2024 (9) TMI 1033 - AT - FEMA

Confiscation of Foreign and Indian Currency recovered from the business premises - Imposition of penalties for contravention of FEMA, 1999 - Allegations of illegal dealings in foreign exchange - FFMC failed to apply with the conditions laid down by RBI in terms of Section 10 47 of FEMA, 1999 - penalty of Rs.5 lakhs was imposed on appellant Sumesh Duggal and Rs.15 lakhs on M/s Duggal Forex Pvt. Ltd HELD THAT - As far as cash of Rs. 11,00,000/- is concerned, the same is duly explained by the appellants by way of tendering the statement of account of M/s Duggal Forex Pvt Ltd. which shows drawal of Rs. 5,00,000/- by way of cheque no. 343741 for sum of Rs. 8,00,000/- by way of cheque no. 343746. The sum of Rs. 11,00,000/- is stated to be out of the said drawn amount of Rs. 13,00,000/-. Accordingly, the said cash of Rs. 11,00,000/- is not an unaccounted money in any manner and is wrongly seized and ordered to be confiscated. Coming to the various foreign currency notes found in the premises of M/s Duggal Forex Pvt Ltd. and not tallying with the record, appellant has stated that the said amount is duly accounted for and produced the record in support of his contention (as referred by him in para no. 3 above), which reflects that there is no contravention on the part of M/s Duggal Forex Pvt Ltd. Perusal of the impugned order reflects that the Adjudicating Authority has not considered the said record and is silent on this aspect. Therefore, on the basis of record submitted by M/s Duggal Forex Pvt Ltd., the said company has not committed any contravention, as there is no irregularity in the account of the said company. Now, coming to Sumesh Duggal, the evidence on record clearly reflects that he used to sell US on premium rate to the officials/officers of Nigerian High Commission. In sequel to my findings in the preceding para, the appeal filed by M/s Duggal Forex Pvt Ltd is hereby allowed and the appeal filed by Sumesh Duggal is hereby dismissed. The Indian and foreign currency seized from the premises of M/s Duggal Forex Pvt. Ltd. is hereby directed to be released. Appellant Sumesh Duggal has already deposited the penalty of Rs. 5,00,000/- as pre-deposit of penalty for admitting his appeal. Hence, appellant Sumesh Duggal is not liable to pay any additional amount.

Summary

Issues Involved:

1. Confiscation of foreign and Indian currency.
2. Imposition of penalties for contravention of FEMA, 1999.
3. Allegations of illegal dealings in foreign exchange.
4. Procedural lapses and natural justice concerns.

Detailed Analysis:

1. Confiscation of Foreign and Indian Currency:

The appeals were filed under Section 19 of FEMA, 1999 against an order dated 30.03.2017, which confiscated foreign and Indian currency recovered from the business premises of the appellant. The confiscated amounts included UK lb3690, AUS $100, Sing $1650, US $6116, and Rs.11 lakhs. The Adjudicating Authority concluded that the appellant failed to comply with RBI conditions under Section 10 and 47 of FEMA, 1999. The seized currency was alleged to be involved in illegal transactions, and the appellant did not maintain proper records as required by RBI guidelines.

2. Imposition of Penalties for Contravention of FEMA, 1999:

Penalties of Rs.5 lakhs on Sumesh Duggal and Rs.15 lakhs on M/s Duggal Forex Pvt. Ltd. were imposed for contraventions of FEMA, 2002. The Adjudicating Authority found that the appellants engaged in illegal dealings in foreign exchange, which included the acquisition, purchase, sale, and transfer of foreign exchange without proper authorization. The penalties were imposed under Section 13(2) of FEMA, 1999 for non-compliance with the conditions laid down by RBI.

3. Allegations of Illegal Dealings in Foreign Exchange:

The case facts revealed that on 21.05.2007, the Income Tax Department seized US $22,27,800 from Captain G.A. Ojedokun, who admitted to purchasing foreign currency from local markets at black market rates. Investigations indicated that Sumesh Duggal and M/s Duggal Forex Pvt. Ltd. were involved in these transactions. Statements recorded under Section 37 of FEMA, 1999 confirmed illegal transactions, including dealings with Nigerian High Commission officials. The evidence included call records and statements from various individuals, corroborating the illegal dealings in foreign exchange.

4. Procedural Lapses and Natural Justice Concerns:

The appellant argued that the Adjudicating Authority failed to provide details and copies of statements of persons involved, thus preventing a proper defense. The appellant also contended that the seized Indian currency was duly accounted for and withdrawn from the bank on the day of the search. The foreign currency was also claimed to be duly accounted for with supporting invoices. The appellant alleged that the statements recorded were not voluntary and were obtained under duress. The Adjudicating Authority was accused of not considering the appellant's replies and representations, leading to a violation of natural justice principles.

Judgment:

The Tribunal allowed the appeal filed by M/s Duggal Forex Pvt. Ltd., finding that the company had not committed any contravention as there was no irregularity in its accounts. The Indian and foreign currency seized from M/s Duggal Forex Pvt. Ltd. was directed to be released. The appeal filed by Sumesh Duggal was dismissed, affirming the penalty of Rs.5 lakhs, which had already been deposited as a pre-deposit for admitting the appeal. The Tribunal concluded that Sumesh Duggal was involved in illegal dealings in foreign exchange and upheld the confiscation of the seized currency. The judgment was pronounced on 8th July 2024.