TaxTMI 
TaxTMI 
2026 (8) TMI 165
X X X X Extracts X X X X
X X X X Extracts X X X X
..../s IGNIS Technology Solutions Pvt. Ltd. for the contraventions of Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA) read with Regulation 6 (1) of the Foreign Exchange Management (Realization Repatriation and Surrender of Foreign Exchange) Regulations, 2000. Further penalty of Rs. 70,00,000/-was imposed on Shri Nihar Ranjan Samantara CEO and Director, of the Appellant Company, vide the Impugned Order, for the aforementioned contraventions in terms of Section 42(1) of FEMA. 2. Ld. Counsel for the Appellants submitted that it was during the course of investigation in some other matter relating to one Shri G Dhananjaya Reddy under the Prevention of Money Laundering Act, 2002 that the Respondent Directorate initiated investigation against the Appellant Company and the individual Appellant under FEMA. Ld. Counsel stated that Shri G Dhananjaya Reddy cheated the Appellants as well. Ld. Counsel contended that the Appellant Company was in genuine business as reflected in a year wise revenue break-up of the Appellant's business with M/s. Warner Chappel Music Inc. This confirms that the Appellant had been engaged in bona fide business activity and previously as well had ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on software was not examined. Thus, vital evidence placed on record by the Appellant was chosen to be ignored and disregarded. Ld. AA failed to give a fair hearing to the Appellants. The Impugned Order is perverse and passed in violation of the principles of natural justice. Ld. Counsel submitted that after the purchase of the Software in October-December 2010, the Appellant Company started testing it internally and found some minor bugs which were rectified. The software was found to be fully functional but was deficient in terms of some features. 5. Ld. Counsel for the Appellant submitted that the Appellants came under the radar of CBI due to the nefarious activities of Sh. Dhananjay Reddy, a trusted person of the Appellant's Director, who had had conducted certain defaults behind the back of the Appellant's Director. The Appellant had informed the Ld. AA that the CBI had seized the documents of the Appellant and even the efforts undertaken by the Appellant to get the documents by making request to the CBI Court were not effective, as the documents had gone for governmental expert analysis at that time. The Appellant thereafter was left with no option but placed a requ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....proved in the Court of law and thus the entire action being illegal, the resultant Order deserves to be set aside. Ld. AA failed to appreciate that statements recorded under different acts cannot be blindly used under FEMA. Moreover, blindly and merely relying on investigation conducted by other agencies for some other purposes has made the Impugned Order incomplete and unfair. Ld. AA failed to realise that if the AD Bank would have found any deficiency in the transaction and/or it's documentation, it would have confronted the Company about it, however nothing of that sort was ever done. In the case of Xerox Modi Corp. Ltd. vs. Special Director of Enforcement Directorate ((2015) 54 taxmann.com 311 Delhi), the Hon'ble Delhi High Court has held under paragraphs 30 and 31 that: "Where all remittances made by the Appellant have been explained and there was likelihood that the Appellant Company had utilised remittances for import as claimed by it, violation of provisions of FEMA had not been established and impugned order imposing penalty was quashed." Ld. Counsels therefore pleaded to allow the Appeals. 7. Ld. Counsel for the Respondent Directorate submitted that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ments were supplied to the Appellants. On 23.10.2019 charges in the SCN were explained by the Ld. AA to Shri Amarnath Aggarwal, Advocate for the two Appellants. Shri J P Udgata, Advocate appeared on behalf of the Appellants on 09.01.2020. The Ld. AA pointed out to him that no proof of having imported software from M/s. Supreme Software Technologies, UAE against the remittance of US$ 75,25,000 was produced by the Appellant Company. He was further informed that the personal hearing with respect to the two Appellants were concluded, however, the Ld. Advocate could submit proof of import with a period of 15 days. Ld. Counsel for the Respondent stated that there has been no violation of principles of natural justice. 9. Ld. Counsel for the Respondent submitted that during the course of investigation the statement of the individual Appellants Shri Nihar Ranjan Samantara was recorded under Section 37 of FEMA on 16.02.2015. He admitted having been signatory in the United Bank of India current account and term loan account of the Appellant Company. He had signed the application form for the loan along with Shri Henri Amalraj. Afterwards all the banking transactions were managed by S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0,330/-) to the current account number 90010200009399 held in the name of M/s. Supreme Software Technologies FZC, Sharjah with Bank of Baroda, Main Brach, Dubai, from the term loan account and cash credit account of the Appellant Company. The Amount totalling US$ 74,24,928/- got credited to the account of M/s. Supreme Software Technologies FZC, Sharjah. 11. Ld. Counsel for the Respondent Directorate submitted that the amount remitted to M/s. Supreme Software Technologies FZC, Sharjah was in fact diverted and siphoned off. The amount of US$ 20,10,000 (Rs.8,88,70,716 after deduction of charges) was diverted to the account of M/s. Valuemart Info Technologies Ltd., which was under the control of Shri G. Dhananjaya Reddy. The amount of US$ 25,24,000 (Rs.11,18,71,177 after deduction of charges) was diverted to the account of M/s. Nexxoft Infotel Limited, operated by Shri G. Dhananjaya Reddy. The amount of US$ 14,29,454 (Rs. 6,31,18,540 after deduction of charges) was diverted to the account of M/s. Elsoft Technologies Private Limited operated by Shri N. Ravichandran on the instructions of Shri G. Dhananjaya Reddy. The amount of US$ 11,60,000 was diverted to the account of M/s. Prolian....
X X X X Extracts X X X X
X X X X Extracts X X X X
....& PK, Chartered Accountants, had observed that "the Company has got computer software as work in progress, for which there is no valuation report available. In view of the above, we are in position to give our opinion as the valuation/realization of capital work in progress (Software) of Rs. 35,47,81,507/-. The first remittance to M/s. Supreme Software Technologies FZC, UAE was made by Noticee 1 Company on 12.10.2010. Noticee 1 seems to have submitted a valuation report dated 31.10.2010 of S. Janardhan & Associates, Chartered Accountant on "Project Help Desk Suite an IT Request Management System, a Proprietary Software IP of Techstar Inc, Dallas, Texas, USA, in which the valuation had been furnished by the Chartered Accountant as US$ 7.5 million. There is no mentioned of this software being purchased from M/s. Supreme Software Technologies FZC, UAE anywhere. A certificate from one Sanjaya Swain, IT Architect, IBM India Pvt Limited dated 28/11/2014 was enclosed stating the CD marked "Help Desk-Original" provided by Noticee-1 Company contained several program files written in ".Net" language and the programs were functional, but another CD marked "Help Desk+Plus" was not working and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the valuation/realization of capital work in progress (Software) of Rs. 35,47,81,507/- (though the amount mentioned is not relatable to the amount remitted for this software). Even the so-called independent expert had stated that programs contained in CD marked "Help Desk+Plus" was not working and cannot serve any extra purpose of the help desk. As mentioned earlier, M/s. United Bank of India had asserted that Noticee -1 did not appear to have received the goods and they did not submit proof confirming the receipt of the goods to them and that they had complained to Reserve Bank of India and CBI. Noticee-1 is under obligation to satisfy the Authorised Dealer that they had imported the software of said description and value and it is clear from the letter dated 15/02/2018 of M/s. United Bank of India that Noticee 1 had not submitted documents to their satisfaction." Ld. Counsel therefore prayed to dismiss the two Appeals. 14. We have considered the rival submissions and the material on record. It is undisputed that the remittance of USD 75,25,000 (equivalent to Rs. 33,42,10,330/-) was made by the Appellant Company M/s Ignis Technology Solutions Pvt. Ltd. to M/s Supreme Softwar....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Janardhan & Associates, Chartered Accountant have categorically stated that the necessary certification is the Valuation Report of 'Project Help Desk Suite' for the purpose of acquisition of the product and for arranging finance for such acquisition. It is therefore clear that the document dated 31.03.2010 cannot certify that the software/data/drawing/design has actually been received by the importer. The second document dated 28.11.2014 is much subsequent to the claimed dates of import. In fact, it is on record that CBI had filed chargesheet bearing No. 03/2014 on 05.11.2014 in the matter closely related to the present proceedings under FEMA. Moreover, the certificate dated 28.11.2014 was based upon the examination of the CD marked 'Held Desk-Original' and another CD marked 'Help Desk + Plus'. While from the first CD, Shri Swain found the programs as functional, the programs from the second CD were found as not working. The CDs were provided by the Appellant Company to Shri Swain. We do not find that from the content and the circumstances under which this Certificate has been issued, we can regard it as proof of the software having been imported in September/October, 2010. O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ugh Data Communication Channel and not through any medium like CD or USB. Moreover, Intimation cannot by any stretch of imagination be regarded as acceptance of the contents therein by the Customs Department. Hence, nothing further having been heard from them cannot be regarded by the Appellants as no challenge having been made to their claimed position of import having occurred. We find that the Ld. AA has examined the certifications submitted by the Appellants and thereafter rejected the same as proof of import of the software. As already observed by us that even our conclusion has been on similar lines which is independent of the findings made under the other Acts. We do not find any substance in the pleading of the Appellants that examination of the valuers and the experts would have added value to ascertain the merit of their case. We reiterate that the dates on which the two certificates were issued and that too given their contents were sufficient to hold these two certificates, as inadequate to prove that import of the software did occur. In view of the aforementioned it was not necessary for the Ld. AA to call for records from CBI. The Appellants have raised the issue abou....