Forex company wins appeal, gets seized Rs 11 lakh released; individual guilty of dollar premium sales

The Appellate Tribunal under SAFEMA allowed the appeal by the forex company and dismissed the individual appellant's appeal regarding FEMA violations. The company successfully demonstrated that seized Indian currency of Rs. 11 lakhs was properly accounted for through bank records, and foreign currency holdings were adequately documented. The Tribunal found no contraventions by the company and ordered release of all seized currency. However, the individual appellant was found guilty of selling US dollars at premium rates to Nigerian HC officials. The Rs. 5 lakh penalty already deposited by the individual was deemed sufficient with no additional payment required.

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Issues Involved:

1. Confiscation of foreign and Indian currency.
2. Imposition of penalties for contravention of FEMA, 1999.
3. Allegations of illegal dealings in foreign exchange.
4. Procedural lapses and natural justice concerns.

Detailed Analysis:

1. Confiscation of Foreign and Indian Currency:

The appeals were filed under Section 19 of FEMA, 1999 against an order dated 30.03.2017, which confiscated foreign and Indian currency recovered from the business premises of the appellant. The confiscated amounts included UK lb3690, AUS $100, Sing $1650, US $6116, and Rs.11 lakhs. The Adjudicating Authority concluded that the appellant failed to comply with RBI conditions under Section 10 and 47 of FEMA, 1999. The seized currency was alleged to be involved in illegal transactions, and the appellant did not maintain proper records as required by RBI guidelines.

2. Imposition of Penalties for Contravention of FEMA, 1999:

Penalties of Rs.5 lakhs on Sumesh Duggal and Rs.15 lakhs on M/s Duggal Forex Pvt. Ltd. were imposed for contraventions of FEMA, 2002. The Adjudicating Authority found that the appellants engaged in illegal dealings in foreign exchange, which included the acquisition, purchase, sale, and transfer of foreign exchange without proper authorization. The penalties were imposed under Section 13(2) of FEMA, 1999 for non-compliance with the conditions laid down by RBI.

3. Allegations of Illegal Dealings in Foreign Exchange:

The case facts revealed that on 21.05.2007, the Income Tax Department seized US $22,27,800 from Captain G.A. Ojedokun, who admitted to purchasing foreign currency from local markets at black market rates. Investigations indicated that Sumesh Duggal and M/s Duggal Forex Pvt. Ltd. were involved in these transactions. Statements recorded under Section 37 of FEMA, 1999 confirmed illegal transactions, including dealings with Nigerian High Commission officials. The evidence included call records and statements from various individuals, corroborating the illegal dealings in foreign exchange.

4. Procedural Lapses and Natural Justice Concerns:

The appellant argued that the Adjudicating Authority failed to provide details and copies of statements of persons involved, thus preventing a proper defense. The appellant also contended that the seized Indian currency was duly accounted for and withdrawn from the bank on the day of the search. The foreign currency was also claimed to be duly accounted for with supporting invoices. The appellant alleged that the statements recorded were not voluntary and were obtained under duress. The Adjudicating Authority was accused of not considering the appellant's replies and representations, leading to a violation of natural justice principles.

Judgment:

The Tribunal allowed the appeal filed by M/s Duggal Forex Pvt. Ltd., finding that the company had not committed any contravention as there was no irregularity in its accounts. The Indian and foreign currency seized from M/s Duggal Forex Pvt. Ltd. was directed to be released. The appeal filed by Sumesh Duggal was dismissed, affirming the penalty of Rs.5 lakhs, which had already been deposited as a pre-deposit for admitting the appeal. The Tribunal concluded that Sumesh Duggal was involved in illegal dealings in foreign exchange and upheld the confiscation of the seized currency. The judgment was pronounced on 8th July 2024.

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