Admissibility of Customs derived Evidence: admissible in FEMA proceedings if transaction linked and corroborated; active participants liable.

The article addresses two issues: admissibility of statements and materials obtained under the Customs Act in FEMA adjudications and the sustainability of penalties against five appellants. It states that Customs-recorded statements and seized documents may be admitted in FEMA proceedings where they relate to the same transactions, statutory evidential presumptions apply, and independent corroboration exists; reliance on such material was sustained. It further explains that penalties may be imposed on persons shown by evidence and admissions to have participated in contraventions, while nominal or non active partners lacking participation were not held liable and their penalties were set aside.

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Issues: (i) Whether statements and investigation material obtained under the Customs Act, 1962 (including statements recorded under Section 108 of the Customs Act and documents seized in DRI searches) are admissible and can be relied upon in adjudication proceedings under the Foreign Exchange Management Act, 1999 (FEMA); (ii) Whether the penalties imposed by the Adjudicating Authority under Section 3(b)/Section 3(4) of FEMA on the five appellants are sustainable, and specifically whether the penalties imposed on Shri S. Gowrishankar and Smt. Mamta Gupta ought to be set aside.

Issue (i): Whether statements and investigation material obtained under the Customs Act, 1962 can be relied upon in FEMA adjudication proceedings.

Analysis: The Tribunal examined the link between the transactions investigated under the Customs Act and the alleged contraventions under FEMA and considered authorities permitting cross-use of statements when they pertain to the same transactions. The Tribunal reviewed the nature of statements recorded under Section 108 of the Customs Act, 1962 and the evidentiary weight accorded to documents seized and examined by GEQD, Hyderabad. It noted statutory presumptions in Section 39 of FEMA permitting admission and presumptions as to documents seized or produced in investigations under the Act. The conduct of the noticees (non-appearance and non-cooperation) and the corroboration between seized digital material, GEQD reports and recorded statements were considered in assessing admissibility and probative value.

Conclusion: The Tribunal held that the statements and investigation material obtained under the Customs Act, 1962 are admissible and may be relied upon in FEMA adjudication proceedings where they relate to the same transactions and are corroborated; the impugned order's reliance on such material is sustainable.

Issue (ii): Whether the penalties imposed under FEMA on the appellants are sustainable and whether penalties on Shri S. Gowrishankar and Smt. Mamta Gupta should be set aside.

Analysis: The Tribunal reviewed the adjudicating authority's findings about the involvement of each appellant, the scope of evidence from statements and digital material, and the partners' respective roles in the partnership firm. It considered admissions by principal actors, GEQD corroboration of concealed documents and payments through non-banking channels, and the non-cooperation of two principal appellants. It applied principles governing retracted statements and the need for corroboration and assessed whether prima facie liability under Section 3(4) of FEMA was established against each appellant. The Tribunal also considered Section 42 of FEMA concerning liability of persons for contraventions and found that two partners were nominal/namesake partners without active involvement, supported by admissions of the principal actors.

Conclusion: The Tribunal upheld the adjudicating authority's imposition of penalties of Rs. 3,00,000 on M/s Shami Impex, Rs. 15,00,000 on Shri Dhiraj Gupta and Rs. 15,00,000 on Shri Kamalesh Gupta for contraventions under FEMA. The Tribunal set aside the penalties of Rs. 1,00,000 each imposed on Shri S. Gowrishankar and Smt. Mamta Gupta.

Final Conclusion: The appeals are partly allowed: appeals by Shri S. Gowrishankar and Smt. Mamta Gupta are allowed (penalties set aside) while appeals by Shri Dhiraj Gupta, M/s Shami Impex and Shri Kamalesh Gupta are dismissed (penalties upheld); the impugned order is otherwise sustained.

Ratio Decidendi: Statements and documents recorded or seized under the Customs Act, 1962 that pertain to the same transactions can be admitted and relied upon in FEMA adjudication proceedings where statutory presumptions apply and where such material is corroborated; liability under FEMA may be imposed on those shown by evidence and admissions to have participated in the transactions, while nominal partners lacking active participation are not liable for penalties.

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