SAFEMA upholds penalties for illegal foreign exchange trading network targeting overseas travelers under FEMA

The Appellate Tribunal SAFEMA upheld penalties against two respondents for illegal foreign exchange trading under FEMA. The respondents operated an organized network purchasing foreign currency from local markets to sell to overseas travelers. The Tribunal confirmed confiscation of seized foreign currencies (US$6,370, Euros, Sterling pounds, and other denominations) and penalties of Rs.24,00,000 and Rs.12,00,000 respectively. Additionally, the Tribunal ordered confiscation of Rs.10,57,000 in Indian currency, overturning the lower authority's decision to release these funds, finding them linked to illegal foreign exchange transactions.

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Issues:
1. Contravention of provisions of Foreign Exchange Management Act, 1999 (FEMA)
2. Confiscation of seized foreign exchange
3. Confiscation of seized Indian currency
4. Imposition of penalties on the involved parties

Analysis:

1. The judgment pertains to a Revision Petition filed by the Enforcement Directorate against an order passed by the Special Director, Enforcement Directorate, Mumbai, imposing penalties for contravention of FEMA provisions. The penalties were imposed on two individuals for their involvement in illegal foreign exchange transactions amounting to Rs. 1,58,70,789/-. While foreign exchange worth Rs. 7,06,816.40/- was confiscated, the Ld. Adjudicating Authority refrained from confiscating the seized Indian currency of Rs. 10,57,000/-. No penalties were imposed on two other individuals associated with the case.

2. The Enforcement Directorate filed the Revision Petition to challenge the order and sought the confiscation of the seized Indian currency. The petition argued that the impugned order was erroneous in not confiscating the Indian currency despite clear evidence on record.

3. The Appellant's Counsel contended that the Adjudicating Authority failed to properly consider the facts presented by the Customs Department and the statements on record. The Counsel highlighted that the seized Indian currency was obtained through illegal means, as indicated in the impugned order. The Counsel urged the Tribunal to allow the petition.

4. The Respondents' Counsel, on the other hand, argued against reversing the order related to the seized Indian currency and requested the dismissal of the Petition.

5. Upon reviewing the submissions and evidence, the Tribunal found that the involved individuals were engaged in the illegal business of buying foreign exchange from the local market to sell to passengers traveling abroad. The organized network involved identifying passengers, obtaining foreign currency from them against Indian currency, and collaborating with external parties for currency transactions.

6. The Adjudicating Authority had imposed penalties and ordered the confiscation of seized foreign exchange but refrained from confiscating the Indian currency due to a lack of direct evidence linking it to the contraventions. However, based on the evidence and discussions, the Tribunal intervened with the order and directed the confiscation of the Indian currency amounting to Rs. 10,57,000/- under section 13(2) of FEMA.

7. Consequently, the Revision Petition/Appeal was allowed, and the matter was disposed of with the revised order for the confiscation of the Indian currency.

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