2024 (9) TMI 556 - AT - FEMA

Offence under FEMA - bogus purported exports (of sub-standard goods) to Russia with inflated invoices for the purpose of obtaining export benefits under DEPB and Duty Drawback Schemes - Reliance on statement of the witnesses recorded during investigation u/s 37 - Denial of Cross-Examination of Witnesses HELD THAT - In the present case, the Adjudicating Authority has not summoned any person to examine him on oath as per clause (a) of Section 28 (2) of FEMA, 1999. Even no evidence is led by respondent ED before the Adjudicating Authority by way of receiving evidence by way of affidavits as per clause (c) of Section 28 (2) FEMA, 1999. Respondent ED is relying upon the statement of persons recorded u/s 37 of FEMA, 1999 which are duly corroborated with documentary evidence collected from various sources during the investigation of this case. The cross examination of any person will be material, if the whole case is based on the oral statement of different persons recorded u/s 37 of FEMA, without any corroborative documentary evidence, or when any witnesses summoned and examined before the Adjudicating Authority on oath. Tribunals and Adjudicating Authorities are quasi-judicial bodies, which mostly adopts summary procedure for conducting the proceedings and the same cannot be equated with regular Courts. Moreover, the tribunals are not bound by the procedure laid down in Civil Procedure Code, 1908. In the present case apart from the statement of the witnesses recorded during investigation u/s 37 of FEMA, there is huge documentary evidence, which corroborates the same, as pointed out by respondent in the preceding para. As per the allegation against the appellant Suresh Saluja @ Pappy Saluja, he made the bogus purported exports (of sub-standard goods) to Russia with inflated invoices for the purpose of obtaining export benefits under DEPB and Duty Drawback Schemes - Said consignments never reached Russia, as per investigation conducted by DRI, however, appellant procured the remittances through unauthorised channels. As also revealed during investigation that appellant Suresh Saluja instigated number of persons for floating bogus firms/concerns in order to show the purchase of material to complete the paper transactions without actual purchase. The bank accounts of said bogus firms/concerns were also opened at the instance of Suresh Saluja, but he retained the blank signed cheques of the said accounts to withdraw the bogus payments made to said firms/concerns. Even otherwise, summoning Kabul Singh, Balwant Singh Maan, and Dr. Naginder Khera for purpose of cross examination is not going to demolish the investigation conducted by respondent ED, being based on documentary evidence and the other material evidence. Appellant wants to cross-examine the witnesses, without filing his reply to the grounds of Show Cause Notice, which is also against the canons of court proceedings, as without going through the defnce taken by appellant, Ld. Adjudicating Authority can not appreciate whether the summoning of the said persons for cross-examination is really required during the Adjudication Proceedings in the interest of justice or the request for the same is made with a malafide intention to delay the proceedings and/or without any basis in view of documentary evidence on record. It is apparent that the said application was moved by the appellant Suresh Saluja to delay the adjudication proceedings pending before the Adjudicating Authority, as he has not disclosed his defence till date and wants to play a blind game with the investigation agency/ED. As pertinent to mention here that appellant Suresh Saluja without filing his reply to explain his defence to the show cause notice, challenged the Show Cause Notice, at premature stage before the Hon'ble High Court of Punjab and Haryana, Chandigarh by way of CWP-1371 of 2017, and thereafter filed the appeal before this Appellate Tribunal. This points towards the direction that appellant is trying his best to stall the adjudication proceedings, as he is conscious of the fact that huge penalty is going to be imposed by the Adjudicating Authority on the basis of evidence on record, as and when any final order is passed, in absence any cogent defence in his favor. The present appeal is hereby dismissed, being devoid of any merits, and thereby, adjudicating authority is hereby directed to conclude the adjudication proceedings as per law, if there is no stay by Hon'ble Punjab Haryana High Court. Appellant is at liberty to file reply on merits to the grounds of SCN. It is made clear that nothing expressed herein will affect the right of any party in the Adjudication proceedings. Further, Ld. Adjudicating Authority will be at liberty to examine and cross-examine any witness on oath, if so required, in the interest of justice.

Summary

Issues Involved:
1. Declining Cross-Examination of Witnesses
2. Allegations of FEMA Violations
3. Documentary Evidence Supporting Allegations
4. Procedural Fairness and Natural Justice

Issue-Wise Detailed Analysis:

1. Declining Cross-Examination of Witnesses:
The appellant filed an appeal under Section 19 of the Foreign Exchange Management Act, 1999, challenging the order dated 08.02.2018, wherein the Adjudicating Authority declined the request for cross-examination of witnesses Kabul Singh, Balwant Singh Maan, Dr. Naginder Khera, and the Investigating Officer. The appellant argued that cross-examination is a valuable right and integral to the principle of natural justice, relying on judgments from the Hon'ble High Courts of Bombay and Delhi. The appellant contended that the whole case of the respondent ED is based on the statements of these witnesses, making their cross-examination essential to highlight the truth.

2. Allegations of FEMA Violations:
The case revolves around the alleged contraventions of Section 3(a), 3(b), 4, and 4(2) of the Foreign Exchange Management Act, 1999, by M/s Shivam Overseas and its partners. The allegations include receiving payments in India through unauthorized channels, making payments for the credit of persons outside India, unauthorized acquisition of foreign exchange, and depositing the same through fake Currency Declaration Forms (CDFs). The appellant was accused of manipulating foreign exchange under the guise of exporting substandard goods to Russia with inflated invoices to falsely claim export incentives.

3. Documentary Evidence Supporting Allegations:
The respondent ED presented substantial documentary evidence corroborating the statements recorded under Section 37 of FEMA. The evidence included bank records, export invoices, and investigation reports from various authorities, including the Directorate of Revenue Intelligence (DRI). The evidence indicated that the goods exported by M/s Shivam Overseas never reached their destination, and the export proceeds were obtained through unauthorized channels. Statements from various individuals, including Harish Batra and other associates, revealed that the firms involved in the transactions were bogus and created at the instance of the appellant for paper transactions without actual business.

4. Procedural Fairness and Natural Justice:
The Adjudicating Authority and the Tribunal, being quasi-judicial bodies, are not bound by the strict procedures of the Civil Procedure Code, 1908. The Hon'ble Supreme Court in Telstar Travels Private Limited & Ors. v. Enforcement Directorate emphasized that substantial compliance with the principles of natural justice is sufficient. The Tribunal noted that the cross-examination of witnesses is material only if the case is based solely on oral statements without corroborative documentary evidence. In this case, the substantial documentary evidence supported the allegations, making the cross-examination of witnesses unnecessary. The Tribunal concluded that the appellant's request for cross-examination appeared to be a tactic to delay the adjudication proceedings, as the appellant had not disclosed his defense and was attempting to play a blind game with the investigation agency.

Conclusion:
The appeal was dismissed as devoid of any merits. The Adjudicating Authority was directed to conclude the adjudication proceedings as per law, with the liberty to examine and cross-examine any witness on oath if required in the interest of justice. The appellant was granted the liberty to file a reply on merits to the grounds of the Show Cause Notice. The Tribunal clarified that nothing expressed in the judgment would affect the rights of any party in the adjudication proceedings.