2024 (9) TMI 1031 - AT - FEMA

SAFEMA Tribunal upholds FERA violations for fake import remittances using forged documents without actual goods imported

Sh. R.K. Verma, Sh. Ramesh A. Soni Versus The Assistant Director, Directorate of Enforcement, Mumbai

The Appellate Tribunal under SAFEMA upheld contraventions of FERA Sections 8(3) r/w 8(4) and 9(1)(b) against both appellants for illegal foreign exchange ... Contravention of Sections 8 (3) r/w 8(4) and 9(1) (b) of FERA - illegal foreign exchange remittance abroad in the garb of charges being paid for the imports of the goods which never occurred - Composite penalty for contraventions. HELD THAT:- We find that Sections 8(3) and 8(4) of FERA are worded in terms of a ‘person’ and there is no usage of ‘importer’. Similarly, Section 9(1)(b) is also worded in terms of a ‘person’. In the present case the Respondent Directorate had various statements before it, which conveyed that more than one concern was being controlled and owned by the Appellant Shri R.K. Verma. The investigations evoked suspicions as to fraud having been committed in filing of forged bills of entry with the bank. Hence, it became imperative to unearth the truth. It is, therefore, important for us to determine whether the remittances which were actually released were by Shri Verma, either directly or indirectly, and whether he was the ‘person’ as has been referred to in the aforementioned Sections. Whether the bills of entry to demonstrate that the goods had actually been imported against the remittances made, were deposited or not with the bank? - Appellants have claimed that these bills were in fact deposited with the bank but went missing. The Appellants have also maintained that the bills were not available since the prescribed period for its retention was over and in any case the bills had already been audited. However, the bank lodged a FIR with the Police for the missing import documents. The counter allegation is that the theft of the missing import documents was caused so to prevent detection of forgery. The Police failed to bring the case to conclusion. In fact, to raise this issue so as to contend that the bills of entry could have demonstrated that the imports of the goods occurred is to deviate from the correct evaluation of evidence on record. The documents from the bank clearly demonstrate that the amounts were remitted in the name of M/s. MICO Enterprises and M/s. Diamount. The reports from the Customs Department show that no diamonds were imported against the impugned remittances. Hence the question about the availability of the bills of entry is not germane to determine whether imports occurred against the impugned remittances. From the statements of Shri Vinod A. Shah it is clear that Shri R.K. Verma met him in Antwerp in the last quarter of 1990 and requested him to open a Company for him. He therefore opened a firm by name M/s. Diamblue in which major shareholder was Shri Rajesh Verma, a person introduced by Shri R.K. Verma. It therefore appears that M/s. Diamblue which received the remittances made by M/s. Diamount was in fact under the control of the Appellant Shri R.K. Verma. The inference that follows is about the key role that the Appellant Shri R.K. Verma played in the entire modus operandi to illegally remit the foreign exchange abroad in the garb of charges being paid for the imports of the goods which never occurred. Thus, we find that the contraventions of Sections 8 (3) read with 8(4) and 9(1) (b) of FERA are established against the Appellant Shri R.K. Verma and contraventions of Sections 8 (3) read with 8(4), 9(1) (b) and 64(2) of FERA are established against Shri R.A. Soni. We therefore, find no merit in the two Appeals. Issues Involved:1. Validity of the Adjudicating Authority.2. Delay in proceedings.3. Reliance on retracted statements.4. Vagueness of the Show Cause Notice (SCN).5. Composite penalty for contraventions.6. Allegations against Shri R.K. Verma.7. Allegations against Shri R.A. Soni.8. Denial of cross-examination.9. Missing import documents.Issue-wise Detailed Analysis:1. Validity of the Adjudicating Authority:The Appellants argued that the Additional Director General (Systems) was not an Adjudicating Officer under Section 3 read with Section 50 of FERA. However, the Respondent countered that the Additional Director General (Systems), Customs and Central Excise, was duly notified as Adjudicating Authority under Notification No. 6(F.No. 3/1/2002-Ad I-C) dated 28.08.2003 by the Central Government, as empowered under Section 5 of FERA. The Tribunal upheld this notification, validating the authority of the Additional Director General (Systems) to adjudicate the SCN issued in the present case.2. Delay in Proceedings:The Appellants cited the judgment in Union of India v/s. Citibank [2022 SCC Online SC 1073] to argue for termination due to delay. However, the Tribunal noted that the SCN was issued within two years after the last statement was recorded, which was not considered a significant delay. The Tribunal dismissed the argument of delay, noting the complexity and extensive nature of the investigations.3. Reliance on Retracted Statements:The Appellants contended that the allegations were based on retracted statements. The Tribunal found that the statements of Shri R.K. Verma and Shri R.A. Soni were corroborated by other independent and cogent evidence. The Tribunal referred to judgments such as Vinod Solanki Vs Union of India [(2008) 16 SCC 537] and K.T.M.S Mohamed Vs. Union of India [(1992) 3 SCC 178], which held that retracted statements could be relied upon if corroborated by other evidence.4. Vagueness of the Show Cause Notice (SCN):The Appellants argued that the SCN was vague. The Tribunal found that the SCN issued on 12.01.1996 listed detailed remittances and provided sufficient information for the Appellants to understand the charges. The Tribunal rejected the contention that the SCN was vague, noting that it contained specific details of the remittances and the alleged contraventions.5. Composite Penalty for Contraventions:The Appellants argued that the imposition of composite penalties for various contraventions was irregular. The Tribunal did not find merit in this argument, as the penalties were imposed for distinct contraventions of Sections 8(3) read with 8(4) and 9(1)(b) of FERA for Shri R.K. Verma, and Sections 8(3) read with 8(4), 9(1)(b), and 64(2) of FERA for Shri R.A. Soni.6. Allegations against Shri R.K. Verma:The Appellants argued that Shri R.K. Verma was neither the proprietor of the firms involved nor the holder of the import code. The Tribunal found that Shri R.K. Verma admitted in his statements that he controlled the firms and arranged the remittances. The Tribunal concluded that Shri Verma was the main person involved in the fraudulent remittances and upheld the penalties imposed on him.7. Allegations against Shri R.A. Soni:The Appellants contended that Shri R.A. Soni was wrongly charged with abetment. The Tribunal found that Shri Soni's statements, corroborated by other evidence, indicated his involvement in the fraudulent remittances. The Tribunal upheld the penalties imposed on Shri Soni, finding that he abetted Shri Verma in the illegal remittances.8. Denial of Cross-examination:The Appellants argued that the denial of cross-examination violated natural justice. The Tribunal referred to judgments such as Telstar Travels Private Limited & Ors. V. Enforcement Directorate, (2013) 9 SCC 549, which held that denial of cross-examination does not violate natural justice if the SCN and relied-upon documents are provided. The Tribunal found no prejudice caused to the Appellants by the denial of cross-examination.9. Missing Import Documents:The Appellants claimed that the import documents were deposited with the bank but went missing. The Tribunal found that the remittances were made without actual imports, as confirmed by the Customs Department. The Tribunal concluded that the missing documents did not affect the determination of the contraventions.Conclusion:The Tribunal dismissed the Appeals No. FPA-FE-1283/MUM/2004 and FPA-FE-1284/MUM/2004, finding no merit in the arguments presented by the Appellants. The penalties imposed for the contraventions of FERA were upheld.