2006 (9) TMI 628 - AT - FEMA

Charges Upheld for Unauthorized Forex Transactions; Partial Penalty Refund Granted as Evidence Lacking for Overseas Activities.

Abdul Kalam Versus Director, Enforcement Directorate

Abdul Kalam Versus Director, Enforcement Directorate - TMI Issues Involved:1. Seizure of foreign exchange and Indian currency.2. Illegal sale and purchase of foreign exchange without RBI permission.3. Failure to take reasonable steps to realize foreign exchange.4. Purchase of gold from the sale proceeds of foreign exchange.5. Alleged sale of goods in Bangladesh and failure to repatriate foreign exchange.6. Alleged expenditure in China and payment to Sohail Siddiqui.Issue-wise Detailed Analysis:1. Seizure of Foreign Exchange and Indian Currency:The business place and residence of the appellant were searched by the Enforcement Directorate on 9-12-2002, resulting in the seizure of foreign exchange, Indian currency, and gold biscuits. The appellant was charged with unauthorized selling and purchasing of foreign exchange, and failure to repatriate foreign exchange from Bangladesh. The appellant denied the charges, claiming his confessional statement was obtained under threat and coercion, and that the documents were not recovered from his custody. The Tribunal found no evidence to support the appellant's claims and upheld the recovery as valid, citing the Panchnama signed by the appellant and two witnesses.2. Illegal Sale and Purchase of Foreign Exchange Without RBI Permission:The appellant admitted in his confessional statement to purchasing and selling foreign exchange from his shop, M/s. Beauty Handicrafts, and that the seized foreign currency was acquired from various persons, mostly from Bangladesh. The Tribunal found the confessional statement corroborated by the recovery of foreign exchange, Indian currency, and gold biscuits. The appellant's retraction of his confessional statement was deemed an afterthought, and the Tribunal upheld the charges of illegal sale and purchase of foreign exchange.3. Failure to Take Reasonable Steps to Realize Foreign Exchange:The appellant admitted receiving a cheque of Rs. 8,000 from his friend in Australia, which he failed to encash, and later received the equivalent amount in Indian currency. The Tribunal observed that the appellant failed to take reasonable steps to repatriate the foreign exchange equivalent to Rs. 8,000, thus contravening section 8 of the FEM Act, 1999.4. Purchase of Gold from Sale Proceeds of Foreign Exchange:The appellant admitted purchasing gold pieces of biscuits from the sale proceeds of foreign exchange. He later claimed the gold was a gift from his father, but provided no evidence to support this claim. The Tribunal found the purchase of gold established from the confessional statement and other evidence, and upheld the charge of contravention of the FEM Act, 1999.5. Alleged Sale of Goods in Bangladesh and Failure to Repatriate Foreign Exchange:The appellant contended that the respondent failed to provide specific details of his journey to Bangladesh and denied carrying goods worth Rs. 1,86,136. The Tribunal found the charge not corroborated by independent evidence and absolved the appellant from this charge.6. Alleged Expenditure in China and Payment to Sohail Siddiqui:The appellant denied making any expenditure in China or payment to Sohail Siddiqui, and argued that the respondent did not provide specific details of his journey to China. The Tribunal found the charges not supported by specific incriminating statements or evidence and absolved the appellant from these charges.Conclusion:The Tribunal confirmed the charges related to the seizure of foreign exchange, illegal sale and purchase of foreign exchange, failure to realize foreign exchange, and purchase of gold from sale proceeds of foreign exchange. However, the charges related to the alleged sale of goods in Bangladesh and expenditure in China were not proven and were dropped. The appeal was partly allowed, with the appellant entitled to a partial refund of the penalty paid.