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2018 (8) TMI 365 - AT - FEMAAdjustment of penalty from the frozen amount and FDR - review petition - Held that - At no point of time, did the Enforcement Directorate either seize them or confiscate them so that they could be forfeited to the Central Government. The adjudicating authority has released these amounts from being frozen, by not confiscating them. This money belongs to the appellant/his son, and while directions for freezing was only a temporary measure, the adjudicating authority should have passed appropriate order of either releasing them or confiscating them. But he has mentioned that he is not confiscating them, meaning thereby that he is releasing them. Once no confiscation order has been passed it is not clear under which provisions of law the said amount was appropriated towards the penalty amount. Without going into the maintainability of the review petition under Section 19 (6), any merit in the review petition wherein they have prayed that the review petition may be allowed by modifying the impugned order to the extent that the principal amount should be confiscated (interest accrued has been appropriated to the Central Government by the impugned order). No merits in the appeal that this is a blatantly illegal order in as much as appropriation has been ordered of the money which has been released/not confiscated by the adjudicating authority himself. Once the principal amount is released, the question of allowing the interest accrued on the blocked amount and FDR be credited to the Central Government (to use the language in the impugned order) does not arise.
Issues involved:
1. Appeal against order passed by Joint Director of Enforcement Directorate under FEMA. 2. Review petition filed by Enforcement Directorate under Section 19(6) of FEMA. 3. Appropriation of penalty amount from frozen bank account and FDR. 4. Confiscation of funds and legality of adjudication order. Analysis: Issue 1: Appeal against order passed by Joint Director of Enforcement Directorate under FEMA The case involves an appeal filed against an order passed by the Joint Director of Enforcement Directorate regarding a raid conducted at the residence of an individual where foreign currency and documents were seized. The individual claimed the funds were received from his sons in Philippines and were used for various purposes. Penalties were imposed for contravention of FEMA sections, and directions were given regarding freezing of bank accounts and FDRs. Issue 2: Review petition filed by Enforcement Directorate under Section 19(6) of FEMA A review petition was filed by the Enforcement Directorate under Section 19(6) of FEMA, contesting the adjudication order that directed the adjustment of penalty amount from the frozen bank account and FDR. The respondents agreed with the contention that the funds should not have been appropriated without confiscation or forfeiture to the Central Government. Issue 3: Appropriation of penalty amount from frozen bank account and FDR The adjudicating authority ordered the adjustment of the penalty amount from the frozen bank account and FDR without confiscating them. The appellants argued that the funds belonged to them and should not have been appropriated without a proper confiscation order. The respondents acknowledged this and filed a review petition. Issue 4: Confiscation of funds and legality of adjudication order The appellate tribunal examined the case, finding that the adjudicating authority had released the funds without confiscating them, making the appropriation of penalty amount illegal. The tribunal allowed the appeal, rejecting the review petition, and emphasized that once the principal amount is released, there is no basis for crediting the interest accrued to the Central Government. The adjudication order was deemed blatantly illegal due to the unauthorized appropriation of funds not confiscated by the authority. This detailed analysis highlights the key legal aspects of the judgment, focusing on the issues raised by the parties and the tribunal's findings regarding the legality of the adjudication order under FEMA.
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