2025 (3) TMI 1141 - AT - FEMA

Offence under FEMA - appellant was involved and played vital role in preparing the forged documents submitted in the bank and was assisting the exporter in supplementing the goods in the consignments of M/s Prominent Exim - HELD THAT - The facts on record does not show any material to implicate and prove a case for contravention of the provisions quoted above by the appellant Manoj Arjun Gore. He was Custom Clearance Agent and used to process papers for export of the materials. The commission for it was to be received by Vinod Chitalia to the extent of 40% of DEPB and was passing it to the appellant to the extent of 15%. The amount received for process of the export documents cannot make out a case for contravention of Section 3(b) and 3(d) of the Act of 1999. Respondents could not refer to the evidence to show that appellant made contravention to Section 3(b) and 3(d) of the Act of 1999. The penalty of Rs.4, 00, 000/- and Rs.6, 00, 000/- has been imposed on the appellant but finding no material to prove contravention of Section 3(b) and 3(d) of the Act of 1999 by the appellant we cause interference in the impugned order and is set aside qua the appellant. Appeal is allowed with aforesaid.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment were:

1. Whether the appellant contravened Section 3(b) of the Foreign Exchange Management Act, 1999, which prohibits making any payment to or for the credit of any person resident outside India without appropriate compliance.

2. Whether the appellant contravened Section 3(d) of the Foreign Exchange Management Act, 1999, which prohibits entering into any financial transaction in India as consideration for or in association with the acquisition or creation or transfer of a right to acquire any asset outside India.

ISSUE-WISE DETAILED ANALYSIS

1. Alleged Contravention of Section 3(b) of the Foreign Exchange Management Act, 1999

Relevant legal framework and precedents: Section 3(b) of the Act prohibits making payments to or for the credit of any person resident outside India without compliance with the Act, rules, or regulations.

Court's interpretation and reasoning: The Tribunal analyzed whether the appellant, as a Custom Clearance Agent, engaged in activities that amounted to making payments to or for the credit of persons outside India. The appellant argued that his role was limited to facilitating export processes and that he did not engage in any such financial transactions.

Key evidence and findings: The Tribunal considered the evidence presented, including statements from involved parties. The respondent alleged that the appellant played a vital role in preparing forged documents for bank submission. However, the evidence did not conclusively demonstrate that the appellant made any payments to or for the credit of persons outside India.

Application of law to facts: The Tribunal found no material evidence to support the claim that the appellant contravened Section 3(b) by making unauthorized payments. The appellant's actions as a Custom Clearance Agent did not inherently involve such transactions.

Treatment of competing arguments: The respondent's argument focused on the appellant's involvement in document preparation and alleged association with illicit transactions. However, the Tribunal emphasized the lack of concrete evidence linking the appellant to contraventions of Section 3(b).

Conclusions: The Tribunal concluded that the appellant did not contravene Section 3(b) of the Act, as there was no evidence of unauthorized payments made to persons outside India.

2. Alleged Contravention of Section 3(d) of the Foreign Exchange Management Act, 1999

Relevant legal framework and precedents: Section 3(d) prohibits entering into financial transactions in India as consideration for or in association with the acquisition or creation or transfer of a right to acquire assets outside India.

Court's interpretation and reasoning: The Tribunal examined whether the appellant's activities constituted entering into financial transactions related to acquiring assets outside India. The appellant maintained that his role was limited to processing export documents and receiving a commission, which did not involve such transactions.

Key evidence and findings: The Tribunal reviewed the evidence, including the statement of Shri Kaushik Shinde, which suggested the appellant's involvement in preparing forged documents. However, the evidence did not establish that the appellant engaged in financial transactions linked to acquiring assets outside India.

Application of law to facts: The Tribunal determined that the appellant's receipt of a commission for processing export documents did not amount to entering into prohibited financial transactions under Section 3(d).

Treatment of competing arguments: The respondent argued that the appellant's actions facilitated illicit transactions. However, the Tribunal highlighted the absence of evidence proving that the appellant's activities were associated with acquiring assets outside India.

Conclusions: The Tribunal concluded that the appellant did not contravene Section 3(d) of the Act, as there was no evidence of involvement in financial transactions related to acquiring assets outside India.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Tribunal noted, "The facts on record do not show any material to implicate and prove a case for contravention of the provisions quoted above by the appellant."

Core principles established: The judgment reinforced the principle that allegations of contravention under Sections 3(b) and 3(d) require concrete evidence of unauthorized payments or financial transactions linked to acquiring assets outside India.

Final determinations on each issue: The Tribunal set aside the penalties imposed on the appellant, concluding that there was insufficient evidence to prove contraventions of Sections 3(b) and 3(d) of the Foreign Exchange Management Act, 1999. The appeal was allowed, and the impugned order was overturned concerning the appellant.

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