2024 (9) TMI 706 - AT - FEMA

Tribunal Reduces FERA Penalty to Rs. 2 Lakhs; Orders Release of Funds in Appellant's Bank Account for Over-Invoicing Case.

Shivshankar Chunnilal Joshi Versus The Special Director, Directorate of Enforcement, Mumbai

The Tribunal partially allowed the appeal, reducing the penalty imposed on the Appellant under FERA to Rs. 2 Lakhs, aligning with the pre-deposited ... Offence under FERA - contravention of Section 8(3) read with (r/w) Section 8(4) and Sections 8(3) r/w 8(4) r/w Section 64 of FERA - penalty has been imposed on him for the over-invoicing of the imported books and unauthorised remittances in foreign exchange made abroad through his alleged proprietorship firms - It is contention of the Appellant that the main accused Shri Kamlesh Shah placed the order for the import of the books, made the payment for the consignments for the imported books and the subsequent remittance in foreign exchange abroad and the only act committed by the Appellant was that he allowed Shri Kamlesh Shah to use the name of his proprietorships for import of books. HELD THAT:- We observe that the Appellant had the knowledge that Shri Kamlesh Shah had placed orders for the books, effected the consignment imports and made payment of remittances in foreign exchange to give effect to the fraudulent scheme. Further, based on the said recorded statements under Section 40, we are not inclined to believe the assertion of the Appellant that he was not aware that Shri Kamlesh Shah had opened the bank. Moreover, we observe that any inconsistencies in the statement of Shri Kamlesh Shah do not cast doubts on the veracity of the recorded statements and records available before us for drawing inference about the involvement of the Appellant. Based on the materials before us, we do not consider the Appellant to be main mastermind to over-value the imported book consignments and send remittances abroad in foreign exchange for the said import. From the role played by the Appellant in the entire scheme, we hold that the contravention of Section 8(3) r/w Section 8(4) as well as of the said Sections r/w Section 64(2) of FERA are established against the Appellant. We reduce the total penalty on the Appellant to Rs. 2 Lakhs. We note that Rs. 2 Lakhs has already been pre-deposited by the Appellant and therefore, the amount is to be adjusted towards the reduced penalty. We also observe that the Ld. Adjudicating Authority has directed Rs. 60,859.52 lying in the bank account of M/s Vishal Internationals, the proprietorship firm of the Appellant to be adjusted against the total penalty of Rs. 8 Lakhs imposed on the Appellant in the impugned order. In view of the reduction in penalty to Rs. 2 Lakhs, which has already been deposited by the Appellant as pre-deposit, we direct that the amount of Rs. 60,859.52 blocked in the account of M/s Vishal Internationals in the Corporation Bank be released to the Appellant, along with interest thereupon, if any. Issues:1. Imposition of penalties under FERA for contravention of Sections 8(3) and 8(4).2. Allegations of over-invoicing and unauthorized remittances in foreign exchange.3. Appellant's contention of lack of knowledge and involvement in the fraudulent scheme.4. Examination of evidence and statements to determine the role and liability of the Appellant.5. Reduction of penalty and adjustment of pre-deposited amount and blocked funds.Detailed Analysis:1. The judgment pertains to an appeal filed against penalties imposed under the Foreign Exchange Regulation Act, 1973 (FERA) for contravention of Sections 8(3) and 8(4). The penalties were imposed on the Appellant for over-invoicing of imported books and unauthorized remittances in foreign exchange. The Appellant pre-deposited Rs. 2 Lakhs out of the total penalty imposed.2. The Appellant was accused of facilitating over-invoiced book imports and unauthorized remittances through his proprietorship firms. The Appellant denied knowledge of the fraudulent activities, claiming that the main accused was responsible for placing orders, making payments, and remitting funds abroad. The Respondent argued that the Appellant permitted the misuse of his firms for illegal activities, gaining a commission in the process.3. The Appellant contended that he was unaware of the bank account opened by the main accused for unauthorized remittances. He emphasized the main accused's statement to dissociate himself from the violations. The Respondent, however, presented evidence indicating the Appellant's involvement and knowledge of the fraudulent scheme.4. The Tribunal examined the statements and evidence on record, concluding that the Appellant allowed the main accused to use his firms for illegal activities. The Appellant received a commission for facilitating over-invoiced book imports and unauthorized remittances. The Tribunal found the Appellant's role established based on recorded statements and financial records.5. Ultimately, the Tribunal reduced the total penalty on the Appellant to Rs. 2 Lakhs, considering the pre-deposited amount. Additionally, funds blocked in the bank account of one of the Appellant's firms were directed to be released due to the penalty reduction. The appeal was partly allowed, and the matter was disposed of accordingly.