Partly allowed

FPA-FE-212/BNG/2008 of Shri v. K. Singh v The Assistant Director, Directorate of Enforcement, Bangalore

ATFP3 Jul 2024FPA-FE-212/BNG/2008

Case brief

AI extract

What is this about?

The Tribunal upheld the finding of contravention regarding failure to recover export dues under FERA 1973 but reduced the penalty from Rs. 50 lacs to Rs. 14 lacs as the original amount was disproportionate to the appellant's role and actual financial gain.

What did the court decide?

Penalty reduced from Rs. 50 lacs to Rs. 14 lacs; appeal partly allowed and disposed of.

FPA-FE-212/BNG/2008 of Shri v. K. Singh Vs. The Assistant… — Company and Corporate | ATFP (2024)

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APPELLATE TRIBUNAL FOR SAFEMA AT NEW DELHI

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FPA-FE-212/BNG/2008

Shri V. K. Singh

… Appellant

Versus

The Assistant Director, Directorate of Enforcement, Bangalore … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant : Shri Ritvik Malhotra Shri Naveen Malhotra, Advocates

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For the Respondent : Shri Vivek Gurnani Shri Kanishk Maurya, Advocates

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CORAM JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI BALESH KUMAR : MEMBER

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FINAL ORDER 03.07.2024

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By this appeal, a challenge has been made to the adjudication order dated 26.06.2008 in reference to contravention of section 18(2) and 18(3) read with section 64(2) of Foreign Exchange Regulation Act (FERA), 1973. The penalty of Rs. 50 lacs has been imposed on the appellant.

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The appellant preferred an application for waiver of the condition of predeposit. An order on the said application was passed by the Tribunal followed by an order of High Court. In pursuance of which, it is stated that appellant has deposited a sum of Rs. 6 lacs to satisfy the condition of pre-deposit. Thus, the appeal has been argued finally.

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The learned counsel for the appellant submitted that without any violation of section 18(2) and 18(3) read with section 64(2) of FERA, 1973, the Adjudicating Officer imposed a penalty of Rs. 50 lacs on the appellant and on the other noticee Smt. Venita, proprietrix of M/s Sai International, Hyderabad, Rs. 45 lacs.

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The allegation in the memorandum served on the appellant is that during the year 1988, M/s Sai International affected export of three consignments of readymade garments to Dubai for a value of Rs. 2,51,80,620/- and failure to

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FPA-FE-212/BNG/2008

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Page 1 of 5

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secure the export value of the entire sum. The export was made by the Sai International of Smt. Venita, thus, she alone was responsible for realisation of export proceeds but penalty have been imposed even on the appellant though he was not even connected with all the three export consignments rather it was only for one. In that too, as the Customs House Agent (CHA). The appellant, infact, had taken only Rs. 2.5 lacs for the consignment and didn’t receive any other amount yet heavy penalty of Rs. 50 lacs has been imposed on the appellant. One consignment handled by the appellant as CHA and not other two consignments for which, the appellant alleged to have received Rs. 14 lacs but it is by erroneously drawing the presumption against the appellant. The penalty of Rs. 50 lacs has been imposed which deserve to be interfered. The prayer is accordingly to set aside the impugned order. In the written arguments, an issue of denial of cross examination has been taken.

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The appeal has been contested by the respondent on grounds that appellant had handled three export consignments through its CHA firm and received a sum of Rs. 14 lacs, though he asked for time for verification from the books but thereupon appellant did not appear rather he was later on detained under COFEPOSA. The detailed argument of both the parties would be dealt with by us and accordingly reference of arguments would be recorded by us in our findings.

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It is a case where in the year 1988, M/s Sai International, Hyderabad affected export of three consignments of readymade garments to Dubai for a sum of Rs, 2,51,80,620/- under the GR form detailed below:

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S. No.	GR Form No.	Date	Name of the Buyer	Amount (Rs.)
a)	767908	23.10.98	M/s Heera Sons A1 Hashmi Commercial Enterprises	1,23,23,850
b)	211011	27.11.98	-do-	1,23,09,000
c)	224937	16.3.99	Self a/c of Indian Association of Dubai	5,47,770

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The company failed to recover the amount of export dues and thus investigation in the matter was conducted where it was revealed that without the

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FPA-FE-212/BNG/2008

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Page 2 of 5

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permission of RBI or an extension order for recovering of the export dues, the noticee firm failed to recover the amount and even did not seek further extension for its recovery. Smt P. Venita was found responsible apart from the appellant Shri V. K. Singh and Shri Dilip Nehalani. The allegation against them is for contravention of section 18(2) and 18(3) read with section 64(2) of FERA, 1973.

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The show cause notice was issued to the appellant apart from two others to call upon their reply and personal hearing. The appellant appeared through an advocate and submitted his reply on 03.09.2002 and thereupon final hearing was made by the Adjudicating Officer. It was after noticing a letter of the appellant dated 05.08.2005 to treat reply dated 03.09.2002 and written submissions of advocate dated 04.10.2002 to be final for disposal of the case. The appellant has shown himself to be innocent and otherwise no contravention of section 18(2) and 18(3) of FERA, 1973. It would thus be gainful to quote both the provisions and are quoted thus:

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“ 18. Payment of exported goods-

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(2) Where any export of goods, to which a notification under clause (a) of sub-section (1) applies, has been made, no person shall, except with the permission of the Reserve Bank, do or refrain from doing anything, or take or refrain from taking any action, which has the effect of securing-

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(A) in a case falling under sub-clause (i) or sub-clause(ii) of

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clause (a) of sub-section (1),-

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(a) that payment for the goods-

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(i) is made otherwise than in the prescribed

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manner, or

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(ii) is delayed beyond the period prescribed under clause (a) of sub-section (1), or

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(b) that the proceeds of sale of the goods exported do not represent the full export value of the goods subject to such deductions, if any, as may be allowed by the Reserve Bank; and

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(B) in a case falling under sub-clause (ii) of clause (a) of subsection (1), also that the sale of the goods is delayed to an extent which is unreasonable having regard to the ordinary course of trade: Provided that no proceedings in respect of any contravention of the provisions of this sub-section shall be instituted unless the prescribed period has expired and payment for the goods representing the full export value has not been made in the prescribed manner within the prescribed period.

FPA-FE-212/BNG/2008

Page 3 of 5

The perusal

(3) Where in relation of any goods to which a notification under clause (a) of sub-section (1) applies the prescribed period has expired and payment therefore has not been made as aforesaid, it shall be presumed, unless the contrary is proved by the person who has sold or is entitled to sell the goods or to procure the sale thereof, that such person has not taken all reasonable steps to receive or recover the payment for the goods as aforesaid and he shall accordingly be presumed to have contravened the provisions of sub-section (2).”

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though the appellant Shri V.K. Singh has kept his role limited to one consignment only. The export was made by M/s Sai International after participation in Dubai fair. As per the statement of the appellant, he acted as CHA and material on records shows that two shipments vide shipping bill bearing number 23 dated 24.10.1998 worth Rs. 1,22,37,300/- and shipping bill bearing no. 167 dated 11.12.1998 worth Rs. 1,22,17,000/- were made by M/s Sai International. The role of Mr. Dilip Nihalani having a firm in Dubai in the name of M/s Alsama Alzarga trading company has come. However, we are concerned with the role of the appellant in reference to the contravention of the provisions of Section 18(2) and (3) of FERA 1973. The appellant has virtually admitted his failure for contravention of 18(3) but it is only in reference to one consignment therefore questions the imposition of heavy penalty of Rs 50 lacs while on the main defaulter Smt Venita, it is only 45 lacs.

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The perusal of statement dated 09.04.2001 of the appellant Shri V.K. Singh shows that he was a custom house agent since 1989. He had worked for Ms. Venita of M/s Sai International as a walk-in-customer and attended CFS cargo exports of readymade garments. Mrs. Venita approached him alongwith Dilip Nihalani and that out of two exports relating to GR form dated 20.11.1998 and 23.10.1998, he prepared documents relating to second exports but he did not attend the first export. It was however submitted that the allegation of receipt of Rs 14 lacs from M/s Sai International is to be verified though he admitted that cheques were received from Dilip Nihanlani but would be verified from cash register. Appellant Shri V.K. Singh did not appear with the cash register thereupon. He was detained under COFEPOSA.

Accordingly, the

FPA-FE-212/BNG/2008

Page 4 of 5

Adjudicating Officer concluded the proceedings finding contravention of section 18(2) and 18(3) read with section 64(2) of FERA, 1973 in reference to three consignments. In fact, the export dues were not recovered and at the same time, benefit of drawback was taken. The drawback amount was about Rs. 22 lacs and it was admitted that the appellant had received Rs. 13,18,000/- though later on, accepted receipt of Rs. 2,50,000/- only and that too for one consignment.

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We find contravention of section 18(2) and 18(3) of FERA, 1973 because Shri V.K. Singh and Shri Dilip Nihalani colluded and were instrumental in making the exports and they received incentive from the custom authorities in respect of the shipment.

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The appellant had admitted for preparation of the documents though attended only one shipment. Taking into consideration the overall circumstances and while we find a case for contravention of section 18(2) and 18(3) read with section 64(2) of FERA, find penalty of Rs. 50 lacs to be disproportionate. The penalty of Rs. 45 lacs has been imposed on Smt Venita, proprietrix of M/s Sai International while Rs 50 lacs on the appellant who said to have received Rs. 14 lacs towards work and out of drawback. Thus, to make the penalty rational, we reduce it to Rs. 14 lacs and out of which Rs. 6 lacs have already been deposited to satisfy the condition of pre-deposit. We partly allow the appeal while finding a case for contravention of section 18(2) and 18(3) of FERA, 1973, but penalty of Rs. 50 lac is reduced to Rs. 14 lacs and with the aforesaid, the appeal is disposed of.

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(Justice Munishwar Nath Bhandari) Chairman

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(Balesh Kumar) Member

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New Delhi, 3rd July, 2024 ‘KA’

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FPA-FE-212/BNG/2008

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FPA-FE-212/BNG/2008 of Shri v. K. Singh v The Assistant Director, Directorate of Enforcement, Bangalore

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FPA-FE-212/BNG/2008 of Shri v. K. Singh v The Assistant Director, Directorate of Enforcement, Bangalore

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