2024 (6) TMI 628 - AT - FEMA

Violation of FEMA Act - bets accepted/placed on cricket matches on behalf of his clients - Connection of the raided premises with the appellant - Penalty imposed for contravention of Section 4 of FEMA and contravention of Section 3(d) of the Act of 1999 - specific information that the appellant and one Jaspal Singh Saluja were receiving and accepting bets on scores and outcome of cricket matches and other sporting events on behalf of their clients and bookies based locally, nationally and internationally and a search was conducted where documents of incriminating nature in terms of the mobile phones, computers, TV, recording systems, laptop, audio cassettes, etc. were found apart from Indian currency of Rs.80,000/- It was seized under the Panchnama - At the time of search, appellant Satpal Singh Vig was not present but one Jaspal Singh Saluja and some other persons were available Whether appellant was not involved in any illegal activity taking place at the premises? - r eliability of statements of Jaspal Singh Saluja, who had retracted his statements. HELD THAT - The noticee was indulging in accepting and placing bets on cricket matches on behalf of his clients that the investigations made revealed that the noticee Shri Satpal Singh Vig had 19 clients who were based overseas out of which accounts of 11 were retrieved from the seized computer which are annexed as relied upon documents . The net amount outstanding at the end of series of bets accepted/placed by a particular overseas client is arrived at in a manner explained in detail Complaint. As seen that there were 25 outstanding accounts bifurcated into two groups of 15 and 10 being received/receivable and paid/payable respectively. It is also mentioned in the Complaint that one Shri Manojbhai based in Dubai is handling these accounts i.e. the dealings with overseas clients on behalf of Shri Satpal Singh Vig@Pali. Therefore section 3(d) of FEMA 1999 is invoked in respect of these amounts and it is appropriate given the nature of transactions involved. These amounts are bets accepted/placed and there is/can be a time difference between acceptance/placement of a bet and realisation of the same. However, as stated in the said section creation or transfer of a right to acquire any asset outside India by any person in this case is established the moment Shri Manojbhai accepts/places a bet on behalf of the noticee. The terms in question here in fact do not in any way affect the contravention committed by the noticee and appear to have been used to encompass the transactions which could have been at different stages of completion merely on account of time factor or physical delivery of amounts. We find that apart from the statements of the appellant and Shri Saluja, the material produced was sufficient to substantiate the allegation against the appellant. This is to show that on instructions, Manojbhai from the account available was paid Dhirams 80,000/- on 27.6.2004 and Dhirams 1,39,346/- on 02.07.2004. Such other payments have been referred by the Special Director apart from the other material. The case in hand is not such where the respondents could not prove the case by adducing the evidence otherwise if we enter into other facts and the evidence, it would be sufficient to show that substantial evidence was led by the respondents to prove the case, however, what has been referred by us would also be sufficient to find out the case against the appellant. Thus, we do not find any error in the findings recorded by the Special Director. Penalty of Rs. 26 lakhs has been imposed for the contravention of Section 4 and Rs.98 lakhs for Section 3(d) of the Act of 1999 - We find the penalty amount to be in excess to the contravention of the amount involved therein. The appellant has already deposited Rs.50 lakhs towards the pre-deposit pursuant to the order of Bombay High Court though the Tribunal passed an order to deposit 60% of the amount to satisfy the condition of pre-deposit. In any case, to make the penalty amount proportionate to the contravention, we reduce it and accordingly for contravention of Section 4 of the Act of 1999, penalty of Rs.10 lakhs is imposed and thereby Rs.26 lakhs is substituted by Rs.10 lakhs and in the same manner penalty of Rs.98 lakhs is reduced to Rs.40 lakhs and is substituted accordingly. The total penalty of Rs.50 lakhs is imposed upon the respondents and with the aforesaid, appeal is partly allowed.

Summary

Issues Involved:
1. Connection of the appellant with the raided premises.
2. Use of statements made by Jaspal Singh Saluja against the appellant.
3. Language barrier in recording statements.
4. Discrepancies in the amounts received and paid.
5. Non-production of Anik Shah.
6. Validity of the penalty imposed.

Detailed Analysis:

1. Connection of the appellant with the raided premises:
The appellant argued that the premises raided on 02.08.2004 had no connection with him. However, the respondents contended that the premises were taken on rent by the appellant, and the business was managed by Jaspal Singh Saluja and the appellant. The Tribunal found sufficient material, including documents and statements, to substantiate the connection of the appellant with the premises and the illegal activities conducted there.

2. Use of statements made by Jaspal Singh Saluja against the appellant:
The appellant contended that the statements of Jaspal Singh Saluja, which were retracted, should not have been used against him. The Tribunal noted that the retraction was not immediate and was made after a considerable period. The statements were recorded continuously over three months without any immediate retraction, indicating they were made voluntarily. The Tribunal held that the statements, corroborated by other material evidence, were rightly relied upon by the respondents.

3. Language barrier in recording statements:
The appellant claimed that the statements were recorded in English, a language unfamiliar to him. The Tribunal found that the appellant was provided assistance to understand the statements in his own language, and some statements were recorded in Hindi. The Tribunal concluded that the appellant was made aware of the contents of the statements, and there was no language barrier that invalidated the statements.

4. Discrepancies in the amounts received and paid:
The appellant highlighted discrepancies in the amounts received and paid, arguing that the amounts should have been distinguished separately. The Tribunal examined the complaint and found that the transactions involved bets accepted and placed on behalf of the appellant's clients, including overseas clients. The Tribunal held that the terms "received/receivable" and "paid/payable" were used to encompass transactions at different stages of completion and did not affect the contravention.

5. Non-production of Anik Shah:
The appellant argued that the documents recovered, allegedly written by Anik Shah, could not be relied upon as he was not produced as a witness. The Tribunal noted that repeated summons were sent to Anik Shah, but he did not appear. The Tribunal held that the respondents made sufficient efforts to produce Anik Shah, and the documents recovered were valid evidence.

6. Validity of the penalty imposed:
The appellant challenged the penalties of Rs. 26 lakhs for contravention of Section 4 and Rs. 98 lakhs for contravention of Section 3(d) of the Foreign Exchange Management Act, 1999. The Tribunal found the penalty amounts to be excessive compared to the contravention involved. The Tribunal reduced the penalties to Rs. 10 lakhs for Section 4 and Rs. 40 lakhs for Section 3(d), making the total penalty Rs. 50 lakhs, which was already deposited by the appellant as a pre-deposit.

Conclusion:
The Tribunal partly allowed the appeal by reducing the penalties but upheld the findings of contravention based on the evidence presented. The appellant's arguments regarding the connection with the premises, use of statements, language barrier, discrepancies in amounts, and non-production of Anik Shah were considered and addressed comprehensively.