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TMI Blog2025 (1) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Services Limited (in short "M/s TKESL") for contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973 (in short "the Act of 1973") and Rs.5,00,000/- on other appellant, Mr. Ishaat Hussain for the same contravention. The penalty of Rs. 25,00,000/- has been further imposed on M/s TKESL for contravention of Section 8(1) of the Act of 1973 for borrowing foreign exchange to the extent of US$ 333025 and GBP 3720.20 and GBP 3798.18. The penalty of Rs. 2,00,000/- has been imposed on the other appellant, Mr. Ishaat Hussain, for the same contravention. 2. The challenge to the impugned order has been made by the two appellants. Although the penalty was imposed on many others vide the impugned orders, they may have not filed the appeals to challenge the impugned order and thus we would be addressing the issues raised by the two appellants. 3. The Ld. Counsel for the appellants have submitted brief facts of the case which are as under: BRIEF FACTS OF THE CASE M/s Tata Iron and Steel Co. Ltd. entered into a joint venture business with M/s Korf K.G. Germany forming a new company i.e. M/s Tata Korf Engineering Services Pvt. Ltd. to promote new technologies in the field of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly it was removed from the schedule of fixed assets of the Company. The appellant, M/s TKESL, sought clarification from the Chief Controller of Imports and Exports, New Delhi, as to whether the aircraft could be treated as a 'gift' despite the fact that the foreign collaborators never intended to gift it. The Controller then clarified that the aircraft could be kept in India just to facilitate easy travel of their personnel. The said aircraft may not be treated as a gift. At this stage, the Officer of the Enforcement Directorate started an investigation in respect of the import of the aircraft under the Act of 1973. During the course of investigation, they summoned the officers concerned by issuing notices under Section 40 of the Act of 1973. According to the Directorate of Enforcement, New Delhi, it was an import of the aircraft in the hands of the appellant Company. The matter proceeded with the issuance of show-cause notice alleging contravention of Section 8(1) of the Act of 1973. A memorandum was issued to Tata Korf, Shri Russi H. Mody and many others, who are not appellants, other than Shri Ishaat Hussain. The said memorandum was duly replied to with a prayer that if the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contravention of Section 8(1) of the Act of 1973. The Ld. Counsel for the appellant, further, submitted that no evidence whatsoever could be produced by the respondent to prove acquisition or transfer of foreign currency by the appellant. The appellant referred to the certificate issued by Jurgen Benz, Managing Director, Korf Shipping GMBH. It is apart from the letter of Hans Jurgen Eckert dated 25.07.1992. The documents were sufficient to show that the payment for purchase of aircraft was made by Korf Shipping GMBH on the instructions of Dr. Willy Korf. The appellant, further, made reliance on the letter of Mr. V.K. Lakshmanan. The Ld. Counsel for the appellant further submitted that the bank draft of US$ 3,33,025 was issued by Swiss Bank Corporation in favour of the appellant company for payment of custom duty, which demonstrates that the payment was made by Korf Shipping GMBH and not by the appellant. The said amount was sent to Korf Organization through Mr. Kadan for payment of customs duty. The said draft, in terms of statement of Mr. Rohit Luthra dated 25.07.1994 was not issued by Swiss Bank Corporation, New York, but had been issued by one of its branch. The respondent fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. The Ld. Counsel for the appellant further submitted that the entire memorandum does not disclose any allegation against Mr. Ishaat Hussain and accordingly no evidence was produced to show contravention of the provision of the Act of 1973 by him. The prayer was accordingly made to set-aside the impugned order. 6. The appeals were vehemently contested by the Counsel for the respondent and elaborate arguments were made to contest the appeals. Those arguments would be referred while recording finding to each issue raised by the appellant. It is to avoid repetition of one and same facts and accordingly we would now record our finding after analyzing each argument of the parties before us. 7. We have considered the rival submissions of the parties and scanned the records carefully. The brief facts of the case have been given which show that the appellant company was incorporated as Joint Venture of M/s Tata Iron and Steel Co. Ltd. with M/s Korf K.G. Germany. After formation of the new Company i.e. M/s Tata Korf Engineering Services Pvt. Ltd., it was realized that due to poor airline network in India at the relevant point of time, personnel of M/s Korf K.G. Germany were facing diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate of registration from Civil Aviation Department was obtained on 26.10.1990. The certificate therein disclosed the name of the appellant company to be the owner of the aircraft. It is a case of the appellant that a Resolution was passed by the Board of the Company in its meeting 26.06.1991 to treat the aircraft as an asset and capitalized the same in the books of accounts. However, in subsequent Board meeting held on 27.05.1992, the company decided to remove the aircraft from the schedule of fixed assets in the absence of capitalized amount. The due information about it was given to the authority with a request to make necessary change and not to treat the aircraft to be a gift to the appellant company. It was duly endorsed in their favour. 8. According to the appellant, aircraft was purchased by Mr. Willy Korf to place it in India to facilitate their personnel for travelling while according to the respondent no evidence was produced to show the payment of aircraft by Mr. Willy Korf. Rather, according to the respondent, all the evidence collected by them indicate purchase of an aircraft at the instance of the appellant company and it was not by Mr. Willy Korf. The afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be tendered at final closing in exchange for delivery of the aircraft to purchaser at Premier Air Centre, Alton, Illinois in airworthy condition with all systems operational and with a bill of sales conveying good title closing to be on or about 30 July, 1990......" It is a fact that apart from aforesaid material, the respondent produced many other documents which includes telefax message dated 23.07.1990 sent by Shri R. Kadan to M/s USASI. The relevant portion of said message is quoted hereunder: "(i) "....further to our telecon today, this is to confirm that the balance purchase price of US$ 24,30,000 is being transferred to Insured Aircraft Escrow Account as per details given by Mr. Woodford. The value date of these funds will be 24 July, 1990..." (ii) "I note that you will commence necessary modifications as agreed at the premier Air Centre Alton..." (iii) ".... As agreed, you will cover the aircraft under your insurance policy from the time of completion until the aircraft's arrival in India...." (3) A copy of the letter dated 26.7.90 from USASI to R. Kadan (faxed on 27.7.90) requesting to remit US$ 42,704 by wire towards modification of the aircraft. (4) A c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord, further, shows that USASI was initially contacted by M/s Graybar Electric Company for purchase of the aircraft. However, USASI then received a fax from Mr. Raj Kadan of M/s Tata Ltd. London and offer the purchase of the aircraft on behalf of M/s Tata Korf. The USASI purchased the aircraft from the original owner M/s Graybar Electric Company for US$ 2.5 million and upon the receipt of the order from Mr. Raj Kadan, who agreed to pay the price of US$ 2.7 million. The transaction was processed. It is also part of record that payment for purchase of the aircraft was made electronically. Thus, Mr. James Kerrigan was unable to disclose as to who had sent the payment. The fact now remains who is the owner of the aircraft. In the owner list, the name of the owner in acquisition was mentioned as "VT-RHM Rusi H. Modi/ Tata Engineering Services Ltd., Calcutta". The fact aforesaid is relevant, however, it could have been rebutted by the appellant company by producing documents to show payment for purchase of aircraft by Dr. Willy Korf, who was one of the Directors of the appellant's company. In any case, the appellant has raised objection to rely upon the evidence of Mr. James Kerrigan. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence or for that matter an adverse presumption can be raised against the department. If a fact, the statement of the accused coupled with the entries in the account books and other related documents, recovered from his possession clearly proves the borrowing and lending of foreign exchange/monies to different persons and at different times. In such like cases, it is just not possible for the department nor they are required under law to examine each and every witness who allegedly received the amount as otherwise they themselves would be liable for prosecution. In spite of this difficulty the department did summon and examine few of the witnesses, who during the adjudication proceedings, admitted the receipt of the amount from the appellant and corroborated the entries appearing against their names in the account books. This was the maximum the respondent could do, and they succeeded to establish their case. As regards the first charge of the receipt of Rs. 3,68,000.00 in nine Installments, the Department not only placed reliance on the admission of the appellant but also found corroboration from the account books as well as the letters of the non-residents. The crux of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icy, the name of the owner was shown to be M/s Tata Korf. Even in the books of account of M/s Korf KG Germany, the aircraft was not shown to be its assets, rather it never found place in any of the books of accounts. It is, otherwise, admitted that the aircraft was never sent back to Mr. Willy Korf or the company alleged to have purchase it, rather it remained till last in India itself. The authority below thus recorded findings against the appellant and in favour of the respondent to hold that the appellant company got involved in acquisition of foreign exchange and its borrowing without permission of Authorised Dealer or of the Reserve Bank of India. The draft of US$ 333025 and GBP 3270.20 and GBP 3798.18 were utilized for payment of customs duty. However, the earlier draft was received from M/s Tata Industries USA and other two drafts from M/s Tata Ltd. London and Sh. Raj Kadan of M/s Tata Inc. who played vital role in arranging the remittances. It is also a case that the appellant company acquired and transferred foreign exchange of US$ 28,26,433.26. The authority thus passed the impugned order holding the contravention. 12. We do not find any error in findings and otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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