SAFEMA appeal partially allowed, FEMA Section 3 violations confirmed, penalty reduced to Rs. 15 lakh from higher amount

The Appellate Tribunal under SAFEMA partially allowed the appeal in a FEMA violation case. The Tribunal found contraventions of Section 3(a) for US$ 99,770 and Sections 3(a) and 3(d) for US$ 5,95,738.4 and RMB 5,78,079.8, but rejected one charge of US$ 16,000 relating to optical frames transaction. The Tribunal set aside foreign currency confiscation, ordered release of seized Indian currency of Rs. 9.29 lakh, and reduced the consolidated penalty from the original amount to Rs. 15,00,000 finding the imposed penalties disproportionately higher.

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Issues Involved:
1. Violation of principles of natural justice.
2. Legality of confiscated foreign currency.
3. Alleged acquisition of foreign exchange abroad.
4. Interpretation of emails recovered from the appellant's computer.
5. Seizure of bank passbook and its implications.
6. Seizure of deposit slip and blank cheque book.
7. Alleged illicit purchase of foreign currency.
8. Penalty imposed and its proportionality.

Detailed Analysis:

1. Violation of principles of natural justice:
The appellant argued that the principles of natural justice were violated as cross-examination of the Departmental Officers and witnesses was not permitted. The tribunal found that the appellant's statements were true and voluntary, corroborated by independent evidence recovered from his premises. Therefore, the absence of cross-examination did not prejudice the appellant's interests.

2. Legality of confiscated foreign currency:
The appellant explained that the seized foreign currency was legally acquired by him and his family members before traveling abroad. The tribunal noted that the regulations permitted retention of foreign currency up to US$ 2000 per passenger. Given that the appellant and his family had traveled abroad and provided receipts of foreign exchange, the charge under Section 3(a) of FEMA for Rs. 2,99,000/- could not be sustained. The tribunal set aside the penalty of Rs. 40,000/- and the order of confiscation of the foreign currency.

3. Alleged acquisition of foreign exchange abroad:
The appellant contended that the passbook seized did not reflect his account details and belonged to another individual. The tribunal found that the appellant failed to provide an adequate explanation for the passbook's presence. The adjudicating authority's inference that the appellant was arranging funds credited in the account was upheld, establishing contraventions of Sections 3(a) & 3(d) of FEMA.

4. Interpretation of emails recovered from the appellant's computer:
The appellant argued that the emails related to business transactions coordinated on behalf of actual importers in India. The tribunal found that the appellant failed to explain several transactions, including transfers of significant amounts to China. The presumption under Section 39 of FEMA was applied, and the tribunal agreed with the adjudicating authority that the contraventions were established.

5. Seizure of bank passbook and its implications:
The appellant explained that the passbook belonged to his cousin and was with him for reconciliation purposes. The tribunal noted that the appellant's statements corroborated the evidence recovered, leading to the conclusion that the appellant was involved in arranging funds credited in the account.

6. Seizure of deposit slip and blank cheque book:
A deposit slip and blank cheque book of an overseas account were seized. The appellant admitted not having RBI permission to open the account but produced a letter requesting its closure. The tribunal found the appellant's explanation insufficient to negate the contraventions.

7. Alleged illicit purchase of foreign currency:
The adjudicating authority inferred from a notebook entry that the appellant illicitly purchased US$ 16000. The appellant attributed the entry to a legitimate business transaction. The tribunal accepted the appellant's explanation and did not uphold the contravention for this amount.

8. Penalty imposed and its proportionality:
The tribunal found the penalties imposed disproportionately high. It reduced the consolidated penalty for the contraventions to Rs. 15,00,000/-.

Conclusion:
The tribunal partly allowed the appeal, setting aside the confiscation of foreign currency worth Rs. 2,99,000/- and ordering the release of seized Indian currency of Rs. 9.29 Lakh. The contraventions of Sections 3(a) & 3(d) of FEMA were established for amounts US$ 5,95,738.4 and RMB 5,78,079.8, with a reduced penalty of Rs. 15,00,000/-.

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