2009 (1) TMI 954 - AT - FEMA

Tribunal Dismisses Appeals, Upholds Penalties for FERA Violations Due to Unjustified Large NRE Account Transactions.

The tribunal dismissed the appeals, confirming the appellants' contravention of Section 9(1)(a) of FERA. It upheld the penalties of Rs. 40,000 and Rs. ... - Issues Involved:1. Contravention of Section 9(1)(a) of the Foreign Exchange Regulation Act (FERA).2. Admissibility and relevance of evidence.3. Burden of proof and circumstantial evidence.4. Validity of the penalty imposed.Issue-wise Detailed Analysis:1. Contravention of Section 9(1)(a) of the Foreign Exchange Regulation Act (FERA):The appellants were penalized for violating Section 9(1)(a) of the FERA by making payments to non-residents without the Reserve Bank of India's permission. The adjudicating authority found that the appellants received substantial amounts from NRE accounts of NRIs and made payments in return, which contravened the statutory scheme under Section 9(1)(a). The appellants argued that these payments were gifts, but the tribunal found no evidence of a genuine relationship or reason for such large gifts, thus confirming the contravention.2. Admissibility and Relevance of Evidence:The appellants contended that the evidence against them was insufficient and primarily based on statements from third parties, which they deemed irrelevant. However, the tribunal held that the statements of other beneficiaries who admitted to paying a premium for similar drafts were relevant and established a pattern. The tribunal emphasized that the appellants failed to provide any documentary evidence to support their claim of receiving genuine gifts.3. Burden of Proof and Circumstantial Evidence:The tribunal relied on circumstantial evidence to establish the appellants' guilt. It referenced the Supreme Court's rulings on circumstantial evidence, noting that a complete chain of incriminating circumstances can prove guilt beyond a reasonable doubt. The tribunal found that the appellants' inability to explain the large sums received from NRIs, coupled with the suspicious nature of the NRE account transactions, created a strong presumption against them. The tribunal also cited Section 106 of the Evidence Act, which places the burden of proving facts within the special knowledge of the accused.4. Validity of the Penalty Imposed:The tribunal upheld the penalties imposed on the appellants, finding them commensurate with the gravity of the offense. The penalties of Rs. 40,000 and Rs. 60,000 respectively, were deemed appropriate given the substantial amounts involved and the clear contravention of FERA provisions. The tribunal dismissed the appeals, confirming the adjudicating officer's order and appropriating the pre-deposited amounts towards the penalties.Conclusion:The tribunal's judgment comprehensively addressed the issues of contravention of FERA, the relevance of evidence, the burden of proof, and the validity of penalties. It confirmed the appellants' guilt based on circumstantial evidence and upheld the penalties imposed, dismissing the appeals for lack of merit.