TaxTMI 
TaxTMI 
2025 (11) TMI 1105
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....ave been imposed on NTPL and on the Appellant Dr. C. Manoharan respectively for contravention of Section 3(b) of the Foreign Exchange Management Act, 1999 (FEMA) to the extent of Rs. 52,51,15,278/- and Rs. 63,43,37,148/- respectively vide the Impugned Order. Further penalty of Rs. 10,00,000/- each has been imposed on Smt. Thenmozhi and Smt. C. Lakshmi for contravention of Section 3(b) of FEMA read with Section 42 of FEMA. 2. Ld. Counsel for the Appellants stated that the allegation made in the Show Cause Notice (SCN) No. T-4/01/CEZO/SRO/2017 dated 10.02.2017 that the Appellant Shri C. Manoharan has paid amounts totaling Rs. 63,43,37,148/- (Rs. 52,51,15,278/- in respect of M/s Nitish Tools Pvt. Ltd. + Rs. 10,92,21,870/- in respect of M/s SSE-M/s Shree Sai Enterprises) to Shri Sunil of Coimbatore in India during the relevant period under the instructions of his overseas suppliers in China, for the credit of such Overseas suppliers and have thus had contravened the provisions of section 3(b) of FEMA, 1999 rendering himself liable to penalty under Section 13(1) of FEMA, 1999. The allegation related to under valuation of cemented carbide tips, carbide inserts and hollow drill rods im....
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....el further said that even the CBI could not find any evidence for which it could prosecute the Appellants. He also alleged that the statements recoded under the provisions of FEMA were under coercion. He pleaded for allowing the Appeals. Ld. Counsel for the Appellants relied upon a number of case laws, of which the relevant decisions and judgments shall be discussed during the course of making evaluation of evidence and making of findings by us. 5. Ld. Counsel for the Respondent Directorate argued that the investigations against the Appellants have been made not only under the Customs Act by DRI, but also under FEMA and PMLA by the Respondent Directorate and under the provisions of Prevention of Corruption Act, 1988 and the IPC by the Central Bureau of Investigation (CBI). During the search of the residence of the Appellant Shri C. Manoharan and Smt. M Thenmozhi, unaccounted cash of Rs. 50,00,000/- was seized by the DRI on 01.02.2012. Smt. M. Thenmozhi is the wife of the Appellant Shri C. Manoharan and Smt. C Lakshmi his mother-in-law. Both were Directors in NTPL. Ld. Counsel stated that during the course of investigation it was revealed that the maximum quantity of the under va....
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.... invoice furnished directly by the Shipper was found to be inline with the contract value whereas the value in the invoice, which was furnished by the M/s SSE was very low and corresponded with the fake invoices submitted by M/s SSE to the Customs. The DRI also recovered an E-mail which is clearly an acknowledgment of the fact that the payments were made by M/s NTPL both through Banking as well as Hawala Channels. Again, Shri C Manoharan in statement dated 17.02.2012 admitted to have under valued the consignments and made payments over and above the declared invoice values through Hawala Channels. E-mails dated 25.05.2009 and 07.07.2009 show that Shri C Manoharan attached Hawala payment receipts to Shri George Zhou, Sales Manager of M/s Zhuzhou in China. Ld. Counsel further stated that the scrutiny of the records of M/s Rukmani Explosives revealed that the transactions with M/s NTPL and M/s SSE were not reflected either in the accounts or in the commercial tax returns. Ld. Counsel further stated that Smt. M Thenmozhi in her statement dated 17.02.2012 under Section 108 of the Customs Act stated that her husband Shri C Manoharan had been handling the entire business. Ld. Counsel stat....
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....nt by him through Channels other than Bank using the service of agents in Coimbatore. Shri Manoharan further stated that the Chinese suppliers were familiar with the route through which they received money i.e. through other than banking channels; that as he was purchasing good quantities, suppliers like M/s Zhouzhou made him as sole agent in India such that he would be the only Indian importer to whom they would supply the goods; that when he discussed with his suppliers about declaring lesser values in the invoices, they suggested that they would organize their chain of contacts who would help him in sending the differential money to them. Accordingly one person by name Shri Sunil, a North Indian who appeared to be a resident of Coimbatore approached him of having been referred by Chinese Supplier and Dubai money changers; that he was hesitant to discuss with them; that however Shri Sunil convinced him about the safety; that thereafter he discussed with Sunil, the method, for which Sunil informed that he (Manoharan) should inform him the amount of dollars to be transferred to the Chinese supplier such that he would inform the exchange rate prevalent in the grey market at the time....
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....r Section 37 of FEMA. Smt. M Thenmozhi also did the same in her statement dated 16.07.2015 under Section 50 of PMLA. 10. Ld. Counsel for the Respondent Directorate contended that the Shri C Manoharan contravened Section 3(b) of FEMA to the extent of Rs. 63,43,37,148/- and NTPL, Smt. M Thenmozhi and Smt. C Lakshmi contravened Section 3(b) of FEMA to the extent of Rs. 52,51,15,278/-. Ld. Counsel for the Respondent Directorate clarified that the Customs Settlement Commission dismissed the Applications made by the Appellants on the ground that they had failed to make a true and full disclosure of their Customs Duty liability. He further stated that Shri C Manoharan had filed writ petition before the Hon'ble High Court of Madras against the Order of the Settlement Commission, however, the Hon'ble High Court dismissed all the writ petitions. Ld. Counsel cited the following paragraphs of the Judgment dated 28.03.2012 of the Hon'ble Bombay High Court in the matter of Vinod M. Chitalia v. Union of India, [2012 SCC OnLine Bom 476] having dealt with the aforementioned issues raised by the Appellant: "21. The statements made to DRI can be used in the present proceeding as they pert....
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....ellant, who are parties to those transactions. The burden which is cast upon the adjudicating authority to establish a violation must be assessed from a robust and common sense perspective. Clandestine violations take place under the cloak of secrecy. To impose a burden of establishing in an adjudication proceeding, every conceivable link of an unlawful transaction would result in a manifest failure of justice and would defeat the underlying purpose of the Act. The standard of proof in an adjudication proceeding cannot be equated with the rigorous standard in a criminal trial. The proof required in an adjudication proceeding is on a preponderance of possibilities. The Department has discharged the burden cast upon it of proving the breach of Sections 3(b) and 3(d)." Ld. Counsel for the Respondent therefore pleaded to dismiss the Appeals. 11. We have considered the rival submission, the material on record and the Judgments relied upon by both the sides. Ld. Counsel for the Appellant has emphatically argued that there has been no investigation under FEMA and the Ld. Adjudicating Authority has heavily relied upon the investigations conducted by DRI under the provisions of the Cu....
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....before DRI. These statements have been confirmed before several authorities and that too on several dates. It is not convincing that the retraction can overrule and overweigh the statements tendered before various authorities under such circumstances. Moreover, the Appellants have failed to produce any evidence as to demonstrate coercion and duress on them while making the statements. As stated earlier, the statements of the Appellants are not in contradiction, but corroborate each other. Further the statements were in the nature of explanation to the documents and other evidences recovered during the course of investigation. We are not merely referring here to the documents recovered from the seized laptop of Shri C Manoharan, but also to the evidence arising from the analysis of bank statements, commercial tax returns of M/s Rukmani Explosives, copies of Customs documents, statement of his own father-in-law Shri K. Chidambarasamy etc. In this regard, we are citing the Judgment relied upon by the Appellant in the matter of M/s Surya Wires Pvt. Ltd. [Excise Appeal No. 51148 of 2020 decided on 01.04.2025]. We quote para 43 of the decision: "43. What also needs to be noticed....
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....o have been obtained by any inducement, threat, coercion or by any improper means then statement must be rejected brevimanu. At the same time, it is to be noted that merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise, etc. to establish that such improper means has been adopted. However, even if the maker of the statement fails to establish his allegations of inducement, threat, etc. against the officer who recorded the statement, the authority while acting on the inculpatory statement of the maker is not completely relieved of its obligations in at least subjectively applying its mind to the subsequent retraction to hold that the inculpatory statement was not extorted. It thus boils down that the authority or any court intending to act upon the inculpatory statement as a voluntary one should apply its mind to the retraction and reject the same in writing. It is only on this principle of law, this Court in several decisions has ruled that even in passing a detention order on the basis of an inculpatory statement of a detenu who has violated the provisi....
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....such document." We find that the documents which have been seized are those which were obtained from the laptop that was in the custody and the use of Shri C Manoharan. It is on record that the Officers of DRI had examined the seized electronic devices viz the laptop, two hard disks & one CPU seized under mahazar proceedings on 03.02.2012 in the presence of Shri Manoharan and Smt. Thenmozhi along with two independent witnesses. The documents recovered from the seized electronic devices have repeatedly been admitted in several statements tendered by Shri C Manoharan. Smt. M. Thenmozhi has not contradicted the statements of Shri C Manoharan. The retractions filed by them subsequently have been without any basis and rejected by us after due consideration. It is also necessary to mention that the application of Section 138 (C) of the Customs Act to these proceedings are doubtful. Moreover, as on today the Adjudication Proceedings under the Customs Act have been decided against the Appellants. Their Appeals before the CESTAT are still pending. Their attempt to get relief by approaching the Settlement Commission has failed. They have also not succeeded through filing writ petitions be....
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....e may consider relevant to the inquiry and if necessary, the hearing may be adjourned to future date and in taking such evidence the adjudicating authority shall not be bound to observe the provisions of the Indian Evidence Act, 1872 (1 of 1872). (emphasis supplied) (6) While holding an inquiry under this rule the adjudicating authority shall have the power to summon and enforce attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document which in the opinion of the adjudicating authority may be useful for or relevant to the subject-matter of the inquiry. (7) If any person fails, neglects or refuses to appear as required by sub-rule (3) before the adjudicating authority, the adjudicating authority may proceed with the adjudication proceedings in the absence of such person after recording the reasons for doing so. (8) If, upon consideration of the evidence produced before the adjudicating authority, the adjudicating authority is satisfied that the person has committed the contravention, he may, by order in writing, impose such penalty as he thinks fit, in accordance with provisions of Secti....
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....t to which an authorisation is issued, he shall, upon adjudication, be liable to a penalty. For the purpose of adjudication, the Central Government may, by an order, appoint officers of the Central Government as the adjudicating authorities for holding inquiry in the manner prescribed after giving the person alleged to have committed contravention against whom a complaint has been made, a reasonable opportunity of being heard for the purpose of imposing any penalty." Hence, obtaining the recovered material from the electronic devices through DRI, needs to only meet the provisions of Section 39 of FEMA for the present proceedings. In the facts and circumstances in the present case, we find that such material has been seized from the custody and control of Shri C Manoharan under the provisions of Customs Act, which fulfils the requirements of Section 39 (i) of FEMA. These documents have been introduced in evidence in the Adjudication Proceedings conducted under FEMA. Thus, the requirement of Section 39(b) of FEMA is met. Under such circumstances the Judgments cited by the Appellants in the context of the Customs Act and other Acts would not have applicability. 14. We therefore ....