2002 (7) TMI 841 - AT - FEMA

Tribunal Waives Some Penalties for Procedural Lapses; Upholds Rs. 8.5 Lakhs Confiscation and Rs. 50,000 Penalty for Violations.

Sampatraj R. Sheth Versus Special Director, Enforcement Directorate

Sampatraj R. Sheth Versus Special Director, Enforcement Directorate - TMI Issues Involved:1. Voluntariness of the appellant's statement.2. Non-production of Panch witnesses for cross-examination.3. Legality of the seizure by officers of DRI.4. Identity and residential status of Kareembhai.5. Reliance on documents not provided to the appellant.6. Confiscation and penalty related to the seized amount of Rs. 8.5 lakhs.7. Presumptions and surmises in adjudication.8. Compliance with procedural requirements under sections 9(1)(b), 9(1)(d), and 64(2) of the Foreign Exchange Regulation Act, 1973.Detailed Analysis:1. Voluntariness of the appellant's statement:The appellant contended that his statement was not voluntary and was recorded under duress and coercion. The tribunal noted that the adjudicating officer erred in seeking corroboration from statements not provided to the appellant. The tribunal found that the appellant's statement could not solely be relied upon for ascertaining the amounts received and disbursed.2. Non-production of Panch witnesses for cross-examination:The appellant argued that Panch witnesses were not produced for cross-examination, which vitiated the impugned order. The tribunal observed that the appellant was not given the opportunity to cross-examine the witnesses, which is a procedural lapse.3. Legality of the seizure by officers of DRI:The appellant claimed that the seizure was made by officers of DRI, and thus presumptions under FERA were not available to the respondents. The tribunal did not find sufficient evidence to support the appellant's claim regarding the illegality of the seizure by DRI officers.4. Identity and residential status of Kareembhai:The appellant contended that Kareembhai's identity and residential status were not established. The tribunal noted that there was a total absence of material regarding Kareembhai's residential status, which is essential under section 9(1)(b).5. Reliance on documents not provided to the appellant:The tribunal found that the documents relied upon, including the statements of recipients, were not among the relied-on documents provided to the appellant. This procedural lapse vitiated the impugned order.6. Confiscation and penalty related to the seized amount of Rs. 8.5 lakhs:The appellant claimed that the seized amount was his accumulated income from agriculture, declared in his Income-tax returns. However, the tribunal noted that no such Income-tax documents were produced along with the written submissions, and the plea was raised for the first time during the appeal. The tribunal upheld the confiscation of Rs. 8.5 lakhs and the penalty of Rs. 50,000 for contravening section 9(1)(d) read with section 64(2).7. Presumptions and surmises in adjudication:The appellant argued that the adjudicating officer proceeded on presumptions and surmises without establishing initial violations. The tribunal agreed, noting that penalties based on presumptions are not sustainable.8. Compliance with procedural requirements under sections 9(1)(b), 9(1)(d), and 64(2) of the Foreign Exchange Regulation Act, 1973:The tribunal found that the evidence available did not support the penalties for contravening sections 9(1)(b) and 9(1)(d). However, the penalty for contravening section 9(1)(d) read with section 64(2) was upheld due to the appellant's conflicting statements and failure to explain the seized amount satisfactorily.Conclusion:The tribunal set aside the penalties of Rs. 2.5 lakhs and Rs. 1.5 lakhs for contravening sections 9(1)(b) and 9(1)(d) respectively. However, it upheld the penalty of Rs. 50,000 for contravening section 9(1)(d) read with section 64(2) and the confiscation of Rs. 8.5 lakhs. The appeal was partly allowed.