By the Appellate Tribunal for SAFEMA at New Delhi
In the case of Shri P. Rosu Reddy Vs The Directorate of Enforcement, Chennai
(FPA-FE-17/CHN/2022)
The Appellant is engaged in importing used Xerox machines from the USA in the name of different companies. During a search, currency of Rs.13.5 Lakhs were found and seized. The Appellant admitted that he is engaged in the trading and servicing of used photocopier machines of Canon Brand. The machines were mostly imported from the USA. The import of the machines was not made in the name of his company but in the name of his friends and sometimes in the name of customers in order to avoid involvement of customs duty. The Appellant evolved a mechanism to seek invoice only for 40% of the value of the photocopier machines and promised to pay balance 60% of the amount through non-banking channels. The exporter agreed for the same. THe Appellant imposed approximately 3500 unit of photocopier machines and paid INR 5 Crores through the banking channel. 60% of the amount was paid through non-banking channel which was approximately Rs.7 Crores in all. Further, 50,000 Singapore Dollars were also deposited in his name. The amount aforesaid was given to him by his sister-in-law who was working as a Professor in Stanford University. Accordingly, following penalties were imposed on the Appellant:
- Penalty of Rs. 23 Crores for contravention of Section 3(d) of the FEMA Act;
- Penalty of Rs. 50 Lakhs for contravention of Section 3(a) and 4 of the FEMA Act,
- Penalty of Rs.50 Lakhs for contravention of Section 8 of the Act of 1999 read with Regulations 3 & 7 of the Regulations of 2000.
The Appellate Tribunal held that:
- Penalty for Contravention of Section 3(d) of the Act: The Appellant has paid 60% of the amount through hawala transaction in contravention of Section 3(d) of the Act of 1999. However, the amount of penalty of Rs. 23 Crores was found to be disproportionate. Therefore, the penalty amount is reduced to Rs.7 Crores.
- Penalty for Contravention of Section 3(a) and 4 of FEMA Act: The appellant only prayed for making penalty to be proportionate. Accordingly, the penalty amount is reduced to INR 25 Lacs.
- Penalty for contravention of Section 8 of the FEMA Act: The appellant failed to take all reasonable steps to realize and repatriate Singapore Dollars held in the fixed deposits with Standard Chartered Bank within a period of 180 days from the date of its accrual. Thus, contravention of aforesaid was found. However, Amount of penalty is reduced to Rs.25 lakhs.
- Confiscation of INR 13.50 Lacs: The confiscation of the amount could have been made if it is involved in contravention of the provisions of the Act of 1999. Mere presence of the cash without involvement of the contravention of any of the provisions of the Act would not justify confiscation of the amount. Therefore, order for confiscation of the amount, is set aside to that extent.
1. Breve resumen de los hechos del caso:
- The Appellant is engaged in importing used Xerox machines from the USA in the name of different companies.
- A search was conducted at the premises of the appellant on 12.11.20027 where the documents and currency of Rs.13.5 Lakhs were found and seized.
- The Appellant admitted to be an Indian citizen and Proprietor of M/s Prompt Cannon Services. Such company is engaged in the trading and servicing of used photocopier machines of Canon Brand.
- The machines were mostly imported from the USA. The Appellant had imported approximately 700 units of photocopier machines and the payments were made through the Central Bank of India and State Bank of India.
- The import of the machines was not made in the name of his company but in the name of his friends and sometimes in the name of customers in order to avoid involvement of customs duty.
- The Appellant evolved a mechanism to seek invoice only for 40% of the value of the photocopier machines and promised to pay balance 60% of the amount through non-banking channels. The exporter agreed for the same.
- From January, 2007 till the first week of November, 2007, the appellant imported approximately 3500 unit of photocopier machines and paid INR 5 Crores through the banking channel. 60% of the amount was paid through non-banking channel which was approximately Rs.7 Crores in all.
Also Read: Appellate Tribunal Refused to Enhance Penalty Amount and Held that Section 13(1) Only Specifies Maximum Amount of Penalty
- Further, 50,000 Singapore Dollars were also deposited in his name. The amount aforesaid was given to him by his sister-in-law who was working as a Professor in Stanford University.
- Accordingly, following penalties were imposed on the Appellant:
- Penalty of Rs. 23 Crores for contravention of Section 3(d) of the FEMA Act;
- Penalty of Rs. 50 Lakhs for contravention of Section 3(a) and 4 of the FEMA Act,
- Penalty of Rs.50 Lakhs for contravention of Section 8 of the Act of 1999 read with Regulations 3 & 7 of the Regulations of 2000.
2. Relevant Legal Extract:
A continuación se reiteran las disposiciones legales pertinentes para su fácil consulta:
- Sección 3(a) y (d) de la Ley FEMA:
“Operaciones en divisas, etc.
3. Salvo lo dispuesto de otro modo en esta Ley, en las normas o reglamentos dictados en virtud de la misma, o con el permiso general o especial del Banco de la Reserva, ninguna persona podrá:
(a) realizar operaciones o transferir divisas o valores extranjeros a cualquier persona que no sea una persona autorizada
…
(d) realizar cualquier transacción financiera en la India como contraprestación o en relación con la adquisición, creación o transferencia de un derecho a adquirir cualquier activo fuera de la India por parte de cualquier persona.”
- Sección 4 de la Ley FEMA:
“Tenencia de divisas, etc.
4. Salvo lo dispuesto de otro modo en esta Ley, ninguna persona residente en la India podrá adquirir, mantener, poseer o transferir divisas, valores extranjeros o cualquier bien inmueble situado fuera de la India.”
- Sección 8 de la Ley FEMA:
“Realización y repatriación de divisas.
8. Salvo lo dispuesto de otro modo en esta Ley, cuando cualquier cantidad de divisas sea debida o se haya devengado a favor de una persona residente en la India, dicha persona deberá tomar todas las medidas razonables para realizar y repatriar a la India dichas divisas dentro del plazo y de la manera que especifique el Banco de la Reserva.”
3. Argumentos del apelante:
El apelante alegó lo siguiente:
- La multa impuesta de 230 millones de rupias es desproporcionada con respecto al importe implicado en la supuesta infracción.
- Asimismo, el apelante impugna la confiscación de 1.350.000 rupias incautadas en el momento del registro. No existe justificación para la confiscación, ya que dicha cantidad no estaba implicada en la infracción de ninguna de las disposiciones de la Ley FEMA.
- Dicha cantidad no fue objeto de transacción ni entregada a nadie para constituir una infracción de la Ley y, por tanto, no existe justificación para confiscarla.
- Se ha impuesto una multa de 5 millones de rupias por la recepción de 50.000 dólares de Singapur de su cuñada, los cuales fueron depositados en una cuenta de depósito en moneda local en el Standard Chartered Bank. La infracción de las secciones 3(a) y 4 de la Ley de 1999 no era aplicable a lo anterior.
- El apelante solicitó que se adopte un criterio razonable para que el importe de la multa sea proporcional a la acusación.
- Además, se determinó la infracción de la Sección 8 de la Ley de 1999, en relación con los Reglamentos 3 y 7 de los Reglamentos de 2000, alegando la falta de declaración de la cantidad de 50.000 dólares de Singapur mantenida en un depósito a plazo fijo en el Standard Chartered Bank, recibida en julio de 2007. El apelante no entregó dicha cantidad a una persona autorizada en un plazo de 180 días a partir de la fecha de su recepción. El abogado del apelante sostuvo que la cantidad mencionada supuestamente fue objeto de transacción el 16.07.2007. Sin embargo, los procedimientos se iniciaron antes de que expirara el plazo de 180 días.
- Por lo tanto, debe intervenirse en la orden de sanción a este respecto.
4. Findings and Analysis by the Hon’ble Tribunal
Hon’ble Tribunal has held that:
- Penalty for Contravention of Section 3(d) of the Act:
- For contravention of Section 3(d) of the Act, the prayer was made to cause interference on the penalty amount to make it proportionate to the alleged contravention.
- The allegation against the appellant was about importing second hand photocopier machines with the arrangement to make payment of 60% of the amount by non-banking channel i.e. through Hawala transaction and the amount involved is INR 7 Crores.
- The Appellant has paid Rs.5 Crores for the invoices generated for supply of 3500 units of photocopier machines. However, 60% of the amount was paid through hawala transaction in contravention of Section 3(d) of the Act of 1999.
- However, taking into consideration the allegation and the amount, the penalty of Rs. 23 Crores was found to be disproportionate. Therefore, the penalty amount is reduced to Rs.7 Crores.
- Penalty for Contravention of Section 3(a) and 4 of FEMA Act:
- The involvement in the given case is 50,000 Singapore Dollars and against the same, penalty of Rs.50 Lakhs has been imposed.
- The appellant did not challenge the allegation of contravention of Section 3(a) and 4 of the Act of 1999 but prayed for making penalty to be proportionate.
- Such penalty amount is also disproportionate to the amount involved in the contravention. Accordingly, the penalty amount is reduced to INR 25 Lacs.
- Penalty for contravention of Section 8 of the FEMA Act:
- The appellant failed to take all reasonable steps to realize and repatriate Singapore Dollars held in the fixed deposits with Standard Chartered Bank within a period of 180 days from the date of its accrual.
- The accrual was made on 16.07.2007 and it was not repatriated within a period of 180 days. The proceedings were caused after 180 days.
- Thus, contravention of aforesaid was found and has not been challenged by the appellant. Amount of penalty is reduced to Rs.25 lakhs on the same analogy i.e. after considering the amount involved which is 50,000 Singapore Dollars.
- Confiscation of INR 13.50 Lacs
- The confiscation of the amount has been challenged on the ground that the amount aforesaid was not involved for contravention of Section 13(2) of the Act of 1999. In fact, it was found with the appellant at the time of search.
- There was no allegation that it was passed on to him or to someone for making Hawala transaction. In fact, no transaction for it took place.
- The Tribunal agreed because confiscation of the amount could have been made if it is involved in contravention of the provisions of the Act of 1999. Mere presence of the cash without involvement of the contravention of any of the provisions of the Act would not justify confiscation of the amount.
- Therefore, order for confiscation of the amount, is set aside to that extent.
5. Final Order
Hon’ble Appellate Tribunal Held that:
- Penalty for contravention of Section 3(d) of the FEMA Act reduced to INR 7 Crores;
- Penalty for contravention of Section 3(a) and 4 of the FEMA Act reduced to INR 25 Lacs,
- Penalty for contravention of Section 8 of the Act of 1999 read with Regulations 3 & 7 of the Regulations of 2000 reduced to INR 25 Lacs
- Order for confiscation of cash of INR 13.50 Lacs was set aside as such amount as not involved in the contravention of FEMA provisions.
