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TMI Blog2012 (5) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of both the notices to show cause. The show cause notices were also addressed inter alia to a Company by the name of Arch Pharmalabs Ltd. and to its Chairman and Managing Director, Deputy Managing Director and Executive Director among other persons. In both the notices, it is alleged inter alia that there was a violation of the provisions of Sections 3(b) and 3(d) of the FEMA. The violation in respect of the first notice was to the extent of Rs.75.39 crores while in the case of the second, of Rs.3.84 crores. 3. Information was received by the Directorate of Revenue Intelligence that Arch Pharmalabs Ltd. (APL) was involved in bogus exports in which, the export documents showed that the drug Azithromycin was being exported while in actuality paracetamol which was of a negligible value was substituted. Three export consignments presented by APL for export under the DEPB Scheme under Shipping bills all dated 29 March 2005 in which goods were declared to be Azithromycin were intercepted. Though the FOB value declared was Rs.1.06 crores, on examination the consignment was found to contain Paracetamol of an actual value of Rs.3.25 lakhs. APL was alleged to have received remittance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 31 August 2009, the Tribunal allowed the appeal, coming to the conclusion that the retracted statement of Manoj Jain could not be relied upon; the statements relied upon by the Enforcement Directorate were required to be corroborated after proving that the admissional statements were made without threat or coercion which evidence was not available; that though the Appellant had moved the Settlement Commission constituted under the provisions of the Customs Act, the order of the Settlement Commission dated 7 June 2006 was in the nature of a compromise or compounding; that APL had received the entire export proceeds through proper banking channels and the finding that the Appellant received payments through hawala transactions, was not based on evidence. The Tribunal held that the transaction of Foreign Exchange which is against bogus exports could not be held to amount to the acquisition, creation or transfer of assets outside India and the charge under Section 3(d) could not survive. Counsel submitted that these findings of the Appellate Tribunal would be binding on the Tribunal when it heard the appeal filed by the present Appellant. The Tribunal, it is submitted, erroneously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust 2009, APL and among others, its Managing Director, Deputy Managing Director and Executive Director were held not to be guilty of a breach. In the earlier order of the Tribunal, it is noted that the statement which was made by Manoj Jain and recorded under the FEMA was in virtual retraction of the statement recorded before the DRI and for that reason alone, it is held that the statement cannot be termed as voluntary in the absence of corroboration in material particulars. In its earlier order, the Tribunal proceeded on the basis that an admissional statement made before the Customs authorities, if so sought to be relied upon by the Enforcement Directorate, is required to be corroborated after proving that the admissional statement was without threat and coercion. No such evidence, according to the Tribunal, was available. 11. In the present case, the Tribunal has come to the conclusion that in so far as the Appellant is concerned, he has been unable to establish that a case of threat or coercion was used against him. The Tribunal noted that the retraction of the statement is only an afterthought. The statements made by the Appellant, according to the Tribunal, contained minutes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only on paper and was an employee of the Appellant. He would obey orders of the Appellant by signing of blank cheques, blank papers, bills, challans and other documents on his instructions. He admitted during his statement that he had signed a number of blank bills as directed by the Appellant and forwarded them to APL. The total purchases from Nikita Pharma Chem Ltd and two other Companies were of the value of Rs. 76.14 crores. The Company of the Appellant had issued bogus purchase bills to APL; (v) The fact that no goods were actually purchased against those fictitious purchase bills was admitted by Manoj Jain, Director of APL in his statement dated 5 May 2005; and (vi) Payments were made by APL inter alia to Nikita Pharma Chem Pvt. Ltd. against fictitious purchase bills which were used to obtain remittances against fictitious exports. 13. In so far as the role attributed to the Appellant is concerned, the Appellant in his statement dated 21 November 2005 stated that he was a Commission agent since 2001 and that he knew APL and its officers. The Appellant stated that his business had been closed due to bad debts from his debtors. He came into contact with APL and its Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y from APL, while penalty was proposed to be imposed upon the Directors of APL and the Appellant herein. APL, its directors and the Appellant approached the Settlement Commission under Chapter XIVA under the Customs Act, 1962 seeking to settle the dispute/issues raised in the show cause notices issued under the Customs Act, 1962. The Application for settlement under Chapter XIVA of the Customs Act, 1962 requires an applicant to make a full and true disclosure with regard to its liability under the Customs Act, 1962 for having the case settled. The Settlement Commission by its order dated 7 June 2006 settled the dispute between the Customs Department on the one hand and APL, its Directors and the Appellant herein on the other. Consequent to the above order dated 7 June 2006, APL was required to pay duty of Rs.61,57,740/while a penalty of Rs.10,000/was also imposed on the Appellant herein. The Settlement Commission in its order dated 7 June 2006 inter alia observed with regard to the Appellant thus: (see page 267 of appeal memo) "Vinod Chitalia is the key person in the scheme of fraudulent exports for taking illegally DEPB benefits by different firms including the applicant's company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... high valued drugs and thereby take DEPB and other export benefits not otherwise legally due besides soiling the reputation of the Republic. This act was sought to be done not once, not twice but repeatedly over a period of time involving eleven shipping bills. Hence, it is apparent that the applicant and the coapplicants in this case are habitual offenders. The offences are extremely serious having several dimension, namely, (a) diversion of expensive goods (bulk drugs) with useless goods like soft stone powder, chalk powder etc. (c) obtaining huge payments of foreign exchange remittances in such fraudulent exports through Hawala transactions and (d) seeking to obtain benefits under various export benefit schemes like DEPB for duty free imports without being entitled to the same. Thus at each stage, the Revenue has stood to loose substantially. By resorting to the fraudulent export transactions in a planned manner with a view to seeking undue export benefits and also obtained foreign exchange remittances illegally the applicants do not deserve sympathy. The involvement of the parties has been adumbrated in the foregoing paras and looking to the same, the applicant and the coapplic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esjudicata bars a Court from exercising its jurisdiction to determine a lis, if it has attained finality between the parties. On the other hand the doctrine of issue estoppel is invoked against a party from raising an issue in a subsequent proceeding, if the same has been decided in an earlier lis by a competent court (See Bhanu Kumar Jain). (2005) 1 SCC 787 Similarly in Ishwar Datta, (2005) 7 SCC 190 the Supreme Court held that issue of estoppel would arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided. Then in a subsequent proceeding involving a different cause of action to which the same issue is relevant it cannot be reopened. On the basis of the above decision, it is clear that even on the principle of issue estoppel, the impugned Order was correct in relying upon a finding in the order of the Settlement Commission dated 7 June 2006 which has been accepted by the Appellant and has the necessary ingredient for imposition of penalty under the FEMA. B. Reliance in the impugned Order on Retracted Statement: 19. Before the Tribunal it was urged on behalf of the Appellant that the statement of Manoj JainDirector of APL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment to or for the credit of any person resident outside India in any manner. In the present case, there is a complete absence of any legitimate consideration, such as the supply of goods against which an inward remittance as high as Rs. 75.39 crores was received. Hence, the only possible inference that would arise is that the inward remittance of Rs.75.39 crores was matched by a hawala transaction involving transactions through a person resident outside India. Similarly, under Section 3(d), no person shall enter into any financial transaction in India as consideration for or in association with the acquisition or creation or transfer of a right to acquire any asset outside India. Money is a form of assets. The acquisition of money outside India is the acquisition of an asset. This acquisition would be subject to the FEMA and has to be in accordance with law. The Appellant was a party to financial transactions in India which constituted a consideration for the receipt of inward remittances amounting to Rs. 75.39 crores from abroad which were not backed by any lawful consideration involving a genuine export of goods. The adjudicating authority has found that the amount which was r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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