2024 (9) TMI 560 - AT - FEMA

Appellate Tribunal upholds FERA penalty for foreign exchange violations despite acquittal in criminal case

Shri Bala Shivaprasad Versus Deputy Director, Directorate of Enforcement, Bangalore

The Appellate Tribunal under SAFEMA dismissed an appeal challenging penalty imposed for FERA violations. The appellant was penalized after foreign ... Violation of Section 8(1) and and (9) (1)(a) of FERA - officers of the Directorate of Revenue Intelligence, Hyderabad seized foreign exchange of various denominations equivalent to Rs.54,20,854 at Hyderabad Airport on 11.12.1999 from Bala Ravi Kishore - reliance on statement recorded u/s 108 of the Customs Act - validity of reliance on the statement though retracted by the appellant - HELD THAT:- The facts on record shows that there was no retraction of the statement and otherwise in absence of reason and without justifying the delay mere retraction cannot be accepted. The Apex Court in the case of Bharat v. State of UP [1970 (3) TMI 183 - SUPREME COURT (LB)] has ruled on the retraction of the statement as an afterthought. We are unable to accept the argument of the learned counsel for the appellant that retraction has been relied though no document has been produced to prove it and otherwise there was material available to prove the case which was mainly the currency recovered though from Shri Bala Ravi Kishore but he was carrying it at the instance of the appellant. We are unable to accept that merely for the reason currency was not recovered from the appellant, a case would not be made out. The facts available on record are sufficient to prove the contravention. It is not only that the currency recovered was meant for its delivery to a person out of India but there was no permission to carry the currency. Director of Enforcement has thus rightly concluded about the contravention of the provisions to impose penalty on the appellant. The appellant has made a reference of Section 49(3) of the Act of 1999 to submit that the adjudication was not initiated within the sunset period of two years. It is only on the ground that notices were not served before the expiry of the period of two years while the notice was issued prior to the period of two years. Thus, we are unable to accept the argument that the proceedings were initiated after the sunset period of two years, rather issuance of Show Cause Notice itself shows initiation of the proceedings and that too within the sunset period. Accordingly, we are unable to accept the aforesaid argument also. Appellant lastly made a reference of the acquittal of the appellant in the prosecution under the Customs Act with an argument that once the appellant is acquitted in the prosecution, the penalty should not sustain. The argument aforesaid has been made in ignorance of the fact that the appellant was exonerated by the Metropolitan Sessions Judge, Hyderabad on the ground that the sanction for the offence under Section 135(1)(b)(ii) of the Customs Act was not taken and, therefore, the prosecution therein failed. It is, however, after recording the finding that the appellant and others attempted and abetted the smuggling of foreign currency - The appeal therein by the respondent was dismissed. The perusal of the order would reveal two issues framed by the court and answered accordingly. Metropolitan Sessions Judge concluded that the conviction could not be made in absence of sanction for conviction under Section 135(1). It is otherwise to be clarified that mere acquittal in the prosecution case would not have bearing unless the issue is decided on merits. In the instant case, the acquittal in the prosecution case is on technical ground thus it will not have bearing on the present case. Appeal dismissed. Issues Involved:1. Validity of reliance on statements recorded under Section 108 of the Customs Act for proceedings under the Foreign Exchange Regulation Act, 1973 (FERA).2. Validity of the retracted statement.3. Alleged violation of principles of natural justice due to non-service of the Show Cause Notice.4. Contravention of Sections 8(1) and 9(1)(a) of FERA.5. Impact of the appellant's acquittal in the prosecution case on the penalty under FERA.6. Compliance with the sunset period under Section 49(3) of FEMA, 1999.Detailed Analysis:1. Validity of Reliance on Statements Recorded Under Section 108 of the Customs Act:The appellant argued that the statements recorded under Section 108 of the Customs Act cannot be used to pass orders under the Foreign Exchange Regulation Act, 1973 (FERA), as FERA is an independent enactment. The tribunal, however, found that the statements recorded under Section 108 of the Customs Act are admissible in adjudication proceedings under FERA. It was noted that these statements are considered judicial proceedings and hence, admissible. The tribunal referred to the judgment of the Bombay High Court in Vinod Chitalia v. Union of India, which held that statements made to the Directorate of Revenue Intelligence (DRI) can be used in adjudication proceedings under FEMA. Additionally, the tribunal cited the Supreme Court's ruling in Ramesh Chandra Mehta v. State of West Bengal, which clarified that statements recorded under Section 108 of the Customs Act are not hit by Article 20(3) of the Constitution of India.2. Validity of the Retracted Statement:The appellant claimed that his statement recorded under Section 108 of the Customs Act was retracted within 12 days, and thus, should not be relied upon without corroboration. The tribunal found no document on record to prove the retraction of the statement. It was emphasized that even if a statement is retracted, it can still be relied upon if the retraction is not made within a reasonable time or without valid reasons. The tribunal referred to the Supreme Court's judgment in K.T.M.S. Mohd. v. Union of India, which stated that a retracted confession could still be acted upon if the retraction was an afterthought or made under advice.3. Alleged Violation of Principles of Natural Justice:The appellant contended that the Show Cause Notice was not served on him, violating principles of natural justice. The tribunal found that the notice was sent to the appellant on several occasions and was received by his wife, who endorsed that the appellant was out of India. A telegram was also sent by the appellant seeking adjournment. The tribunal concluded that the appellant had avoided service of notices and that the impugned order was not passed without sending the Show Cause Notice and its service.4. Contravention of Sections 8(1) and 9(1)(a) of FERA:The tribunal examined the facts and found sufficient evidence to prove the contravention of Sections 8(1) and 9(1)(a) of FERA. The appellant was found to have acquired foreign currency without requisite permission and attempted to transfer it to a person outside India. The tribunal noted that the possession of foreign currency by a carrier could still constitute a contravention of Section 8(1) of FERA. The tribunal upheld the penalty imposed on the appellant for these contraventions.5. Impact of the Appellant's Acquittal in the Prosecution Case:The appellant argued that his acquittal in the prosecution case under the Customs Act should result in the penalty under FERA being set aside. The tribunal noted that the appellant was acquitted on technical grounds due to the lack of sanction for prosecution under Section 135(1)(b)(ii) of the Customs Act. The tribunal clarified that an acquittal on technical grounds does not have a bearing on the adjudication proceedings under FERA, which are civil in nature.6. Compliance with the Sunset Period under Section 49(3) of FEMA, 1999:The appellant contended that the adjudication was not initiated within the sunset period of two years as required under Section 49(3) of FEMA, 1999. The tribunal found that the Show Cause Notice was issued within the two-year period, thus initiating the proceedings within the sunset period. The tribunal rejected the argument that the proceedings were initiated after the sunset period.Conclusion:The tribunal dismissed the appeal, upholding the penalties imposed for contravention of Sections 8(1) and 9(1)(a) of FERA. The reliance on statements recorded under Section 108 of the Customs Act was deemed valid, and the retracted statement was not accepted due to lack of evidence. The tribunal also found no violation of principles of natural justice and confirmed that the adjudication proceedings were initiated within the sunset period. The appellant's acquittal in the prosecution case did not affect the penalty under FERA, as the acquittal was on technical grounds.