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TMI Blog2014 (9) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant liable for contravention of Section 8(1) of FERA, cannot be sustained in law. As regards contravention of Section 9(1)(a) and Section 9(1)(f)(i), the Court is unable to appreciate how the said provisions are at all attracted in the facts and circumstances of the case. The said provisions require a person resident in India having to make “any payment for the credit of any person outside India.” The beneficiary under both the provisions is a person resident outside India. The allegations in the Memorandum do not make out any such case even prima facie. It is not the case of the ED that Mr. Sethi, who in the facts and circumstances was the only person resident outside India, was the beneficiary of any of the transactions in his NRE account. Consequently, the impugned order cannot be sustained even as regards the question of contravention of Section 9(1) of FERA. Thus AO dated 24th March, 2004 and the impugned order dated 24th December, 2010 of the AT are hereby set aside. Any amount deposited by the appellant pursuant to the AO shall be refunded to him in accordance with law within a period of eight weeks from today - Crl. A. No. 450 of 2011 & Crl. M.A. No. 4157 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of the appellant on 25th May, 1995. He claimed to have met Mr. Sethi when he (Mr. Sethi) opened the NRE account with AMEX Bank. When asked specifically about operating the NRE Account for depositing the cash foreign currency in the said account , he replied I do not remember. This is very vague question. The appellant was shown the original credit slips for the deposit of foreign currency but he denied that they were in his handwriting. He stated that he and his wife received the NRE gifts from Mr. Sethi. He could not, however, provide the details since the files had been seized by the ED. When asked to write certain names in capital letters, he declined to do so. 4. A letter dated 7th August, 1995 was received by the ED from Mr. Sethi in which, inter alia, he stated that he had met Mr. Mittal in connection with a Portfolio Management scheme which according to Mr. Mittal, would assure an annual return of 30%. According to Mr. Sethi, at the instance of Mr. Mittal, he opened an NRE Account but stated that he could not deposit any foreign currency into the said account. He claimed to have only signed the first cheque and the cheque deposit requisition form to enable Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Mendiratta during the period between 22nd February, 1993 to 11th October, 1993 from various persons out of India other than the account holder Sh. Subhash Sethi himself. A list of 59 such credit entries in the account of Mr. Sethi, totalling ₹ 5,92,95,895 was set out in the Memorandum. The Memorandum/Show Cause Notice ( SCN ) alleged that there has been a contravention of Sections 8(1), 9(1)(a) and 9(1)(f)(i) of FERA. The noticees were directed to show cause as to why they should not be proceeded against. 7. At the outset, it requires to be noticed that by an order dated 18th December, 2009, whereby the Division Bench ( DB ) in WP(C) No. 7144 of 2002 allowed the batch of writ petitions, including that of Standard Chartered Bank (which took over AMEX Bank) quashing the proceedings arising out of the very same SCN qua the said Bank. 8. In the AO dated 24th March, 2004, it was held that: (a) The appellant had arranged foreign inward remittances in the NRE Account of Mr. Sethi. Such remittances were from illegal channels and must have been organised through black money of the recipients of the gifts ; (b) the appellant had arranged and acquired foreign exchange equiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ED. 11. In the first place, it is not clear why, after recording the statements under Section 40 of FERA of the appellant and Mr. Mendiratta in May 1995, the ED waited till the last date of the sunset period, i.e., 30th May, 2002 for issuing the Memorandum. The second feature is that the only relied upon documents in the Memorandum are the statements made by the appellant and Mr. Mendiratta, the letter dated 7th August, 1995 of Mr. Sethi and the statement of account provided by the AMEX Bank. In other words, the ED does not appear to have undertaken any further investigation in the seven years since it recorded the statements. In particular, there was no attempt made to undertake investigation outside India to find out the names of the persons who had made remittances into the NRE Account of Mr. Sethi. 12. A perusal of the account statement shows that the credit entries were of two types - one was cash deposit of foreign exchange and the other was inward remittances through banks outside India. The subject-matter of the Memorandum was not the cash deposits made in the NRE Account but the inward remittances. The specific allegation in para 4 of the Memorandum is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making it. Otherwise such statement has no value whatsoever. Shri Datta referred to the decision in K.I. Pavunny v. Assistant Collector (HQ), Central Excise Collectorate, Cochin - (1997) 3 SCC 721 to point out that the statement made before the customs officials under Section 108 of the Customs Act is admissible evidence. While that proposition is unexceptionable, and would apply to statements made to the ED officials under Section 40 FERA, the question really is how far such statements can be used as evidence against the co-noticee. The law as explained in Union of India v. Bal Mukund is very clear that unless the statement inculpates the maker of the statement, apart from the co-noticee, it cannot be used against the co-noticee. 15. It is, therefore, not safe, in the present case, to rely on the exculpatory statement made by Mr. Mendiratta. Even otherwise, his statement does not implicate the appellant as far as the inward remittances are concerned. 16. As regards the letter dated 7th August, 1995 of Mr. Sethi, Mr. Ohri is right in his contention that the said document has not been authenticated under Section 72 of FERA read with the Foreign Exchange Regulations (Authenti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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