2011 (2) TMI 1300 - AT - FEMA

Violation of the provisions of Section 9(1)(c) - Imposition of Penalty - Held that - retracted statement cannot be made the sole basis of imposing penalty in the absence of any other independent corroborative evidence. Apart from that, making the admission of liability to third person is not an acknowledgement of debt, the acknowledgement should be in favour of the person who has a right to recover it - admission made by the appellant to the Director of Enforcement will not fall in the category of acknowledgement of debt giving legal and enforceable right to M/s. Tewin Plastics Ltd., UK - penalty imposed by the Adjudicating Authority for violation of provisions of Sections 14(a) and 18(1) against show cause notice no. 2 is solely based on the retracted statement - Therefore, penalty imposed is not sustainable - However, The penalty of Rs. 50,000/-imposed for acknowledging on the date in favour of M/s. Tewin Plastics Ltd., UK is set aside while remaining part of the order is maintainable - Decided partly in favour of appellant.

Summary

Issues:
Violation of Sections 9(1)(c), 14(a), 8(1), and 9(1)(e) - Penalty imposition based on retracted statements - Acknowledgment of debt - Corroboration of evidence - Enforceable rights.

Analysis:

Violation of Section 9(1)(c) - Acknowledgment of Debt:
The case involved the appellant challenging penalties imposed for violations of various sections. The Adjudicating Authority relied on the appellant's retracted statements as the basis for imposing penalties. The appellant contended that his statements were retracted immediately and did not constitute an acknowledgment of debt. The Tribunal referenced the case law of Shri Vinod Solanki v. Union of India, emphasizing that a retracted statement alone cannot be the sole basis for imposing penalties without independent corroborative evidence. It was noted that an acknowledgment of debt must be in favor of the person with the right to recover it. In this case, the appellant's admission to the Director of Enforcement did not qualify as an acknowledgment of debt in favor of M/s. Tewin Plastics Ltd., UK. Consequently, the penalty imposed for the violation of Section 9(1)(c) was deemed unsustainable.

Violation of Sections 14(a) and 8(1) - Corroborative Evidence:
Another show cause notice alleged violations of Sections 14(a) and 8(1) based on payments made by the appellant to M/s. Expressions Perfumes. The appellant admitted these payments in his retracted statement. However, the Tribunal found that the existence of a letter from Shri Andre Garavagno and entries in seized documents provided corroborative evidence for these transactions. As a result, the penalties imposed for these violations were considered justifiable.

Violation of Sections 9(1)(c) and 9(1)(e) - Corroborative Evidence:
The third show cause notice accused the appellant of violating Sections 9(1)(c) and 9(1)(e) by making a payment to M/s. S.A. Expressions Perfumes. The Tribunal noted that this payment was supported by a letter from Shri Andre Garavagno and other recovered documents. Consequently, the penalty imposed under this notice was upheld.

Conclusion:
The appeal was partially allowed, setting aside the penalty imposed for acknowledging a debt to M/s. Tewin Plastics Ltd., UK, while affirming the penalties for other violations. The judgment emphasized the importance of corroborative evidence and the legal requirements for an acknowledgment of debt to establish enforceable rights.