2011 (2) TMI 1302 - AT - FEMA

Appellate Tribunal Upholds Penalties for FERA Violation, Emphasizes Civil Burden of Proof

PRABODH G. MEHTA Versus DIRECTOR OF ENFORCEMENT

The Appellate Tribunal upheld penalties for violating Section 9(l)(f)(i) of FERA, dismissing Review Applications due to lack of evidence refuting payments ... Violation of the provisions of Section 9(l)(f)(i) of Foreign Exchange Regulation Act, 1973 - Imposition of penalty - Delivery of foreign currency to NRI - Held that:- appellants have not disclosed their relationship with the person who donated each of them 25,000/- US Dollars. It is not probable that the total stranger will donate such a huge amount to the appellants. Even at the time of hearing of this review application a similar question was asked to Shri Madhu M. Patel whether he could disclose his relations with the donor, but Shri Madhu M. Patel could not reply the said question. On the other hand, Shri Niranjan J. Shah in his statement had admitted that he were not knowing the appellants. Thus there is a gift of 25,000/- US Dollars each to the four appellants by total strange person and, therefore, it can be safely presumed that present appellants must have paid a sum equivalent to 25,000/- US Dollars to their donee and, therefore, the violation of 9(l)(f(i) is clearly proved - Decided against Appellant. Issues:Violation of Section 9(l)(f)(i) of Foreign Exchange Regulation Act, 1973; Maintainability of Review Application under FERA; Application of Remittance of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991; Burden of Proof in FERA Proceedings.Violation of Section 9(l)(f)(i) of Foreign Exchange Regulation Act, 1973:The case involves appellants challenging penalties imposed for violating Section 9(l)(f)(i) of FERA, alleging receipt of bank drafts from a non-resident Indian and payment in Indian currency to the said person. The Adjudicating Authority found the appellants guilty and imposed penalties, which were upheld by the Tribunal in 2009. The appellants contended that there was no bar on filing a Review Application under FERA, citing judgments related to rectifications in other acts. However, the absence of a specific provision for review under FERA was highlighted, leading to the dismissal of the contention.Maintainability of Review Application under FERA:The appellants argued that the Tribunal's order was nullity and reviewable based on a judgment regarding the Tribunal's powers under the Customs Act. They also referenced judgments related to rectifications under the Central Excise Act. However, it was emphasized that FERA lacks a provision for review, distinguishing it from the other acts. The contention regarding the maintainability of the Review Application was dismissed based on the absence of a specific provision for review under FERA.Application of Remittance of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991:The appellants invoked the Remittance of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991, claiming protection for depositing foreign exchange in Indian banks. However, it was clarified that while the Act protected such deposits, it did not shield payments in Indian currency to non-residents without RBI permission. The Tribunal held that the action of paying equivalent amounts to non-residents was not protected under the Act, justifying the penalties imposed.Burden of Proof in FERA Proceedings:The appellants argued that there was no evidence to prove their payments to the non-resident individual, emphasizing the criminal nature of FERA proceedings and the need for strict proof by the department. Reference was made to a judgment highlighting the quasi-criminal nature of FERA proceedings. However, the Tribunal differentiated between criminal and civil proceedings under FERA, stating that the burden of proof in civil obligations cases differs from criminal proceedings. The Tribunal concluded that the appellants' failure to disclose their relationship with the donor and the admission by the donor of not knowing the appellants supported the presumption of payment, leading to the dismissal of the review applications.In conclusion, the Appellate Tribunal upheld the penalties imposed for violating Section 9(l)(f)(i) of FERA, dismissing the Review Applications on grounds of maintainability and lack of evidence to refute the payments made to non-residents. The Tribunal clarified the distinction between criminal and civil proceedings under FERA and emphasized the burden of proof in civil obligations cases. The application of the Remittance of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991, was analyzed to determine its scope of protection, ultimately justifying the penalties for unauthorized payments in Indian currency to non-residents.