Allowed

FPA-FE-175/KOL/2003 of Shri Anup Kumar v/s The Special Director Directorate of Enforcement, Kolkata

ATFP27 Nov 2018FPA-FE-175/KOL/2003

Case brief

AI extract

What is this about?

The Tribunal allowed FPA appeals against penalties imposed for exporting goods to a hard currency area instead of the declared destination. It clarified that the shipping line is liable for non-compliance as it delivered goods without producing the Bill of Lading. Penalties were reduced for the appellants.

What did the court decide?

Penalties reduced; Rs. 10 lakh for M/s. SSK Exports and M/s. Greenways; Rs. 2 lakh for individuals.

FPA-FE-175/KOL/2003 of Shri Anup Kumar v/s The Special Director… — Money Laundering | ATFP (2018)

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

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DATE OF DECISION: 27.11.2018

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FPA-FE-175/KOL/2003 Shri Anup Kumar … Appellant FPA-FE-176/KOL/2003 M/s. SSK Exports Ltd. … Appellant Versus The Special Director Directorate of Enforcement, Kolkata … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellants : Shri Sudhir Kumar Mehta, Advocate For the Respondent : Shri Prashant Pandey, Legal Consultant

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FPA-FE-177/KOL/2003 M/s. Green Ways Shipping Agencies Pvt. Ltd. … Appellant FPA-FE-181/KOL/2003 Shri P. Sengupta … Appellant FPA-FE-182/KOL/2003 Shri M.K.M. Nair Mani … Appellant Versus The Special Director Directorate of Enforcement, Kolkata … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellants : Shri B. Kumar, Sr. Advocate Shri Naveen Malhotra, Advocate

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FPA-FE-175-177 & 181-182/KOL/2003

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Page 1 of 9

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For the Respondent : Shri Prashant Pandey, Legal Consultant CORAM SMT. ANANYA RAY : MEMBER

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JUDGMENT

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FPA-FE-175-177, 181-182/KOL/2003

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The present appeals have been filed against the adjudication order SDE(SSB)/11/04/2003 dated 21.05.2003 of the Special Director, Directorate of Enforcement, New Delhi. Briefly, the case is M/s. SSK Exports Ltd. were exporting tea to Russia. During the year 1997, fifteen containers destined for Moscow was unloaded at Dubai (instead of its destination Russia as per the Bill of Lading) which is a hard currency area. However, even though these consignments meant for Moscow were unloaded at Dubai the proceeds thereof was realised by drawing funds from the Rupee Credit scheme solely meant for export to Russia. The adjudication order levied various penalties on both the exporters, the shipping line and its officials.

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During the course of hearing, the appellant i.e. M/s. Greenways Shipping Agencies Pvt. Ltd. relied on its written submissions and stated the following:

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i. That SSK Exports booked consignments from Cochin bound for Moscow. However, when the good were in transhipment in Colombo, they received instructions from the exporter through fax messages stating fifteen of these containers to be diverted to Dubai instead of Moscow.

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ii. That following these instructions, they unloaded the goods at Dubai which was delivered to M/s. Indem General Trading

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FPA-FE-175-177 & 181-182/KOL/2003

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Page 2 of 9

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Ltd., Dubai. That they charged steamer freights only from Cochin to Dubai and that these freight manifests were also filed with RBI, Income Tax Department etc.

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iii. That as per the shipping practice, if a shipper or a consignee desired diversion or change of final destination from the original booking they contacted their booking office at the transhipment port i.e. Colombo.

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iv. That such diversion of cargo and change of destination was an usual practice in the worldwide shipping industry depending upon the rates available for a commodity and that such diversions are done on the basis of well documented transhipment procedures.

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v. That they were not aware that these goods were being exported under the Rupee-Rubal trade and that payments are to be made from the Rupee Credit Scheme. There was no mention of the same in the Bill of Lading even though it is not a requirement.

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vi. That the charge of abetment against them does not stand. Although abetment has not been defined under FERA, the same has been defined in Section 107 of IPC. He relied on the judgment of the Supreme Court in the case of Sri Ram & Anr. vs. State of Uttar Pradesh [1975 SCC (3) 495] dated 06.11.1974.

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On the basis of above, they pleaded that they have been wrongly implicated and their appeals (FPA-FE-177/KOL/2003, FPA-FE-181/KOL/2003 & FPA-FE-182/KOL/2003) needs to be allowed.

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FPA-FE-175-177 & 181-182/KOL/2003

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Page 3 of 9

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The appellant in appeal Nos. FPA-FE-175/KOL/2003 & FPA-FE176/KOL/2003 i.e. the exporters stated that they have neither exported the cargo to Dubai nor were the same sold in Dubai. They have not received any hard currency. They referred to the Export General Manifest (EGM) wherein it was mentioned inter alia FOB Indian Port, Dubai I.T.T. Moscow. Hence it is clear from both the B/L as well as the EGM that the goods were meant for Moscow only. They further argued that the shippers had played mischief and offloaded the goods at Dubai for reasons best known to them. That the four letters purportedly written by them to the shipper asking for diverstioin to Dubai dated 31.10.1997, 26.11.1997, 24.09.1997 and 16.09.1997 were all forged and they had submitted a handwriting expert‟s opinion. That they had received only rupee payment for exports to Moscow under the Rupee-Credit Scheme and since the consignee in Moscow did not complaint about any nonreceipt of goods, they had nothing to suspect that the goods were actually off loaded at Dubai. That the department has not been able to prove any mala fide on the part of exporter and they had undertaken all activities in a bona fide manner. The onus is on the shipping line to deliver the goods at its destination as per the Bill of Lading. In this case, the shipping line has failed to discharge its obligations which was also mandatory under the Carriage of Goods by Sea Act. That the shipping line‟s failure to amend or issue a fresh B/L in case the directions were given to them to divert to Dubai further proves that if any mischief has happened it was the shipping line who were responsible. They further stated that they are regular exporters and Russia being a landlocked country the consignments are always off loaded at a port and then taken by road. The counsel accordingly pleaded that their appeals may be allowed.

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In response, the respondent stated:

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FPA-FE-175-177 & 181-182/KOL/2003

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Page 4 of 9

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a. That there is no doubt that the goods were off loaded at Dubai and the contention that it was received by the consignee at Moscow is not borne out by facts.

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b. That the exporter had asked the shippers to divert is also apparent since the letter was written with the letter head of the exporter i.e. SSK Exports and hence cannot be said to be a forged document. Moreover, the adjudicating authority has clearly mentioned in the order that the hand-written expert‟s opinion was irrelevant since it is not known who has signed the letters as they were only initials and the expert‟s opinion do not throw any light on the same.

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c. That the goods were diverted by the shipping agent on the instruction of the exporters is clear from the evidences.

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d. That in the present case even though the goods were diverted and delivered in Dubai instead of Moscow the B/Ls were not amended or re-issued and continued to give them impression that the consignment had gone to Moscow.

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e. That there was a connivance between the shipping agent and the exporter.

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I have carefully examined the case, perused the voluminous records and also heard all the parties.

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The Reserve Bank of India Circular No. 30 issued from the Exchange Control Department dated 28.09.1993, stipulates that funds received from the Indian side in repayment of state‟s credits granted by the erstwhile Soviet FPA-FE-175-177 & 181-182/KOL/2003 Page 5 of 9

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Union shall be utilised by the Russian side for purchase of any goods and services from India that are permissible for export under the Exim Policy of the Government of India. As per Clause 2(vi) of the said circular funds from repayment of state credits are to be utilised for export of goods to Russian Federation only. No third country exports are permitted to be financed out of funds from such repayments of state credits. The whole case is that the while the shipping line has diverted the goods from its destination of Moscow to Dubai, the exporters have deliberately exported to a hard currency area and thus contravened the provisions of the RBI Circular as well as the provisions of FERA. A perusal of the original B/Ls which both the sides have submitted shows the stamp of M/s. Indem General Trading (LLC), Dubai and it was these that were submitted to Dubai office of M/s. Uniglory (UAE) LLC at the time of taking delivery of the containers. M/s. Greenways Shipping Agencies Pvt. Ltd. is a shipping agent in India for M/s. Uniglory Marine, Taipei, Taiwan and have offices in various parts of the world. As per the Indian Bills of Lading Act, 1856 Section 3 states as follows “Every B/L in the hands of a consignee or endorsee for valuable consideration representing goods to have been shipped on board a vessel, shall be conclusive evidence of such shipment………….” In the present case as shown above the endorsement of the party at Dubai on the reverse of original B/Ls is a conclusive proof that the goods have been received in Dubai. These B/Ls contain all the details of the consignments like the container numbers, nature of the commodity, name of the vessel, contract number, the LC number, the name of the Russian buyer as well as the port of destination etc. Hence, even without going into the veracity or genuineness of the four letters written by SSK Exporters to the shipping line to divert the goods to Dubai, the above facts which has not been disputed by either of the parties is a conclusive proof that the goods have been received in Dubai. That Dubai is a FPA-FE-175-177 & 181-182/KOL/2003 Page 6 of 9

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hard currency area is an undisputable fact and therefore the payments should have been received in hard currency. Instead the exporters received the payments through the Rupee Credit Scheme of Russia which is again an undisputable fact. The reliance of the exporter on the export manifest which shows the LC number as well as the destination as “Dubai, I.T.T., Moscow” does not help their case as the export manifest is only a list of goods taken on board the vessel. It is only the B/L which is a legal document between the shipper and carrier detailing the type, quantity and destination of goods being carried which shows the goods being received at Dubai. At this stage, therefore, I do not find any reason to go into the contention whether the goods sailed directly from Cochin to Dubai or via Colombo to Dubai as that point is not relevant now. The adjudicating authority has relied on the Customs record (which the shipping line filed before the vessels left Cochin Port) which shows that the vessels was bound for UAE only, a fact which the exporter has not denied.

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Coming to the appeals by the shipping line and its officials their main contention is that they were asked to divert to Dubai by the exporters, that they were not aware of the scheme under which these goods were being exported, and that the offloading of the goods have been done at Dubai on the instructions of the exporter and they have no role to play in it. That they have charged freight only from Cochin to Dubai and not beyond. If one understands the scheme of B/Ls internationally, a B/L is a document which confers prima facie title over the goods to the named consignee or the lawful holder. This document must accompany the shipped goods regardless of the form of transportation and must be signed by an authorised representative from the carrier, shipper and receiver. In the present case, all the B/Ls show their

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FPA-FE-175-177 & 181-182/KOL/2003

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Page 7 of 9

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destination as Moscow, Russia. Hence, the onus was on the shipping line to deliver the goods at its destination as per the B/L. However, in the present case, they have apparently off loaded and delivered the goods at Dubai without any change or amendment in the existing B/Ls or without issue of a fresh B/L. In a case before the Judicial Committee of the Privy Council related to a case in Singapore, the judgment inter alia stated as follows:

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“it is perfectly clear that the ship owners who delivered without production of the B/L does so at his peril. The contract is to deliver on production of the B/L to the person entitled under the B/L…………. the shipping company did not deliver the goods to any such person. And they delivered the goods without production of the B/L to a person who was not entitled to receive them………… they are therefore liable for breach of contract…………”

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In the present case, the B/L showed the destination/place of delivery as Moscow, the destined parties to whom the goods were to be delivered to be parties belonging to Moscow, Russia. However, the goods were actually off loaded and delivered to a party at Dubai without any change in the B/L which would tantamount to non-production of the required B/L. The shipping line and its officials cannot therefore absolve themselves of their responsibilities and mandatory duty and where as much responsible for the contravention as the exporter themselves. Whether there was any collusion/abatement or not between the shippers and the exporter or whether there was any mala fide in the actions of the appellants by offloading at Dubai by underhand dealings in hard currency is not gone into since the investigations and the adjudication orders do not throw up any conclusive issue in this regard.

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FPA-FE-175-177 & 181-182/KOL/2003

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Page 8 of 9

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I therefore uphold the impugned order. However, considering the entire

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facts and the gamut of the case I reduce the penalty as follows:

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i. M/s. SSK Exports Ltd. (FPA-FE-176/KOL/2003) to Rs. 10,00,000/- from Rs. 20,00,000/-.

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ii. Shri Anoop Kumar (FPA-FE-175/KOL/2003) to Rs. 2,00,000/from Rs. 5,00,000/-.

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iii. M/s. Greenways Shipping Agencies Pvt. Ltd. (FPA-FE672/KOL/2003) to Rs. 10,00,000/- from Rs. 20,00,000/-.

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iv. Shri MKM Nair Mani (FPA-FE-182/KOL/2003) to Rs. 2,00,000/from Rs. 5,00,000/-.

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v. Shri P. Sengupta (FPA-FE-181/KOL/2003) to Rs. 2,00,000/- from Rs. 5,00,000/-.

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The appeals are disposed of accordingly.

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(Ananya Ray) Member

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New Delhi, 27^th November, 2018

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„A‟

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FPA-FE-175-177 & 181-182/KOL/2003

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FPA-FE-175/KOL/2003 of Shri Anup Kumar v/s The Special Director Directorate of Enforcement, Kolkata

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FPA-FE-175/KOL/2003 of Shri Anup Kumar v/s The Special Director Directorate of Enforcement, Kolkata

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