2025 (12) TMI 1471 - AT - FEMA

Seized cash and FEMA contraventions: document-supply and hearing fairness upheld; confiscation and separate penalties sustained, total reduced.

Natural justice objections were rejected because relied-upon seized documents forming the SCN had been supplied under acknowledgment, effective ... Non- supply of important relied upon documents - No effective personal hearings - Breach of principles of natural justice - seizure of Indian Currency - money received from unknown persons in lieu of money transfers from relatives abroad. - contravention of Sections 3(a), 3 (b), 3 (d) and Section 4 of the Foreign Exchange Management Act, 1999 (FEMA) - waiver of the pre-deposit of the penalty - HELD THAT:- We find from the records that several call notices for joining the proceedings for adjudication were not availed by the Appellants. In the absence of any cooperation of the Appellants, the investigation under FEMA focused on the persons, whose names were appearing on the documents which have been recovered from the two residential premises and the business premises of the Appellants. All the documents which were seized and relied in the SCN had been supplied to the Appellants under proper acknowledgment. We are convinced that the Appellants herein deliberately avoided participating in the investigations and the adjudication proceedings and now therefore cannot be allowed to take advantage of their omissions. We also note that the genuineness of the documents recovered have been verified by recording the statement of the persons, whose contract details were mentioned in the said documents. The confiscation of Indian Currency recovered from the Appellants since they have been unable to explain the source of such cash with them. The challenge by the Appellants that why penalty for each of the violation of the Act has been imposed is best answered from the language used in the statute viz Section 13 (1) and 13 (2) of FEMA. We also note that the penalties imposed for each of the Appellant for the contravention indulged in by him of Sections 3 (a), 3 (b), 3 (d) and Section 4 of FEMA is 15% of the amount involved in the contravention of each of the aforementioned Sections. The interest of justice shall be served by reducing the cumulative penalty on each of the Appellant. The pre-deposit of the penalty amount already made shall be adjusted against the reduced penalty payable by each of the two Appellants. We uphold the Order of confiscation of the seized amount. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the adjudication was vitiated for breach of principles of natural justice on the grounds of non-supply of relied-upon documents and denial of effective personal hearing. (ii) Whether acquittal/exoneration in proceedings under the NDPS Act required closure of the FEMA adjudication arising from the same initial information. (iii) Whether the contraventions under Sections 3(a), 3(b), 3(d) and 4 of FEMA, and confiscation under Section 13(2), were sustainable on the material relied upon in the adjudication. (iv) Whether separate penalties for each FEMA contravention were permissible, and whether the quantum of penalty warranted interference and reduction. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Natural justice-supply of documents and opportunity of hearing Legal framework: The Court examined the appellants' challenge based on principles of natural justice in the FEMA adjudication context, focusing on whether relied-upon documents were supplied and whether adequate opportunities were provided. Interpretation and reasoning: The Court found from the record that multiple summons/call notices for investigation and adjudication were issued, but the appellants failed to tender statements and did not avail personal hearing opportunities. It accepted the adjudicating authority's finding that all seized and relied-upon documents forming the basis of the show cause notice had been supplied to the appellants under proper acknowledgment. The Court treated the appellants' conduct as deliberate non-participation and held they could not take advantage of their own omissions after repeatedly avoiding the process. Conclusion: The Court rejected the natural justice challenge and held the adjudication was not vitiated on the pleaded grounds. Issue (ii): Effect of NDPS exoneration on FEMA proceedings Interpretation and reasoning: Although the FEMA action arose from information received from State Police in an NDPS matter, the Court held that the FEMA case could not be treated as 'necessarily to be closed' merely because the appellants were acquitted/exonerated in the NDPS proceedings. The Court treated FEMA adjudication as independently sustainable on its own material and the appellants' lack of cooperation in FEMA investigation/adjudication. Conclusion: The Court held that NDPS acquittal did not mandate termination of the FEMA proceedings. Issue (iii): Sustainability of findings of contravention and confiscation under FEMA on the evidence relied upon Interpretation and reasoning: The Court noted that seized documents (loose sheets/registers/notepad) were recovered from two residential premises and a business premises during search, witnessed under panchanama in the presence of independent witnesses and the appellants' mother. In the absence of the appellants' participation, investigation proceeded by analyzing seized documents and recording statements of persons whose names/contact details appeared therein, which the Court regarded as verification of the genuineness of the recovered material. The Court also relied on the adjudicating authority's specific findings that the appellants undertook foreign exchange-related transactions without any FFMC licence or specific authorization from the Reserve Bank of India, and that the impugned order specifically set out details of each contravention under Sections 3(a), 3(b), 3(d) and 4. On confiscation, the Court upheld confiscation of the seized Indian currency under Section 13(2) because the appellants were unable to explain the source of the cash recovered from them. Conclusion: The Court upheld the findings of contravention under Sections 3(a), 3(b), 3(d) and 4 of FEMA and upheld confiscation of the seized currency under Section 13(2). Issue (iv): Permissibility of separate penalties for multiple contraventions and interference with quantum Legal framework: The Court examined Section 13(1) and Section 13(2) of FEMA as discussed in the judgment and applied their language to the challenge that penalty could not be imposed for each violation. Interpretation and reasoning: The Court held that the statutory language makes a person liable to penalty for each contravention of FEMA (including contravention of provisions, rules, regulations, notifications, directions, orders, or authorization conditions). It therefore rejected the challenge to imposition of penalties across multiple contraventions. However, on quantum, the Court noted that the penalties imposed were calculated at 15% of the amount involved in each contravention and recorded the cumulative penalty for each appellant. Considering the facts and circumstances, it held that the 'interest of justice' required reduction of the cumulative penalty for each appellant to a substantially lower fixed amount, with adjustment of the pre-deposit already made against the reduced penalty. Conclusion: The Court upheld the legality of imposing separate penalties for separate contraventions, but modified the impugned order by reducing the cumulative penalty payable by each appellant to Rs. 75,00,000, with adjustment of the pre-deposit already paid, while leaving confiscation undisturbed.