Appellate Tribunal upholds denial of cross-examination in FEMA proceedings citing substantial documentary evidence under Section 37

The Appellate Tribunal under SAFEMA dismissed an appeal challenging the denial of cross-examination of witnesses in FEMA proceedings. The appellant was accused of bogus exports to Russia with inflated invoices to obtain export benefits under DEPB and Duty Drawback Schemes. The Tribunal held that cross-examination was not required as the case was supported by substantial documentary evidence corroborating witness statements recorded under Section 37 of FEMA. The Tribunal noted that quasi-judicial bodies follow summary procedures and are not bound by Civil Procedure Code requirements. The appellant's request for cross-examination without filing a reply to the show cause notice was deemed an attempt to delay proceedings. The Tribunal directed the Adjudicating Authority to conclude proceedings as per law.

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Issues Involved:
1. Declining Cross-Examination of Witnesses
2. Allegations of FEMA Violations
3. Documentary Evidence Supporting Allegations
4. Procedural Fairness and Natural Justice

Issue-Wise Detailed Analysis:

1. Declining Cross-Examination of Witnesses:
The appellant filed an appeal under Section 19 of the Foreign Exchange Management Act, 1999, challenging the order dated 08.02.2018, wherein the Adjudicating Authority declined the request for cross-examination of witnesses Kabul Singh, Balwant Singh Maan, Dr. Naginder Khera, and the Investigating Officer. The appellant argued that cross-examination is a valuable right and integral to the principle of natural justice, relying on judgments from the Hon'ble High Courts of Bombay and Delhi. The appellant contended that the whole case of the respondent ED is based on the statements of these witnesses, making their cross-examination essential to highlight the truth.

2. Allegations of FEMA Violations:
The case revolves around the alleged contraventions of Section 3(a), 3(b), 4, and 4(2) of the Foreign Exchange Management Act, 1999, by M/s Shivam Overseas and its partners. The allegations include receiving payments in India through unauthorized channels, making payments for the credit of persons outside India, unauthorized acquisition of foreign exchange, and depositing the same through fake Currency Declaration Forms (CDFs). The appellant was accused of manipulating foreign exchange under the guise of exporting substandard goods to Russia with inflated invoices to falsely claim export incentives.

3. Documentary Evidence Supporting Allegations:
The respondent ED presented substantial documentary evidence corroborating the statements recorded under Section 37 of FEMA. The evidence included bank records, export invoices, and investigation reports from various authorities, including the Directorate of Revenue Intelligence (DRI). The evidence indicated that the goods exported by M/s Shivam Overseas never reached their destination, and the export proceeds were obtained through unauthorized channels. Statements from various individuals, including Harish Batra and other associates, revealed that the firms involved in the transactions were bogus and created at the instance of the appellant for paper transactions without actual business.

4. Procedural Fairness and Natural Justice:
The Adjudicating Authority and the Tribunal, being quasi-judicial bodies, are not bound by the strict procedures of the Civil Procedure Code, 1908. The Hon'ble Supreme Court in Telstar Travels Private Limited & Ors. v. Enforcement Directorate emphasized that substantial compliance with the principles of natural justice is sufficient. The Tribunal noted that the cross-examination of witnesses is material only if the case is based solely on oral statements without corroborative documentary evidence. In this case, the substantial documentary evidence supported the allegations, making the cross-examination of witnesses unnecessary. The Tribunal concluded that the appellant's request for cross-examination appeared to be a tactic to delay the adjudication proceedings, as the appellant had not disclosed his defense and was attempting to play a blind game with the investigation agency.

Conclusion:
The appeal was dismissed as devoid of any merits. The Adjudicating Authority was directed to conclude the adjudication proceedings as per law, with the liberty to examine and cross-examine any witness on oath if required in the interest of justice. The appellant was granted the liberty to file a reply on merits to the grounds of the Show Cause Notice. The Tribunal clarified that nothing expressed in the judgment would affect the rights of any party in the adjudication proceedings.

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