TaxTMI 
TaxTMI 
2024 (12) TMI 1312
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....has been imposed on the appellant company while Rs. 5 crores each on the individual Directors of the Company. It was alleging contravention of Section 8(1) of the Act of 1973 for transferring foreign exchange equivalent to Rs. 208 crores without previous, general or special permission of the Reserve Bank of India. The appellants, Shri Anil Agarwal, Navin Agarwal and D.P. Agarwal were charged for violation of Section 68 of the FERA, 1973. 2. The counsel for the appellants submitted that on an information that S/Shri Anil Agarwal, Navin Agarwal and Praveen Agarwal with their father Shri D.P. Agarwal had indulged in surreptitious transfer of unaccounted funds outside India, the Income Tax Department initiated investigation against the Company and its Directors. During the course of investigation, it was revealed that M/s Sterlite Industries (I) Ltd. (hereinafter referred to as `M/s Sterlite') was engaged in the business of copper, telephone cables, aluminum and other non-ferrous items. The Company was promoted by Shri D.P. Agarwal along with his sons who were having substantial shares in the Company. It was to the extent of Rs. 12.5 crores i.e. 1.25 crores shares having face value ....
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.... penalty was imposed, as indicated. 5. The learned counsel for the appellants submitted that the impugned order has been passed on presumption of routing Rs. 208 Crores by the appellants to bring it back to India through an offshore company. The respondent failed to produce any document or material to connect the appellants for transfer of Rs. 208 crores outside India in violation of the provisions of the Act of 1973. The penalty could not have been imposed based on presumption. It is more so when the respondents were at liberty to call for the bank statement of M/s Twinstar to find out from where an amount of Rs. 208 Crores came but no effort for it was made and on account of their failure to get the documents, presumption could not have been drawn against the appellants. 6. They could have summoned and secured the statement of Shri D.P. Agarwal to find out from where the invested money came to M/s Twinstar. The respondent failed to do so to prove their case. In the light of the aforesaid and otherwise the investment in the share of the appellants' company by M/s Twinstar was with the approval of the RBI and thereby no contravention could have been alleged. The respondents h....
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....ent entities of the appellant company. The amount of Rs. 208 Crores was transferred by M/s Twinstar at Mauritius to appellant company and its entities. M/s Twinstar was incorporated on 12.01.1993 with paid up share capital of USD 100. The company was having no source to invest 208 Crores in the appellant company or its entities. It was a subsidiary of M/s Volcan Investments Ltd. incorporated in Nassau Bahamas but the said company was also having capital of USD 2 only. Thus, there was no means for M/s Twinstar to invest Rs. 208 Crores in different companies and thereby it was taken to be a case where initially the amount of Rs. 208 Crores was remitted to M/s Twinstar by the appellants and thereupon it was received back as investment in pursuance to the permission of the RBI. The fact otherwise remains that despite an opportunity to prove the source of Rs. 208 Crores by M/s Twinstar, the appellants failed to prove it by producing adequate evidence. In the light of the aforesaid, the respondents had rightly taken it to be a case where initially Rs. 208 Crores were diverted by the appellants to offshore company to get it back as investment and, therefore, a case was rightly taken up ag....
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....invest 208 crores while its paid up capital was USD 100 only. It is no doubt that investment in M/s Sterlite Group companies was with the permission and approval of the RBI but the issue was as to from where the funds of Rs. 208 Crores came to M/s Twinstar. The appellants did not produce any document to show the source of Rs. 208 Crores to justify the transfer of fund by M/s Twinstar to appellants' Group Companies. The initial burden of proof was on the respondents, which was discussed. The appellant utterly failed to discharge their obligation and therefore, the respondents rightly concluded about transfer of the funds of Rs. 208 Crores by the appellants in contravention of the provisions of the Act of 1973 for routing it back to the appellant company and its entities. It is necessary to indicate that appellant D.P. Agarwal was the Director in the appellant company and also in M/s Twinstar, thus custodian of record. He was summoned many times but did not appear to disclose the source. 14. The investment of Rs. 208 Crores is not in dispute, rather it has been admitted by both the sides. It was also with the approval of the RBI, thus there was no contravention for investment. The....
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....ceived Rs. 208 Crores as investment from offshore company having no means to make huge investment where it was none else but Shri D.P. Agarwal, the key person of the company. In the light of the facts aforesaid, we may refer to the judgement of the Delhi High Court on the burden of proof decided in the case of Prem Singh Chawla Vs. Director of Enforcement reported in 1987 (12) SCC Online Delhi 58. The relevant para of which is quoted hereunder: "8. This argument prima-facie is quite contrary to Section 71 of the Foreign Exchange Regulation Act, which lays down that where any person is prosecuted or proceeded against for contravening any of the provisions of this Act or any rule, direction or order made there under, which prohibits him from doing an act without permission, the burden of proving that he had the requisite permission shall be on him. Similarly, presumption of correctness. to the documents recovered/seized from the custody or control of any person. can also be raised. Heavy onus lay on the accused to prove the contrary. In this case, no attempt has been made by the learned counsel for the petitioner to show as to how the department was under an obligation to ab....
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....roduction of certain specified documents or for the production of all documents of a certain description in the possession or under the control of the person summoned. (3) All persons so summoned shall be bound to attend either in person or by authorised agents, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and produce such documents as may be required: Provided that the exemption under section 132 of the Code of Civil Procedure, 1908 (5 of 1908), shall be applicable to any requisition for attendance under this section. (4) Every such investigation or proceeding as aforesaid shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code. 53. Powers of the adjudicating officer and the Appellate Board to summon witnesses, etc - (1) Without prejudice to any other provision contained in this Act, the adjudicating officer and the Appellate Board shall have all the powers of a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit, in respect of the foll....