2024 (9) TMI 1030 - AT - FEMA

Imposition of penalties under FEMA - Foreign currency confiscation as seized from the premises of the Appellant - Tribunal directed the Appellant to deposit 15% of the amount of penalty imposed and furnish bank guarantee for the remaining 85% as pre deposit - Appellant argued that the principles of natural justice have been violated in as much as cross examination of the Departmental Officers and witnesses was not permitted HELD THAT - During the search of the residential premises a deposit slip of an overseas account along with a blank cheque book of HSBC Bank, Hongkong were seized. The seized deposit slip showed a deposit of US 100 in the said account. The Appellant deposed in his statement that he had not taken permission from RBI to open the account. However, he had subsequently produced a letter requesting the HSBC Bank to close the account. Notebook marked B seized from the resident of the Appellant on which there was an entry relating to one Jazer, the Ld. Adjudicating Authority inferred that it revealed illicit purchase of foreign currency of US 16000 by the Appellant. He in his statement on 07.03.2005 attributed this entry to the transaction of 160 optical frames sold by him at the price of Rs. 48.60 per piece to the said Jazer. In view of this statement tendered by the Appellant under Section 37 of FEMA, we are inclined not to accept the finding of Ld. Adjudicating Authority that the contravention of Section 3(a) of FEMA has happened for the said transaction. Therefore, we are inclined to uphold the finding of the Ld. Adjudicating Authority that the Appellant indulged in contravention of Section 3(a) of FEMA but for a reduced amount of US 99,770 not US 1,15,770 as the charge for the contravention of US 16000 is not found sustainable. 17. Ld. Adjudicating Authority found no contravention of FEMA for the seized Indian currency of Rs. 9.29 Lakh which has not been confiscated. We set aside the confiscation of the foreign currencyWe order the release thereof to the Appellant. We also order, as prayed by the Appellant, to release the seized Indian currency of Rs. 9.29 Lakh which was not confiscated. We find that the contravention of Section 3(a) of FEMA for an amount of US 99,770 by the Appellant is established. We also find that the contravention of Sections 3(a) 3(d) of FEMA for amounts US 5,95,738.4 and RMB 5,78,079.8 by the Appellant are established. Penalties imposed on the Appellant and for the aforementioned contraventions are disproportionately higher. We therefore reduce the consolidated penalty for the aforementioned contraventions to Rs. 15,00,000/- (Rupees Fifteen Lakh Only) on the Appellant.

Issues Involved:
1. Violation of principles of natural justice.
2. Legality of confiscated foreign currency.
3. Alleged acquisition of foreign exchange abroad.
4. Interpretation of emails recovered from the appellant's computer.
5. Seizure of bank passbook and its implications.
6. Seizure of deposit slip and blank cheque book.
7. Alleged illicit purchase of foreign currency.
8. Penalty imposed and its proportionality.

Detailed Analysis:

1. Violation of principles of natural justice:
The appellant argued that the principles of natural justice were violated as cross-examination of the Departmental Officers and witnesses was not permitted. The tribunal found that the appellant's statements were true and voluntary, corroborated by independent evidence recovered from his premises. Therefore, the absence of cross-examination did not prejudice the appellant's interests.

2. Legality of confiscated foreign currency:
The appellant explained that the seized foreign currency was legally acquired by him and his family members before traveling abroad. The tribunal noted that the regulations permitted retention of foreign currency up to US$ 2000 per passenger. Given that the appellant and his family had traveled abroad and provided receipts of foreign exchange, the charge under Section 3(a) of FEMA for Rs. 2,99,000/- could not be sustained. The tribunal set aside the penalty of Rs. 40,000/- and the order of confiscation of the foreign currency.

3. Alleged acquisition of foreign exchange abroad:
The appellant contended that the passbook seized did not reflect his account details and belonged to another individual. The tribunal found that the appellant failed to provide an adequate explanation for the passbook's presence. The adjudicating authority's inference that the appellant was arranging funds credited in the account was upheld, establishing contraventions of Sections 3(a) & 3(d) of FEMA.

4. Interpretation of emails recovered from the appellant's computer:
The appellant argued that the emails related to business transactions coordinated on behalf of actual importers in India. The tribunal found that the appellant failed to explain several transactions, including transfers of significant amounts to China. The presumption under Section 39 of FEMA was applied, and the tribunal agreed with the adjudicating authority that the contraventions were established.

5. Seizure of bank passbook and its implications:
The appellant explained that the passbook belonged to his cousin and was with him for reconciliation purposes. The tribunal noted that the appellant's statements corroborated the evidence recovered, leading to the conclusion that the appellant was involved in arranging funds credited in the account.

6. Seizure of deposit slip and blank cheque book:
A deposit slip and blank cheque book of an overseas account were seized. The appellant admitted not having RBI permission to open the account but produced a letter requesting its closure. The tribunal found the appellant's explanation insufficient to negate the contraventions.

7. Alleged illicit purchase of foreign currency:
The adjudicating authority inferred from a notebook entry that the appellant illicitly purchased US$ 16000. The appellant attributed the entry to a legitimate business transaction. The tribunal accepted the appellant's explanation and did not uphold the contravention for this amount.

8. Penalty imposed and its proportionality:
The tribunal found the penalties imposed disproportionately high. It reduced the consolidated penalty for the contraventions to Rs. 15,00,000/-.

Conclusion:
The tribunal partly allowed the appeal, setting aside the confiscation of foreign currency worth Rs. 2,99,000/- and ordering the release of seized Indian currency of Rs. 9.29 Lakh. The contraventions of Sections 3(a) & 3(d) of FEMA were established for amounts US$ 5,95,738.4 and RMB 5,78,079.8, with a reduced penalty of Rs. 15,00,000/-.

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