Allowed

FPA-FE-172/CHN/2007 of Shri N. K. Kothari v/s The Special Director Directorate of Enforcement, Chennai

ATFP11 Sept 2018FPA-FE-172/CHN/2007

Case brief

AI extract

What is this about?

Appeal filed against penalty for FEMA violations regarding export diversion. Appellate tribunal found adjudication order failed to verify conflicting Bills of Lading from India and Nigeria. Appeal allowed by way of remand with opportunity of hearing.

What did the court decide?

Impugned order remanded back to the adjudicating authority. Appellants to be afforded opportunity of being heard.

FPA-FE-172/CHN/2007 of Shri N. K. Kothari v/s The Special Director Directorate of Enforcement, Chennai — ATFP (2018) — LawSathi Research

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APPELLATE TRIBUNAL FOR SAFEMA, FEMA, PMLA, NDPS, PBPT ACT AT NEW DELHI

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DATE OF DECISION: 11.09.2018

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1. FPA-FE-171/CHN/2007 M/s. Medopharm	… Appellant
2. FPA-FE-172/CHN/2007
Shri N. K. Kothari	… Appellant
3. FPA-FE-173/CHN/2007
Shri Sardamal Chordia	… Appellant
Versus
The Special Director
Directorate of Enforcement, Chennai	… Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellants	:	Shri N. Viswanathan, Advocate
For the Respondent	:	Shri Prashant Pandey, Legal Consultant
CORAM
SMT. ANANYA RAY	:	MEMBER
JUDGEMENT

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FPA-FE-171-173/CHN/2007

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Briefly, the case is that M/s. Medopharm undertook export of five consignments of medicaments to Russia against payment in Indian rupees under the Repayment of State Credit System to Russia Scheme and they

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had realized the proceeds of the same as per the scheme through the banking channel. However, the Department (Enforcement Directorate) found that two of these consignments under Bill of Lading (B/L) Nos. GSLU

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FPA-FE-171-173/CHN/2007

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Page 1 of 4

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MAA 1543 dated 17.06.2000 and GSLU MAA 1713 dated 31.10.2000 were actually shipped to Lagos, Nigeria, Africa. Hence, in terms of Regulation 3(2) of Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 the payment for export should be received in a currency appropriate to the place of final destination which in this case was US Dollars. They were charged under Regulations 8, 9 & 13 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 and Regulations 3(1) and 3(2) of Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 read with Section 42 of FEMA, 1999.

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The learned counsel for the appellant have submitted that the issue is very limited. They have shipped the goods on FOB basis which means that once the goods have been loaded on board the ship by the seller he is not liable further. That the importer in Russia has not made any complaints regarding non-receipt of the goods and that they have received the repatriation through normal banking channels. He relied on the Bill of Lading which clearly stated that the destination was St. Petersburg (Russia) in transit through Colombo. Hence, they have discharged all the obligations as per law and they are not liable for any penalty.

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On the other hand, the respondents have stated that the Bill of Lading produced by the appellants are fake. The actual Bill of Lading has been enclosed by the Indian High Commission of India at Lagos to whom a reference was made by the ED vide its letter dated 14.06.2005. The Indian High Commission, Lagos, Nigeria vide its letter dated 02.09.2005 addressed to ED enclosed a report of the Economic & Financial Crimes Commission of Nigeria (EFCC). It also stated that the EFCC had conducted investigations

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FPA-FE-171-173/CHN/2007

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Page 2 of 4

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and have submitted their report to the Nigerian Foreign Ministry. The report of the EFCC addressed to the Ministry of Foreign Affairs, Nigeria states that the containers in the above two B/Ls were delivered to Vital Pharmaceuticals and Healthcare Ltd., Lagos and were paid by M/s. Vital Pharmaceuticals Ltd., London from Medopharm, Chennai, India. It also mentioned that letters of credit and Form M were opened by Vital at Allstates Trust Bank on the transaction. The containers were shipped as per the Proforma Invoice and cleared at the Tin Can Island Port. A B/L was attached to the same which has the number GSLU MAA 1543 and has the above details as mentioned in the EFCC letter. The respondent stated this was the authentic B/L and proves that the goods have been diverted. This B/L shows the port of destination as Tin Can Island.

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The above clearly brings out there are two sets of documents available for the same shipment under the same B/L nos. While the appellants have claimed one to be genuine, the respondents have claimed the other to be genuine. From the impugned order I do not find any investigation done even to establish which was the correct B/L. The adjudication order does not even deal with the Indian High Commission or EFCC, Nigeria’s letter even though it was mentioned before him during the personal hearing. Moreover, enquiries from the Steamer Agent M/s. Arebee Star Maritime Agencies Pvt. Ltd. was also done and the Branch Manager was summoned to appear before the Assistant Director, Enforcement Directorate, Chennai, wherein he stated that they were making enquiries with regard to discharge of shipments at Lagos when it was destined for Russia, and that as soon as they get any evidence regarding the same he

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FPA-FE-171-173/CHN/2007

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Page 3 of 4

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would furnish it. However, in the entire order there is no further mention of the result of enquiry.

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Accordingly, I find it a case to be remanded back to the adjudicating authority to go into all the issues including the veracity of the B/L and pass a speaking order after affording an opportunity to the appellants.

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I therefore allow the appeal by way of remand.

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(Ananya Ray) Member New Delhi, 11 September, 2018

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‘A’

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FPA-FE-171-173/CHN/2007

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Page 4 of 4

FPA-FE-172/CHN/2007 of Shri N. K. Kothari v/s The Special Director Directorate of Enforcement, Chennai

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FPA-FE-172/CHN/2007 of Shri N. K. Kothari v/s The Special Director Directorate of Enforcement, Chennai

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