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2018 (5) TMI 1531 - AT - FEMAViolation of Section 3(a), FEMA - Penalty - Burden of Proof - Prevention of Money Laundering Act, 2002 - amount received in foreign currency from unknown persons and same was spent when in India - Held that - It is settled legal principle that onus of proof, in both civil and criminal law, is on the person who wishes to prove a particular fact - There is no statutory provision in FEMA imposing reverse evidentiary burden upon an accused person, as is the case under PMLA. The Special Director, ED failed to appreciate the fact that with respect to the Appellant‟s travel to Middle-East, the major expenses were for Air Travel which was purchased in Indian Rupees and other expenses were taken care of by his friends - The Special Director, ED has erroneously held that the aforesaid Affidavits cannot be considered as the Appellant did not mention the names of these persons and the respective countries in his written submissions - The Special Director, ED has incorrectly ignored the affidavit of Mr. Saikumar by holding that the Consulate General of India, Dubai takes No responsibility for the correctness of the statements made in the above affidavit and has thus proceeded on an incorrect understanding of law. Penalty - Held that - the present case is not fit for imposition of Penalty because liability to pay penalty does not arise merely upon the proof of contravention of a provision. Being an quasi-criminal proceeding, imposing penalty for contravention of a statutory obligation ought not ordinarily be imposed unless the accused/ defendant acted deliberately in defence of law or was guilty of contumacious or dishonest conduct or acted in conscious disregard of the obligation. Appeal allowed - decided in favor of appellant.
Issues:
1. Registration of FIR against the appellant under multiple sections of IPC. 2. Summons issued under PMLA and FEMA to the appellant. 3. Complaint filed by ED under FEMA against the appellant. 4. Issuance of Show-Cause Notice under FEMA to the appellant. 5. Penalty imposed on the appellant under FEMA. 6. Appeal filed by the appellant against the penalty imposed. Analysis: 1. The judgment begins with the background of the case, stating that an FIR was registered against the appellant under various sections of the IPC. Subsequently, the Enforcement Directorate (ED) issued summons to the appellant under the Prevention of Money Laundering Act, 2002 (PMLA) based on the scheduled offences mentioned in the FIR. 2. Following the PMLA summons, the ED issued another summons under FEMA to the appellant. The appellant's statement was recorded by the ED under FEMA, where he mentioned spending a certain amount on foreign travel. 3. A complaint was filed by the ED under FEMA seeking the issuance of a Show-Cause Notice against the appellant. The Show-Cause Notice was duly issued, and the appellant responded to it. The closure report was also filed by the police in the original FIR. 4. Subsequently, the Adjudicating Authority imposed a penalty on the appellant under FEMA for violating Section 3(a). The appellant then appealed to the Special Director, ED against this order. 5. The judgment critically analyzes the statements made by the appellant during the ED proceedings. It highlights the lack of evidence to substantiate the claims made by the ED regarding the appellant's foreign travel expenses. The judgment emphasizes that the burden of proof lies on the party asserting a fact, as per the Indian Evidence Act. 6. The judgment further discusses the absence of a reverse evidentiary burden provision in FEMA, unlike in PMLA. It cites legal precedents to support the principle that the burden of proof primarily rests on the prosecution, especially in criminal cases. 7. The appellant presented affidavits to support his defense, indicating that his expenses during foreign travel were covered by friends. However, the Special Director, ED allegedly overlooked this evidence, leading to a flawed decision. 8. Ultimately, the judgment concludes that the penalty imposed on the appellant was unwarranted as the case did not meet the criteria for such punitive action. It cites a Supreme Court decision to support this stance and sets aside the orders imposing the penalty. 9. In the end, the appeal is allowed, and the previous orders are overturned. No costs are awarded, and the matter is disposed of accordingly.
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