including FEMA. In the light of the aforesaid provision the order of the Settlement Commission dated 7 June 2006 in respect of the findings of fact recorded therein is conclusive. 18. In any event, the Appellant herein is barred from raising the issue of his involvement in manipulating documents to enable foreign exchange procurement to the tune of Rs.75 crores as remittances without effecting physical export. This is for the reason that the Appellant would be bound by the principle of issue estoppel. The principle of resjudicata bars a Court from exercising its jurisdiction to determine a lis, if it has attained finalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jain to DRI and in any event the same is corroborated by other evidence. The Tribunal has also recorded a finding of fact that there is nothing on record to indicate that any force was used to record the statements of the Appellant or Manoj JainDirector of APL Limited or other persons. 20. The statements made to DRI can be used in the present proceeding as they pertain to the same transaction. It must be borne in mind that under Section 108 of the Customs Act, 1962 the statements recorded before the DRI are deemed to be in a judicial proceeding within the meaning of Section 193 and 228 of the Indian Penal Code, 1860. The solemnity and sanctity attached to the statement made in a judicial proceeding therefore attaches to the statement made under the Customs Act to the DRI. Therefore there is no prohibition in relying upon statements made under the Customs Act 1962 for the purposes of the adjudication proceeding under the FEMA, more so when reliance is placed upon documents to the complaint made to the Adjudicating Authority. 21. Section 3(b) provides that no person shall make any payment to or for the credit of any person resident outside India in any manner. In the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the fact that the Tribunal, in a passing reference to the earlier decision has observed that APL, its Chairman and Directors were not persons entitled to be exonerated of the charges by the Tribunal. The issue as to the complicity of APL, its Chairman and Directors stands governed by the earlier decision of the Tribunal. Surprisingly, no appeal has been filed by the Union of India or by the Enforcement Directorate against the earlier decision of the Tribunal dated 31 August 2009 and the limitation for filing such an appeal under Section 35 may perhaps have expired by now. Counsel for the Respondents also has no explanation as to why no appeal was filed in the earlier case. Be that as it may, those observations of the Tribunal cannot be construed as affecting the rights of any third parties who were not before the Court, since the Tribunal was and this Court is concerned only with the involvement of those who are parties to the appeal proceedings. Independently, the evidence against the Appellant is sufficient to sustain the finding of breach of Sections 3(b) and 3(d). The penalty is not disproportionate, but is commensurate with the gravity of the charge, the nature of the mis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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