2019 (3) TMI 824 - AT - FEMA

Offence under FEMA - appellant had without any general or special permission of RBI, received amounts ₹ 2,47,99,350/- in India, otherwise than through an authorised person, by order or on behalf of his friend Madan, a person resident outside India - penalty imposed - HELD THAT - From the documents/statements the Investigating Officer became aware of the identity of various persons from whom Shri Harish Kumar had been receiving payments in India, under instructions of his friend Madan, residing in USA, who was earlier residing in Mohali. In view of other certain searches were conducted and a number of persons examined and their statements recorded under FEMA, which brought out corroboratory evidence viz-a-viz the facts as stated by Shri Harish Kumar in his afore-mentioned statements. Shri Harish Kumar later on sought to retract from his abovementioned statements, by way of a letter sent during the course of investigations, besides by way of submissions made during the course of personal haring including in the form of Affidavits, both his as also of one other person, in which Affidavit, it is claimed that amount totaling to ₹ 26,25,000/- was received by Shri Harish Kumar from the said person (Harchand Singh) on interest for using the same in his business of Goldsmith. It is correctly found in the impugned order that from the seized material and the above-mentioned statements, and find that the said statements, when read with in conjunction with the seized documents/material, brings out the facts that the contention of the Noticee that he was forced to make inculpatory statements is not correct. Not only that these statements are in the form of explanation to the seized documents, it is also a matter of records that the said statements were recorded by Shri B.C. Mahey, Assistant Director and not by Shri Balwinder Singh (the then Chief Enforcement Officer), as alleged by the Noticee. Therefore, as agreeing with the finding arrived in the impugned order that it is established beyond a reasonable doubt that during the years 2002 and 2003, the said Shri Harish Kumar @ Rinku without any general or special permission of Reserve Bank, received amounts totaling to ₹ 2,47,99,350/-, in India, otherwise then through an authorized person, by order or on behalf of his friend Madan, a person resident outside India, and thereby he has contravened the provisions of Section 3 (c ) of the Foreign Exchange Management Act, 1999 - the seized amount of ₹ 21,75,000/- was the amount involved in afore-mentioned contraventions of the provisions of FEMA. It is also a matter record that the appellant had retracted his admission after the expiry of almost more than four years. The said period is long period of time. It is after thought thus has no value in the eyes of law. With regard to the penalty of ₹ 25,00,000/- is concerned, it has come on record that appellant is not in a position to deposit the said amount. The appellant is suffering from undue hardship. The financial condition of the appellant is very weak. He has been residing in House in Punjab, on rent from the last many years. On the perusal of the affidavit and a copy of the deed of conveyance filed therewith makes it abundantly clear that the father of the appellant Late Shri Kanwar Bhan had been residing in the aforesaid rented house and after the death of his father the appellant has been residing in that house. He is an unemployed person living with the generosity of the Management of the nearby Gurudwara where he and his family are having their daily meals in return of his help to the distribution of free meal to the devotees. He does not have any income who is not an income tax payee and does not have any other financial resources to make the pre-deposit of the penalty. There is no material on record on behalf of the respondent to show that the appellant is not suffering from the undue hardship. It appears from the record, there is no contrary evidence available. The appellant is exempted to deposit the penalty amount. The same is waived in view of the peculiar facts of the present case. The impupgned order is modified only to this extent of penalty component.

Summary

Issues Involved:
1. Legality of the penalty imposed under FEMA.
2. Validity of the evidence and statements recorded.
3. Denial of cross-examination and principles of natural justice.
4. Claim of ownership over the seized amount.
5. Financial hardship of the appellant in paying the penalty.

Detailed Analysis:

1. Legality of the Penalty Imposed Under FEMA:
The penalty of ?25,00,000/- was imposed on the appellant for receiving amounts totaling ?2,47,99,350/- in India without permission from the RBI, contravening Section 3(c) of FEMA. The seized amount of ?21,75,000/- was also held to be involved in these contraventions. The appellate tribunal upheld the penalty, finding the appellant's retraction of statements after four years to be an afterthought and of no legal value.

2. Validity of the Evidence and Statements Recorded:
The appellant contended that the only evidence against him was his own statements, which were allegedly recorded under duress by Shri Balvinder Singh. However, the tribunal found that the statements were recorded by Shri B.C. Mahey, Assistant Director, and were corroborated by other evidence, including documents seized from the appellant's residence. The tribunal concluded that the appellant's statements were voluntary and provided detailed explanations of the seized documents and his modus operandi.

3. Denial of Cross-Examination and Principles of Natural Justice:
The appellant argued that the denial of cross-examination of Shri Balvinder Singh violated principles of natural justice. The tribunal acknowledged the appellant's right to cross-examine witnesses but found that the statements were recorded by Shri B.C. Mahey, not Shri Balvinder Singh. Therefore, the denial of cross-examination did not affect the validity of the evidence.

4. Claim of Ownership Over the Seized Amount:
The appellant claimed that ?26,25,000/- of the seized amount belonged to his relative Harchand Singh, who had loaned it to him. This claim was supported by an affidavit but was rejected by the adjudicating authority as baseless. The tribunal upheld this finding, noting that the appellant's explanation was not credible and appeared to be an attempt to evade legal consequences.

5. Financial Hardship of the Appellant in Paying the Penalty:
The appellant argued that he was suffering from undue hardship and was unable to pay the penalty. The tribunal found that the appellant was indeed in financial distress, residing in a rented house and relying on the generosity of a nearby Gurudwara for daily meals. The tribunal exempted the appellant from depositing the penalty amount, modifying the impugned order to waive the penalty component due to the appellant's financial condition.

Conclusion:
The appeal was dismissed on merits, but the appellant was exempted from depositing the penalty amount due to undue financial hardship. The impugned order was modified only to this extent. The tribunal upheld the seizure of ?21,75,000/- and the findings of contraventions under FEMA.