Tribunal reduces FEMA Section 10(6) penalty for copper scrap import fraud after containers arrived empty

The Appellate Tribunal under SAFEMA found contravention of Section 10(6) of FEMA where appellant imported copper scrap in 10 containers that arrived empty, despite remitting US$ 6,56,864 through foreign exchange. The Tribunal set aside the penalty against one appellant who was not responsible for business conduct, while reducing the penalty for the other appellant to 25% of the original amount, finding the initial penalty excessive given insufficient efforts to recover the defrauded amount through legal proceedings.

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Issues:
1. Contravention of Section 10(6) of the Foreign Exchange and Management Act, 1999.
2. Imposition of penalties on the appellants for contravention of the Act.
3. Role and liability of each appellant in the transaction.
4. Efforts made by the appellants to recover the remitted amount.
5. Justification for the penalty imposed on each appellant.
6. Consideration of previous judgments in similar cases.

Detailed Analysis:

Issue 1: The appellants were charged with contravention of Section 10(6) of the Act of 1999 for importing copper scrap in 10 containers that were found empty, leading to a penalty being imposed on them.

Issue 2: The penalty of Rs. 30 lakhs was imposed on M/s G. Tex Inc. and Rs. 7,50,000 each on the appellants Rajesh Jhanwar and Madhusudan Jhanwar for their involvement in the transaction.

Issue 3: The appellants argued that they entered into the transaction with M/s Koya International for the copper scrap, but the containers were received empty. The role and knowledge of each appellant in the transaction were also questioned.

Issue 4: The appellants claimed to have made efforts to recover the remitted amount, including lodging complaints and seeking legal assistance, but were unable to recover the funds due to the fraudulent activities of M/s Koya International.

Issue 5: The appellants contested the justification for the penalties imposed on them, arguing that the penalties were disproportionate considering their roles and efforts to recover the remitted amount.

Issue 6: The appellants cited previous judgments to support their argument for a reduction in the penalty amount, emphasizing the fraudulent actions of M/s Koya International and the lack of serious efforts to recover the remitted amount.

In conclusion, the Tribunal found contravention of Section 10(6) of the Act of 1999 in the import transaction but considered the efforts made by the appellants to recover the funds. The penalty imposed on Madhusudan Jhanwar was set aside, considering his lack of involvement in the transaction. The penalty on Rajesh Jhanwar was reduced by 25% due to the excessive nature of the original penalty. The Tribunal partially modified the order, requiring the deposit of 25% of the reduced penalty amount.

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