2016 (9) TMI 1352 - AT - FEMA

Contravention of Section 3(d) r/w Section 42(1)(2) of FEMA, 1999 - search - payments in foreign exchange - Held that - No foreign currency has been recovered. There is no corroboration evidence of the fact that the payments allegedly made by the appellants were made as per the instructions from abroad. There is no evidence available to establish that the payments so made were in consideration of foreign exchange so acquired by the appellant companies towards the differential amount of alleged under-invoicing of imports made by the above said two companies. The appellants are stated to be involved in import of MS Ingots/Scrap from abroad, therefore, for this they were supposed to make payments in foreign exchange. It has not been explained in the Adjudication Order as to what benefit did the appellant gain by under-invoicing and payment in Indian currency by the appellants at the behest of sellers abroad as has been alleged. There are discrepancies, contradictions and vagueness apart from non-adherence to the principles of natural justice affecting the process of fair trial. The case laws relied upon by the ld. CA are on the value of retracted confession and it has been held by the Hon ble Supreme Court in Vinod Solanki v. UOI 2008 (12) TMI 31 - SUPREME COURT that the burden is on the prosecution to show that the confession is voluntary in nature and not obtained as the outcome of threat, etc. In Piyush Saxena v. Enforcement Directorate 2009 (12) TMI 514 - HIGH COURT OF DELHI has held that once the retraction of a confessional statement takes place the burden to prove that the statement was voluntary is on the prosecution. While in Vinod Kumar Sahadev v. UOI 2009 (12) TMI 514 - HIGH COURT OF DELHI held that once the alleged statement was retracted the allegations of force and duress the onus to prove that the statement was voluntary shifts to the Government. The statement of the two noticees lose their sanctity in view of the retraction on the very next day and which was illegally rejected by the Investigating Officer and the Adjudicating Authority without any discussion or consideration relied on the rejection by the Investigating Authority and did not examine the veracity of the statements. In view of the above discussions the impugned order is devoid of merits and cannot stand judicial scrutiny resultantly appeals are liable to be allowed and the impugned order is liable to be set aside.

Summary

Issues Involved:
1. Legality and sufficiency of the Show Cause Notice (SCN).
2. Validity of the statements and their retraction.
3. Evidence of under-invoicing and foreign exchange transactions.
4. Adherence to principles of natural justice and fair trial.
5. Imposition of penalties and confiscation of amounts.

Detailed Analysis:

1. Legality and Sufficiency of the Show Cause Notice (SCN):
The appellants challenged the SCN on the grounds that it lacked specific details of the contraventions, provisions violated, and a list of relied-upon documents. The Madras High Court and the Supreme Court dismissed the challenge, directing the appellants to raise their contentions before the Adjudicating Authority. The Tribunal noted that merely enclosing the complaint with the SCN did not fulfill legal requirements and prejudiced the defense, thus vitiating the proceedings.

2. Validity of the Statements and Their Retraction:
The Enforcement Directorate's case relied heavily on the statements of P. Suryanarayanan and D. Venkateswara Rao, which were retracted the next day. The Tribunal emphasized that the Investigating Officer was not competent to reject the retractions. The Adjudicating Authority's reliance on these statements without considering the retractions and without cross-examination violated principles of natural justice.

3. Evidence of Under-Invoicing and Foreign Exchange Transactions:
The Tribunal found no substantial evidence to support the allegations of payments made as per instructions from abroad in consideration of foreign exchange acquired by the sellers. The Customs Authorities did not report under-invoicing, and there was no clear evidence of unauthorized acquisition of foreign exchange by the appellant companies.

4. Adherence to Principles of Natural Justice and Fair Trial:
The Tribunal noted several procedural lapses, including failure to provide opportunities for cross-examination and not addressing the appellants' objections in the Adjudication Order. These lapses amounted to a violation of principles of natural justice and affected the fairness of the trial.

5. Imposition of Penalties and Confiscation of Amounts:
The Tribunal found discrepancies and contradictions in the Adjudication Order. The penalties and confiscation were deemed arbitrary and excessive without sufficient justification. The Tribunal concluded that the impugned order lacked merit and could not withstand judicial scrutiny.

Conclusion:
The appeals were allowed, and the impugned order was set aside. The confiscated amount was ordered to be refunded to the appellants after the expiry of the appeal period. The Tribunal directed the Registrar to send copies of the order to the appellants and the respondent.