2024 (10) TMI 394 - AT - FEMA

Tribunal Confirms FEMA Violation via Phone Records, Reduces Penalty to Rs. 1,50,000/- After Adjustments.

The Tribunal upheld the contravention of Section 3(c) of FEMA, determining that the appellant received payments from a person outside India, supported by ... Retracted statement and corroboration rule - burden of proof on enforcement authority - contravention of Section 3(c) of FEMA - admissibility of electronic/mobile call records as corroborative evidence - confiscation and adjustment of seized amounts towards penalty - judicial reduction of penalty quantum in exercise of appellate powerRetracted statement and corroboration rule - burden of proof on enforcement authority - Reliance placed on retracted statements relied upon by the Adjudicating Authority and Special Director (Appeals). - HELD THAT: - The Tribunal applied the settled principle that retracted statements, if retracted within a reasonable time, should not be relied upon unless corroborated by other evidence. The Court examined the record and found that the impugned orders did not rest solely on the retracted statements. The enforcement authorities produced additional material including computerized accounts, seized papers indicating payments to named persons and printouts of the appellant's mobile showing frequent calls to Abdulla of Abu Dhabi. In that factual matrix the Tribunal held that the retracted statements could not be treated as the sole basis for conviction; rather they formed part of a composite of evidence which included independent corroboration. [Paras 3, 4, 12]Retracted statements could not be the sole basis for the order but reliance on them was permissible to the extent they were corroborated by other material on record.Contravention of Section 3(c) of FEMA - admissibility of electronic/mobile call records as corroborative evidence - Whether the appellant had contravened Section 3(c) of FEMA by receiving payments at the instance of a person residing outside India. - HELD THAT: - The Tribunal reviewed the search results, seized currency, seized papers showing payments to various persons, statements of third parties and the appellant's own admissions (later retracted), as well as mobile phone printouts evidencing frequent calls to Abdulla in Abu Dhabi. The appellant failed to substantiate the asserted gold business and did not satisfactorily explain the frequent communications with the foreign person. On the cumulative appraisal of evidence the Tribunal found sufficient material to sustain the finding of contravention of Section 3(c) of FEMA. [Paras 9, 11, 12, 13]Contravention of Section 3(c) of FEMA by the appellant was established on the record.Judicial reduction of penalty quantum in exercise of appellate power - confiscation and adjustment of seized amounts towards penalty - Appropriate quantum of penalty and adjustment of amounts already seized/deposited towards satisfaction of the penalty. - HELD THAT: - Although the Special Director (Appeals) had reduced the penalty from the Adjudicating Authority's imposition, the Tribunal exercised its appellate jurisdiction to further moderate the penalty. Having found contravention established, the Tribunal nevertheless reduced the penalty from Rs. 5,00,000 to Rs. 1,50,000 in view of the overall circumstances. It directed that the Rs. 1,00,000 already deposited as pre-deposit together with the Rs. 50,000 remaining with the Enforcement Directorate after confiscation of part of the seized currency be taken into account towards the penalty imposed. [Paras 6, 12, 13]Penalty reduced to Rs. 1,50,000 and amounts already deposited/lying with the ED to be appropriated towards satisfaction of the penalty; appeal partly allowed.Final Conclusion: The appeal is partly allowed: while the finding of contravention of Section 3(c) of FEMA is upheld on the basis of cumulative and corroborative material, the penalty is reduced to Rs. 1,50,000 and amounts already deposited and lying with the ED are to be adjusted towards that penalty. Issues:Challenge to orders passed by Special Director (Appeals) and Adjudicating officer regarding contravention of Section 3(c) of FEMA and imposition of penalty.Analysis:The appellant challenged the orders passed by the Special Director (Appeals) and the Adjudicating officer, alleging contravention of Section 3(c) of FEMA for receiving payments without RBI permission. The penalty was initially set at Rs. 7,00,000/-, reduced to Rs. 5,00,000/- on appeal. The appellant argued lack of evidence to prove the receipt of funds from a person outside India. The reliance on retracted statements was contested, citing legal precedents against their use.The appellant referenced various judgments to support the argument against reliance on retracted statements. It was highlighted that the burden of proof lay with the department, which failed to produce substantial evidence beyond the retracted statements. The appellant also mentioned the confiscation of funds and deposit made to satisfy the penalty amount imposed by the Special Director (Appeals).The respondent contested the appeal, supporting the orders of the Adjudicating Authority and the Special Director (Appeals). Detailed arguments were presented, emphasizing the reliance on corroborative evidence rather than solely on retracted statements. The respondent urged the dismissal of the appeal based on the material available to support the orders.Upon considering the submissions of both parties, the Tribunal examined the allegations of contravention of Section 3(c) of FEMA. The appellant's argument regarding the retracted statements was analyzed in light of the evidence found during searches at business premises and statements of other individuals involved. The Tribunal noted the appellant's admission of receiving payments under instructions from a person residing outside India, supported by phone records showing frequent communication with the said individual.The Tribunal found evidence to prove the contravention of Section 3(c) of FEMA, despite the appellant's inability to substantiate his gold business and reasons for contacting the individual from Abu Dhabi. The penalty amount was reduced from Rs. 5,00,000/- to Rs. 1,50,000/-, considering the deposit made towards the penalty and funds confiscated. The remaining amount with the Enforcement Directorate was directed to be adjusted towards the penalty, resulting in a partial allowance of the appeal.