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TMI Blog2008 (2) TMI 805X X X X Extracts X X X X X X X X Extracts X X X X ..... nformity with the description as to quality and value. The penalty of Rs. 4,00,00,000/- (Rupees four crores only) was also imposed against M/s. Adani Exports Ltd. and Rs. 2,00,00,000/- (Rupees two crores only) against Shri Rajesh Adani, who have been arraigned for abetting Shri Dharmesh P. Shah for the said contravention under Section 8(3) and 8(4), read with Section 64 (2) and Section 68(1) of FER Act, 1973. 3. We have heard elaborate arguments from Shri S.K. Bagaria, ld. Senior Advocate, on behalf of Shri Dharmesh P. Shah, Proprietor of M/s. Vaishal Impex (VIL), the appellant in appeal no. 501/05, Shri Vikram Nankani, Advocate, on behalf of M/s. Adani Exports Ltd. (AEL) and Shri Rajesh Adani the appellants in appeal no. 499 500/05 and Shri Bishwajit Bhattacharyya, ld. Senior Advocate, for the respondent and gone through the records carefully. Briefly stated, the investigations were initiated in this case on an intelligence received by the DRI where it was found that Shri Dharmesh Shah, proprietor of M/s. Vaishal Impex, Ahmedabad (M/s. VIL) had imported in the name of his firm a consignment of 1,10,000 pcs. of CD ROMs of various titles declared as Computer Software on CD at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f them M/s. Contessa Commercial Co., Calcutta and M/s. Pioneer Business Enterprise, Bangaluru imported CD ROMs from a common firm M/s. Gulf Software, Dubai while the appellant M/s. Vaishal Impex imported CD ROMs from M/s. Computer Point, Dubai. All of them approached Adani Exports Ltd. of Ahmedabad for opening L/Cs for them and Adani Exports Ltd. opened L/Cs for them worth over US$ 1,55,95,910 lakhs without obtaining any security or surety. Show Cause Notice was issued against the appellants where they were held guilty by the Adjudicating Officer and being aggrieved these appeals have been preferred by the appellants to set aside impugned order. 6. Shri S.K. Bagaria, ld. Senior Advocate vehemently argued on behalf of the M/s. Vaishal Impex, appellant in appeal no. 501/05 that the impugned order was wholly without jurisdiction and illegal because the appellant imported the goods fully in conformity with the declaration both quality and quantity wise and no violation of Section 8(3) and 8(4) of the FERA has been proved by the respondent in this case. According to him present proceedings were initiated on the basis of investigations conducted and proceedings initiated by custom aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai and the said entire foreign exchange has been utilized by the appellant solely and exclusively for the said purpose and for no other purpose at all. This was also the price of the said CD ROMs in the international market during the material period and the goods were also actually imported by the appellant at the said price. He referred to expert opinion of the Deptt. of Electronics dt. 14-07-98 Electronics Computer Software Export Promotion Council obtained by the custom authorities, who vide its letter dt. 19-06-98 gave a report that the price of US $ 15 equivalent to Rs. 600/- per piece of CD ROMs was fair international price of CD ROMs in the international market. Moreover, apart from the evidence of contemporaneous imports of identical goods at the same price, the transaction value was also fully supported by evidence of international market price of the goods of the same titles in various international catalogues. He pointed out that the supplier in relation to imports at Mumbai, Bangalore and Goa was the same where imports were made at value of US $ 15 per piece which was accepted by custom authorities. 9. Shri V.S. Nankani, ld. Advocate appearing on behalf of M/s. Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... government has not filed an appeal, in the earlier case, the Government cannot agitate the same issue in another case. 11. Shri V.S. Nankani, ld. Advocate further challenged the jurisdiction in this matter on the ground of the sunset clause of Section 49(3) of FEMA, 1999 claiming that the date of service of the SCN was relevant for this purpose and not date of issuance of SCN. Learned Counsel submitted that unless the notice is issued and served on noticee the act of taking notice of any contravention under provision of Section 51 of repealed Act would not be complete. However, the main controversy in this regard lies between narrow compass whether issuance of the SCN and dispatch including service thereof is necessary within the sunset period i.e. before 31-05-02 as contemplated under Section 49(3) of the FEM Act 1999. The Section 49(3) of FEM Act, 1999 has incorporated a sunset clause wherein it is enacted that no court or adjudication officer shall take cognizance or notice of contravention after 2 years from the date of commencement of the Foreign Exchange Management Act. In other words, the cognizance under the repealed Act or notice by an adjudicating officer of any contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ender and, therefore, once the court on perusal of the complaint is satisfied, that the complaint discloses the commission of an offence and there is no reason to reject the complaint at that stage, and proceed; further in the matter, it must be held to have taken cognizance of the offence. One should not confuse taking of cognizance with issuance of process. Cognizance is taken at the initial stage when the Magistrate peruses the complaint with a view to ascertain whether the commission of any offence is disclosed. The issuance of process as at a later stage when after considering the material place before it, the court decides to proceed against the offenders against whom a prima facie case is made out. In the facts and circumstances of this case, the High Court erred in holding that the Magistrate had not taken cognizance, and that being condition precedent, issuance of process was illegal. 14. Thus the sunset clause does not bar the jurisdiction in these matters because SCN was signed on 31-5-2002 which is the date of taking notice of contravention, which is before closing of the sunset period. On this issue we need not have to cite more case law, especially in view of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AEL acted far beyond as a mere facilitator of imports with no security from M/s. VIL, M/s. AEL obliged M/s. VI 16. It is further argued by learned Senior Advocate that there was no force in the averments made on behalf of the M/s AEL that the goods represented the security of the Appellants and therefore, the question of requiring the M/s. VIL giving any further security did not arise at all. The nexus between M/s. AEL and M/s. VIL was writ large. This fact in itself reinforced the finding dated 22-03-04 of the Commissioner of Customs, Hyderabad that M/s. VIL was a front of M/s. AEL. The said finding was now sub-judice before the Supreme Court. M/s. VIL borrowed money Rs. 7.5 crores from M/s. Padmini Polymer Ltd. (PPL) and paid to M/s. AEL for the artificially inflated imports. In fact M/s. AEL had earlier transferred this sum of Rs. 20 Crores to the account of M/s. PPL. The funds thus originated from M/s. AEL and transferred to M/s. PPL to M/s. VIL and back to M/s. AEL. 17. It is also argued that it was puerile to argue that investigation by the Department of Customs was not relevant in FERA Proceedings where Section 77 of FERA stipulates that officers of the Customs Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d filed return in the Office of Income Tax, Ahmedabad...I happened to meet Nitish Doshi of Computer Point, Dubai at Ahmedabad in the house of my friend Joyeshbhai who is co-brother of Nitish Doshi. Mr. Doshi told me that he can strike a deal for Imports of CD ROM software, ... He told that there are a good number of CD ROM software suppliers from Dubai and the company in which he is working is also one of the supplier of this item. He suggested the CD ROM software which could be sold easily and with profit in India. I got tempted and started thinking big without realizing that if goods were not sold at expected sale price then there could be heavy losses I state that I am unable to reconcile as to what happened to me and why I got impressed with the rosy pictures given to me by Mr. Doshi. 20. It emerged from evidence on record that the subject goods were actually imported by M/s. AEL and belonged to them and not to the proprietor M/s. Vaishal Impex or M/s. Pioneer etc. where contemporaneous imports of similar kind of goods were made. The proprietor of Pioneer Business, Bangaluru, late Shri Anil Lohia in his statement recorded under Section 108 of the Customs Act, 1962 had depose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t M/s. PPL had not initiated any legal action against M/s. Vaishal Impex for its realisation. 24. The investigation revealed that though M/s. PPL was based in Delhi, it opened an account in State Bank of Travancore, Ahmedabad, in March 1999. M/s. Adani Exports Ltd. had transferred a sum of Rs. 50 Crores in the said account between 18-3-99 30-3-99. Where Rs. 20 Crores had been transferred by M/s. PPL immediately to the account of Vaishal Impex with Corporation Bank, Navrangpura. M/s. Vaishal transferred the said amount to M/s. Adani Exports Ltd., showing payments towards the letters of credit opened by M/s. Adani Exports Ltd. The balance amount of Rs. 30 Crores were transferred by M/s. PPL to the account of Brisk Plastics Pvt. Ltd., who in turn transferred the same to M/s. CCCPL in whose name also M/s. Adani Exports had opened letters of Credit for imports of CD ROMs. The said account of M/s. PPL was introduced by the director of M/s. Adani Exports Ltd. The said account of M/s. PPL was found to be used only for routing the money of M/s. Adani Exports Ltd., to their various dummy firms which was opened in March, 99 and was closed in September, 99. 25. Shri Vivek Nagpal, Chairma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exporter after 8 months was nothing but an attempt to protect the appellant Company from the clutches of law. The reliance placed on Commissioner of Customs v. M/s. Dimple Overseas, 2005 (190) E.L.T. 58 is misconceived which related to export from India where the importer might have filed wrong declaration before Local Customs for obvious reasons of evading duty. In the instant case there was no incentive for the foreign exporter to file a wrong declaration as there was no duly on exports of type of goods from Dubai. The realization of the so called mistake by the exporter in the earlier declaration and filing of the second declaration after 8 months speak volumes particularly when it was done after the investigations had been initiated by DRI. 29. The export declaration initially filed at the port of export, had a sanctity, which could not be brushed aside by filing another declaration after 8 months when investigation has started. In the case of Orson Electronics Pvt. Ltd. v. Commissioner of Customs, Bombay, 1997 (93) E.L.T. A133, the Hon ble Apex Court confirmed the decision of the Tribunal where the tribunal accepted the higher value declared to Japanese Customs in export do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y dt. 18-10-01 the STP stated that the subject goods could be run on a computer containing the operating system of Windows where no adverse inference could be drawn against the appellant. It is argued that there is no condition requiring software to function without any operating system preloaded thereon and thus the two subsequent opinions could not be relevant and relied upon. A report of the expert bodies of the Govt. of India, viz., Department of Electronics as well as the Electronics and Computer Software Export Promotion Council on 14-7-98 and 19-6-98 respectively, were correct and these reports affirmed the position that the goods in question were computer software. 34. However, we find no force in the argument advanced by ld Senior Counsel where he has not been able to give justification against the opinion given by the expert bodies viz, NIC and STP. The samples of CD ROMs were sent to the National Information, Centre Gandhinagar by DRI vide Letter dt 15-2-2001 for their opinion with a specific query as to whether the CD ROMs contain software as per Notification No. 3/98-Cus., dated 11-2-98 amending Notification No. 11/97-Cus., dated 1-3-1997 for deriving benefit under i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the definition given in the notification, where weightage is required to be given to such an opinion. The opinion given by NIC, Gandhinagar is to be seen in its proper perspective which is the technical opinion of the technical experts of the Government which is to be preferred over the opinion of the Electronic and Computer Software Export Promotion Council (ECS) and the Department of Electronics, particularly when ECS vide their letter dated 15-01-2001 have categorically stated that their opinion, is based on normal technical practices and may not be construed as final technical decision or a clarification. They further opined that it would be appropriate if the opinion of the designated technical authority for Information Technology i.e. Ministry of information Technology be obtained. 38. It is worth mentioning here that interactivity means that user can manipulate with the compute while the programme is running. In the present case, there is no evidence on record to show that the subject goods were software as required under the definition given in the Notification as stated above and the user could manipulate the data while the programme was running. In fact, the CDs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t if software is required to load a programme on the computer then the programme which has to be loaded on the computer continues to be software. However, the aforesaid ruling of the Supreme Court dealt with the motion capture animation files under different custom notification no. 20/1999-Custom which is not applicable to the facts of the present case and the argument of ld Senior Counsel in this regard is liable to be rejected particularly when the report of NIC/STP is clear on the point. 42. It is argued that the question of getting exemption from customs duty was wholly irrelevant for the purposes of the 1973 Act. Even in the Show Cause Memorandum there was absolutely nothing to show that the goods were not computer software as normally, generally and commercially understood. The authorities under the 1973 Act cannot take a different view on the said issue. It is argued that the custom authorities were and are the jurisdictional authorities to determine value of the imported goods. CESTAT has already considered the facts, investigations and evidence and has concluded in favour of the appellant and there was no scope to discard or reject the same which could not be ignored by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquired otherwise than for the purposes for which it was acquired. 44. In the instant case, it has been found that the appellants have failed to utilise the foreign exchange for the purpose for which it was acquired where the goods were misdeclared as computer software on CD ROMs which were not as per the definition given in the said Notification and in fact they were found to be of sub-standard quality as discussed above. The facts, evidence and attendant circumstances of the case go on to prove that the declared price of US$ 15 per pc. could not be accepted as genuine as it was highly inflated and exaggerated. The value of CD ROMs has rightly determined by the Adjudicating Officer at Rs. 62,39,834/- as against declared value of Rs. 7.5 crores. The opinion of Electronic Software Promotion Council (ECS) regarding the value of US$ 15 being fair, given vide their letter dated 19-06-98; was without any basis of documentary evidence. 45. Now coming to the next question relating to the charges against M/s. AEL and Rajesh Adani for abetment by assisting M/s. VIL for contravention of the said provision of the FER Act, it is argued by Shri Vikram Nankani, Advocate that the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith any person with the actual knowledge or having reason to believe that such person is engaged in assisting in any manner, an organised crime syndicate; (ii) ****** (iii) the rendering of any assistance, whether financial or otherwise, to the organized crime syndicate; 48. In Ranjitsingh Brahmajeetsingh Sharma v. State of Maharashtra and Anr, MANU/SC/026 i/2005, the Supreme Court explained the expression abet under MCOCA in the light of the definition of these words under Sections 107 and 108 of the Indian Penal Code as under : However, having regard to the cognate meaning, the term may be read in the light of the definition of these words under Sections 107 and 108 of the Indian Penal Code. The inclusive definition although expansive in nature, communication or association must be read to mean such communication or association which is in aid of or render assistance in the commission of organized crime. In our considered opinion, any communication or association which has no nexus with the commission of organized crime would not come within the purview thereof. It must mean assistance to organized crime or organized crime syndicate or to a person involved in either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a highly exaggerated value to siphon out foreign exchange to earn huge profits. 50. We find no force in the contention of the ld. Counsel of the appellants that the impugned order has been passed without hearing the appellants and without giving an opportunity of cross-examination of witnesses where reliance is based on the judgment of the Hon ble Supreme Court in the State of Kerala v. Shaduli (1977) 2 SCC 777. From perusal of record it is clear that the appellants were given five opportunities of being heard where notices were sufficiently served on their correct address. As regards cross-examination of witnesses the settled principle is that it cannot be permitted merely on demand until and unless certain reasons and circumstances are brought out or established. No such situation is brought out by the appellants for demanding cross-examination. Here it will be relevant to mention the ruling of Supreme Court in Surjit Singh Chhabra v. UOI, 1997 SCC (Criminal) 272 where the Hon ble Court observed that the customs officials were not police officials and the cross-examination of the witnesses was denied on the grounds of the failure of the noticees to give any sufficient reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by Hon ble Supreme Court in Standard Chartered Bank others v. Directorate of Enforcement, JT 2005 (5) SC 267 in following word : The object of the Act is clearly to protect the economic interests of the country and to deal with any violation that causes economic loss to the country. In the context of that, object, any contravention of the provisions of the Act have to be viewed seriously and any one directly responsible or conniving at the offence is liable to be punished. This appears to be the legislative intent in enacting FER Act 1973 replacing the Foreign Exchange Regulation Act, 1947, and also including it in the Ninth Schedule to the Constitution. 53. In any case, the law requires establishment of such a degree of probability that a prudent man may on its basis, believe in the existence of the facts in issue. For assessing evidence in such cases, the Supreme Court in Collector of Customs, Madras Others v. D. Bhoormall, [1983 (13) E.L.T. 1546 (S.C.) = MANU/SC/023, 1974] dealing with smuggling activities and the penalty proceedings under Section 167 of the Sea Customs Act, 1878 observed that many facts relating to illicit business remain in the special or peculiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We do not agree that there was no abetment for contravention of 8(3) and 8(4) of FERA. In our opinion the charges are proved by cogent evidence where appeals were liable to be dismissed. The facts, and evidence in this case coupled with circumstantial evidence are sufficient to substantiate the charge against proprietor of M/s. Vishal Impex for contravention of 8(3) and 8(4) of FERA and by abetment against M/s. Adani Export and its director, Shri Rajesh Adani. 55. In the aforesaid circumstances, the inevitable conclusion is that the charges are proved by cogent evidence against the appellants. Such offences have widespread ramifications for the society. The association of the appellants who remitted huge foreign exchange speaks volume against the appellants who have rightly been held guilty by the Adjudicating officer. The penalty imposed is also commensurate with the violations shown to have been done. These penalties are sufficient to create deterrence from violation of regulatory statute. The quantum of penalty cannot be said as harsh and excessive when we look to the decrease in the value of money by inflation in the society. The impugned order does not contain any error henc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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