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TMI Blog2014 (9) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... d Account was Mr. Umesh Mendiratta. It appears that on 18th May, 1995, the ED, in the course of its investigation, recorded the statement of Mr. Mendiratta under Section 40 FERA in which he stated that he was an accounts clerk in the chartered accountant firm of Suresh K. Mittal & Co. and drawing a salary of Rs. 3,000 per month. He stated that although he did not know Mr. Subhash Sethi, he had been instructed by his employer, Mr. S.K. Mittal, the appellant herein, to become the Mandatee of the said account. He claimed to have signed the account opening form and the mandate card. He stated that he had to fill-up the vouchers and sign the cheques and issue slips for pay orders ('POs'), whenever instructed by the appellant. He was asked to explain the deposit of Rs. 59,31,000 in the said account in the foreign currency. He stated that, after seeing the original deposit slips, some of the slips were in his handwriting and some were in the handwriting of the appellant. When asked why the POs were issued to various persons, he explained that as certain persons wanted to get their black money converted into white, the appellant used to sell the POs at a premium of 10% to 14%. The appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Memorandum dated 23rd April, 2002 to the appellant, Mr. Sethi, Mr. Mendiratta and AMEX Bank. As far as the appellant is concerned, it is not in dispute that the said Memorandum was ultimately dispatched on the last date of the sunset period, i.e., 30th May, 2002 and received on 31st May, 2002. The allegation in the Memorandum was that the NRE Account of Mr. Sethi was misused by the appellant and Mr. Mendiratta and that the appellant in association with Mr. Mendiratta "used to arrange inward remittances from various persons outside India other than the A/c holder Sh. Subhash Sethi himself and the said inward remittances have been credited into the said NRE A/c time to time in the year 1993; that Sh. S.K. Mittal in association with the said Sh. Umesh Mendiratta made disbursements to various persons through Cheques/ DDs/Pos by debit to the said NRE A/c from American Express Bank, New Delhi against premium @ 10% over & above the value of the said instruments from the recipients of such instruments in the garb of gifts and that they used to issue gift deeds to such beneficiaries which got pre-signed by the said NRE A/c holder Sh. Subhash Sethi." The Memorandum further alleged that from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contravened Section 8(1) and Section 9(1)(a) and 9(1)(f)(i) of FERA; and (f) AMEX Bank had violated para 13B 22(b) of the Exchange Control Manual, 1993 insofar as the credits of foreign exchange in the NRE Account of Mr. Sethi were concerned. AMEX Bank was also found guilty of contravention of Section 9(1)(a) and Sections 6(4), 6(5) and 8(1) of FERA. However, the AO, as far as AMEX Bank is concerned, does not survive in view of the above order of the DB. As a result, the AO imposed a penalty of Rs. 1,00,00,000/- each on Mr. Sethi and Mr. Mendiratta and Rs. 5,00,00,000/- on the appellant. 9. Aggrieved by the aforementioned order, the appellant file Appeal No. 283 of 2009 before the AT. By the impugned order dated 24th December, 2010, the AT concluded that the statement of Mr. Mendiratta made it clear that the appellant used to purchase foreign exchange from various persons in black and used to deposit it in the account of Mr. Sethi and then issue cheques to persons after getting the commission. The account statement of AMEX Bank also showed cash deposits in foreign currency. The AT concluded that the statement of Mr. Mendiratta made it clear that the said amount was deposited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the general or special permission of the RBI. 14. In order to substantiate the charge under Section 8(1), the ED has relied upon three pieces of evidence. The first is the statement of Mr. Mendiratta which on the face of it is exculpatory inasmuch as Mr. Mendiratta claims not to have any knowledge of the inward remittances into the NRE account. Such an exculpatory statement by a co-noticee can hardly have any value and cannot be used to fasten the liability on the other noticees. In Union of India v. Bal Mukund - AIR 2009 SC (Supp) 1811, the Supreme Court, in the context of a confessional statement under Section 67 of the Narcotics Drugs and Psychotropic Substances Act, 1985 held that the statement by a co-accused, implicating the another co-accused, cannot, ipso facto, be considered as substantive evidence in order to form the basis of a conviction. It was important to first analyse the evidence against the accused excluding such confession altogether and "see whether, if it is believed, a conviction should be sufficiently based on it." Recently, in Ram Lal Mehta v. Director of Enforcement (decision dated 11th March, 2014 in Crl. A. No. 241 of 2008), it was held by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry in that regard. He claimed to have no knowledge of any remittances in his account. Although the remittances were in the form of inter-bank transfers, no effort was made by the ED to ascertain the identities of the persons or entities who had made such remittances. In other words, in the absence of any investigation in that regard, there was no substantive material to bring home the contravention of Section 8(1) of FERA against the appellant. 18. Mr. Aggarwal referred to the other proceedings involving another SCN against the appellant herein. However, this is impermissible in view of the decision of the Supreme Court in GTC Industries Limited v. Collector of Central Excise, New Delhi - (1997) 6 SCC 655 where it was emphasised that "each show cause notice must be limited to the case that is made out therein.... It is not within the jurisdiction of the Tribunal to direct otherwise; to do so is to go beyond its purely adjudicatory function." 19. Therefore, the 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. 20.&em ..... X X X X Extracts X X X X X X X X Extracts X X X X
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