AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 724
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....n 3(b) of FEMA, 1999, for contravention to the extent of Rs. 6,51,18,257/- (on account of differential payment), for sum of Rs. 2,00,00,000/-. III. Mr. Yugendhar Rao for contravention of Section 3(b) of FEMA, 1999, for contravention to the extent of Rs. 6,51,18,257/- (on account of differential payment), for sum of Rs. 2,00,00,000/-. IV. Shri P.V. Samba Siva Rao for contravention of Section 3(b) of FEMA, 1999, for contravention to the extent of Rs. 6,51,18,257/- (on account of differential payment), for sum of Rs. 2,00,00,000/- It is pertinent to mention here that in compliance of order on applications for pre-deposit of penalty amount, the appellants have already complied the same as under:- i) G. Yugendhar Rao Rs. 10,00,000/- vide DD no.32727 dated 22.07.2024 SBI, ii) M/s Osho Organics Rs. 6,75,000/-, vide DD no.3496 dated 23.07.2024 HDFC Bank, iii) Rajasekhar Rs. 10,00,000/- vide DD no.508897 dated 22.07.2024 ICICI Bank, iv) Shri P V Sambasiva Rao Rs. 10,00,000/- vide DD no.32726 dated 22.07.2024 SBI, 2. As per the facts of the case, officers of Directorate of Revenue Intelligence, Zonal Unit Hyderabad, have registered ....
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....d him to lend his name for the said propriety concern, for which he has accepted and, except lending his name to the said firm, he had no active role in the said concern. M/s Prism was established in the year 2009-10 and is located at Plot No. 8, Block No. 16, Auto Nagar, near Vanasthali- puram, Hyderabad. It deals with procuring, manufacturing and marketing of various agricultural products like fertilizers, pesticides, insecticides etc. He is also working as a manager Logistics in M/s Prism and his role is supervision of inward raw material, mixing, packing, labelling, dispatch of final product, logistics etc. The 03 directors of the firm are looking after the finance, banking, manufacturing, marketing, local & overseas correspondence, procurement of raw material locally & overseas, placement of orders, clearance of goods from the customs and receiving payments from the parties of M/s Osho Organics. A case was registered against M/s Osho by Directorate of Revenue Intelligence, Hyderabad in the year 2016 for under-valuation and mis- declaration of Imported goods to the customs and after investigation of case a Show Cause Notice was issued vide file no. DRI/HZU/26A/ENQ- 16(INT-20....
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....made to sign certain documents which he was not aware of and regarding the differential value of USD 969050 (equivalent to INR 6,51,18,257) paid to the overseas suppliers. He stated that he never dealt with any financial matters of the firm and all the financial matters regarding payments being sent abroad to overseas suppliers in respect of goods Imported are dealt only by Shri G. Yugandhar Rao, Shri S.P. Rajasekhar and Shri P.V Sambasiva Rao. He is not aware of whether they have sent the differential amounts through banking channels, or non-banking channels. After Issuance of SCN by DRI, they have approached Settlement Commission at Chennai for finalization of the case and the case was finalized vide File No. S.A.CUS/25,34-37/2017-SC dated 16.10.17 by the Settlement Commission by Imposition of a penalty of Rs. 10,00,000 on M/s Osho, and Rs. 75,000 each on Shri G. Yugandhar Rao, Shri S.P. Rajasekhar and Shri P.V Sambasiva Rao, Directors of M/s Prism. The Settlement Commission had appropriated customs duty of Rs.2,00,41,149 and interest Rs.19,24,184 to Govt. of India which was paid by them at the time of Investigation. An amount of Rs.1,05,000 was imposed as fine for release of ....
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....l customs duties forgone and penalties in respect of all Noticee and the case details are given below as under:- a) They have imported goods vide 11 Bills of Entry i.e., 8100936, 9509164, 9726978, 3957467, 5837104, 6190453, 6359459, 5671791, 5833583, 6560549 and 6642177 till date. b) The pesticides/ Insecticides they imported from China are Chlorantraniliprole, DPA, DA6, Nitenpyram, Abamectin, Imdacloprid, Fipronil, Potassium Humate, Surfactant, Mixture of Amino acids and Emamectin Benzoate. c) Some of their suppliers from China are Shandong Shengbo Industry Co. Ltd, Shanghal Celeagro Industry Co. Ltd, Agro Crown Co. Ltd and Sino Agro Chemicals. d) He did placement of orders to foreign suppliers for the products imported in respect of M/s Osho. He discusses, negotiates and places orders with the overseas suppliers for the products Imported by M/s Osho over phone or e-mail. e) For the above said 11 BOEs, they have declared USD 209450 (equivalent to INR. 1,42,27,453) to the Customs at the time of Import, however, the actual value of materials Imported from the overseas suppliers is USD 1178500 (equivalent to INR. 7,93,45,710). The differen....
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.... investigation of DRI and due to financial burden, they should not send the amount of US$ 271025 (pertaining to 5 imports) to their overseas suppliers out of total undervalued amount of USD 969050 and requested for a lenient view. On the basis of the investigation conducted by ED, it is held that Shri T. Ravi Kumar proprietor of M/s Osho has lent his name to Shri S.P. Rajasekhar, Shri G. Yugandhar Rao, and Shri P.V. Sambasiva Rao to establish a Proprietary firm and by signing the required documents, he allowed them to Import high value Pesticides/Insecticides/Fungicides from China in guise of chemicals such as "Wetting Agents" with an intent to evade payment of appropriate Customs duties by under valuation and mis-declaration of imported goods to the customs and to avoid compliance with various provisions of the Insecticides Act, 1968 and giving them scope to indulge in hawala transactions for sending differential values of USD 969050 (equivalent to INR 6,51,18,257) to their overseas suppliers at China and hence contravened Section 3(b) of FEMA, 1999, r.w.s. 42 of FEMA, 1999. Shri S. P. Rajasekhar, Shri G. Yugandhar Rao, and Shri P. V. Sambasiva Rao directors of M/s Prism have i....
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....issions during the personal hearings, the Adjudicating Authority held that they contravened Section 3(b) of FEMA, 1999 and accordingly imposed the penalties as mentioned in para no. 1 above. Aggrieved by the said order, appellants filed the present appeals. 3. During the arguments, Ld. Counsel for the appellant M/s Osho Organics submitted that the appellant proprietorship concern has no significant role in day-to-day activities of the proprietorship concern, as all the three directors of M/s Prism had started M/s Osho Organics and they only looked after all the activities of M/s Osho Organics and its proprietorship T. Ravi Kumar is actually their employee. It is in fact even mentioned in the impugned order that Sh. T. Ravi Kumar has not paid any amount to any person and he had not involved himself in such payments made to overseas clients through Hawala channels. He pointed out that DRI issue notice on the ground that there is a difference in values shown in the proforma invoices issued by the suppliers and those declared to the customs. He contended that it is a settled legal position that value mention in proforma invoices are nothing, but quotations which cannot be relied ....
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....tance of Rs. 6,51,18,257/- is made against three directors of Prism and M/s Osho Organics. Even if the any appellant is involved along with other three, it is not explained which person had remitted how much amount. All the persons together cannot send the money and there is no such charge. In the absence of quantification of the amounts that are alleged to have been sent outside India by each person, maximum penalty of Rs. 2,00,000/- can only be imposed. He further submitted that the charge made against the appellants is that they had violated the provisions of Section 3(b) read with Section 42 of the Act. Section 42 can be applied only against Directors or Managers or any other persons working in a company or against a partner of a partnership firm, whereas M/s Osho Organics is a proprietary concern, which is owned by its proprietor Sri T. Ravi Kumar. The present three appellants have nothing to do with the said proprietary concern, which is identified with its proprietor T. Ravi Kumar, who used to manage the its day-to-day operations. Therefore, invocation of Section 42 against directors of Prism is illegal. Section 42 is not applicable to a proprietary concern, as it applies on....
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....his regard: (a) In the case of Rakesh Kapoor & Others vs. UOI reported in MANU/DE/0464/2014, the Hon'ble Delhi High Court held that even in the absence of retraction of the confessional statement, penalty cannot be imposed without corroborating evidence. (b) It has been held in the case of Devendra C Kothari vs. ED 2013 (297) E.L.T 462 (ATFE) that when only evidence being confession of accused with nothing on record to show that it was obtained voluntary, and without free will and fear of threat or coercion there is no basis to show that accused had paid any commission or received any amount from person who was resident outside India and hence such statement of accused could not be sole basis of imposing penalty. Ld. Counsel for the three appellants submitted that the impugned order is passed on the charge of payment of amounts to persons outside India in violation of Section 3(a) read with Section 42 of FEMA. No evidence whatsoever was brought on record except statements recorded in pursuance to the show cause notice issued by DRI and without conducting any independent investigation under FEMA. The notice was issued on the basis of a worksheet prepared by the ....
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....ce along with the RUD's received from DRI and statements of different persons recorded under Section 37 of FEMA, 1999, revealed that the appellant has mis-declared the goods and value thereof to avoid any import duty and differential value between the remittances made and value of the goods actually imported were transferred through Hawala channel, wherein they used to hand over cash to the designated persons in India and such designated person used to send this amount to their supplier in China. On some occasions appellant and his other associates used to carry USD to China and hand it over to their supplier in China. The confessional statements made by the appellants were not retracted immediately. The said confessional statements were also corroborated with previous statements made before DRI, proforma invoices and confession of guilt regarding under- valuation before the Settlement Commission. The appellants also paid the differential custom duty, as per the order of the Settlement Commission alongwith interest. All these facts emerged during investigations under the Customs Act and even under the provisions of FEMA, and thus, all the allegations stand corroborated in every asp....
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....ods against which an inward remittance as high as Rs. 75.39 crores was received. Hence, the only possible inference that would arise is that the inward remittance of Rs. 75.39 crores was matched by a hawala transaction involving transactions through a person resident outside India. Similarly, under Section 3(d), no person shall enter into any financial transaction in India as consideration for or in association with the acquisition or creation or transfer of a right to acquire any asset outside India. Money is a form of assets. The acquisition of money outside India is the acquisition of an asset. This acquisition would be subject to the FEMA and has to be in accordance with law. The Appellant was a party to financial transactions in India which constituted a consideration for the receipt of inward remittances amounting to Rs. 75.39 crores from abroad which were not backed by any lawful consideration involving a genuine export of goods. The adjudicating authority has found that the amount which was received by APL through banking channels was not actually due to them against any goods exported. This amount as held by the adjudicating authority, represented an amount transmitted fro....
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....eclaration by showing the insecticides/pesticides/fungicides as "wetting agents". There is nothing on record that the said wetting agents were having value equal to the imported consignments. The appellants themselves admitted the facts that they imported the insecticides/pesticides by mis-declaring as wetting agents, in order to compete in the market at competitive prices. They also admitted the fact that differential amount of imported consignment was used to be sent to the exporter based in China through Hawala transactions and also in person while visiting China. The Hon'ble Supreme Court in the case of Vinod Solanki v. Union of India [(2008) 16 SCC 537] has held that:- "23. It is trite law that evidence brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidence, which would lend adequate assurance to the court that it may seek to rely thereupon. We are not oblivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also notice that in some of the cases retracted confession has been used as a piece of corroborative evidence and not as ....
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.... "39. Presumption as to documents in certain cases.- Where any document- (i) is produced or furnished by any person or has been seized from the custody or control of any person, in either case, under this Act or under any other law; or (ii) has been received from any place outside India (duly authenticated by such authority or person and in such manner as may be prescribed) in the course of investigation of any contravention under this Act alleged to have been committed by any person, and such document is tendered in any proceeding under this Act in evidence against him, or against him and any other person who is proceeded against jointly with him, the court or the Adjudicating Authority, as the case may be, shall- (a) presume, unless the contrary is proved, that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the court may reasonably assume to have been signed by, or to be in the handwriting of, any particular person, is in that person's handwriting, and in the case of a document executed or attested, that it was executed or attested by the person by whom it purports to....
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....ged to have been committed by such person indicating the provisions of the Act or of rules, regulations, notifications, direction or orders or any condition subject to which authorisation is issued by the Reserve Bank of India in respect of which contravention is alleged to have taken place. (5) The adjudicating authority shall, then, given an opportunity to such person to produce such documents or evidence as he 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 adjudicati....
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.... any manner. It is further provided that no person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India. That if any person contravenes any provision of the Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under the Act, or contravenes any condition subject 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 the appellants und....