2024 (9) TMI 1035 - AT - FEMA

SAFEMA penalties reduced to pre-deposit amounts for unauthorized payments without RBI exemption under Sections 9(1)(b) and 9(1)(d)

Shri Mustaq Mohd. Patel, Shri Mohammed Rafiq Ali Patel Versus The Special Director Directorate of Enforcement, Surat

The Appellate Tribunal under SAFEMA at New Delhi upheld contraventions under Sections 9(1)(b) and 9(1)(d) for receiving and making payments without RBI ... Contravention of Sections 9(1)(b) & 9(1)(d) - receiving payments from persons resident in India by order of person resident outside India and by making payments to persons resident in India by order of person resident outside India, without the general or special exemption of RBI - Alleged breach of principles of natural justice in the adjudication process. HELD THAT:- Adjudicating Authority has considered the subsequent retraction and recorded its opinion before accepting the statements. We also find that the confessional statements have been corroborated by other independent and cogent evidence as have been brought out in the paragraphs from the impugned Order which have been cited afore while dealing with the arguments of the Ld. Counsel for the Respondent. After service of the Show Cause Notice and having furnished the relied upon documents, even so during the proceedings of adjudication, there does not appear to be any prejudice caused to the interest of the Appellants by the denial of cross examination. A number of hearings were given to the Appellants during the course of the Adjudication proceedings. In the Appeals before us we find that the Ld. Adjudicating Authority has taken note of the statements of persons who were named in the seized documents and diaries as well as of documents recovered from them Contraventions by the two Appellants are established. Ld. Counsel for the Appellants has pleaded for reduction in penalties due to economic status of the two Appellants. In the order dated 01.08.2008, this Tribunal reduced the pre deposit to 10% of the penalty which have already been deposited by the two Appellants in 2011 and 2012. We find that the ends of justice will be met if the penalties are reduced to the amounts of pre deposit made. Therefore, the penalty on the Appellant Shri Mustaq Mohd. Patel is reduced to Rs. 13,50,000/- and the penalty on the Appellant Shri Mohammed Rafiq Ali Patel is reduced to Rs. 1,35,000/-. Issues Involved:1. Contravention of Sections 9(1)(b) & 9(1)(d) of the Foreign Exchange Regulation Act, 1973 (FERA) by the appellants.2. Alleged breach of principles of natural justice in the adjudication process.3. Validity of evidence and statements, including retracted confessions.4. Proportionality of penalties imposed on the appellants.Issue-wise Detailed Analysis:1. Contravention of Sections 9(1)(b) & 9(1)(d) of FERA:The appellants, Shri Mustaq Mohd. Patel and Shri Mohammed Rafiq Ali Patel, were penalized for receiving payments of Rs. 2,70,96,000/- and making payments of Rs. 2,70,14,712/- to persons resident in India by order of persons resident outside India without the general or special exemption of the RBI. The Tribunal confirmed the contraventions based on the seized documents, including diaries and loose sheets, and the statements of the appellants and other individuals. The adjudicating authority meticulously examined the facts and found that the appellants were actively involved in hawala transactions as per the instructions of Shri Mustaq Mohd. Patel's brother residing in Canada.2. Alleged Breach of Principles of Natural Justice:The appellants claimed the impugned order was passed ex-parte, breaching natural justice principles. They argued that their advocate's illness was not considered, no fresh notice was issued, and their replies were ignored. The Tribunal found that multiple opportunities were given to the appellants to present their defense, but they sought repeated adjournments. The adjudicating authority was not obligated to provide further hearing opportunities before passing the order. Thus, there was no violation of natural justice principles.3. Validity of Evidence and Statements:The appellants contended that the evidence was not independent, statements were recorded under coercion, and retracted subsequently. The Tribunal noted that the retractions were made after 15 days and there was no substantiation of coercion allegations. The statements, corroborated by other independent evidence, detailed the amounts received and distributed on orders from abroad. The Tribunal referred to Supreme Court judgments, indicating that retracted statements could be relied upon if corroborated by independent evidence. The adjudicating authority had considered the retractions and recorded its opinion before accepting the statements.4. Proportionality of Penalties:The appellants argued that the penalties were disproportionate given their economic status. The Tribunal acknowledged the financial difficulties and noted that the penalties were reduced to 10% of the original amount in a prior order. The penalties were further reduced to the amounts already pre-deposited by the appellants (Rs. 13,50,000/- for Shri Mustaq Mohd. Patel and Rs. 1,35,000/- for Shri Mohammed Rafiq Ali Patel) to meet the ends of justice.Conclusion:The Tribunal modified the impugned order, reducing the penalties as mentioned above, and disposed of the appeals accordingly.