Dismissed

FPA-FE-672/KOL/2003 of M/s Green Ways Shipping Agency Pvt. Ltd. v. The Special Director, Directorate of Enforcement, Kolkata

ATFP13 Aug 2024FPA-FE-672/KOL/2003

Case brief

AI extract

What is this about?

The Appellate Tribunal dismissed the appeal against a penalty imposed under the Foreign Exchange Regulation Act, 1973. The court held that the shipping agency was not an innocent agent but actively participated in and abetted the exporter's contravention of the Act and RBI guidelines by diverting tea shipments to Dubai contrary to bill of lading terms.

What did the court decide?

Impugned order imposing penalty dismissed; appeal held to have failed.

FPA-FE-672/KOL/2003 of M/s Green Ways Shipping Agency Pvt… — Banking and Recovery | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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FPA-FE-672/KOL/2003

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M/s Green Ways Shipping Agency Pvt. Ltd.

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…. Appellant

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Versus

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The Special Director, Directorate of Enforcement, Kolkata. …. Respondent

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For the Appellant : Mr. Naveen Malhotra, Mr. Ritvik Malhotra, Advs. For the Respondent : Mr. MahipDattaParashar, Mr. Rahul Mehta, Advs.

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CORAM

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JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI BALESH KUMAR : MEMBER

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FINAL ORDER

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13.08.2024

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FPA-FE-672/KOL/2003

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This appeal under Section 52 of the Foreign Exchange Regulation Act, 1973 (in short `the Act of 1973’)has been preferred to challenge the order dated 30.09.2003 passed by the Deputy Director, Directorate of Enforcement, Kolkata.The penalty of Rs.8 lakhs has been imposed upon the appellant for contravention of Section 8(1), 72(c) and 73(3) read with Section 49 and 64(2) of the Act of 1973. 2. The learned counsel for the appellant submitted that the appellant is one of the leading sole agent for the World Shipping Line Uniglory Marine in India having its branches at different

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FPA-FE-672/KOL/2003

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Page 1 of 10

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places. It was served with a Show Cause Notice by the respondent alleging contraventions of the provisions referred to above. A reply to the Show Cause Notice was submitted refuting the allegations made against the appellant. It was submitted that the containers were shipped by the appellant on the instructions of M/s Century International said to have over-invoiced the export to Moscow, Russia in the year 1999. The allegation against the appellant was that though the four containers of Indian Black Tea were for its export to Moscow but were diverted to Dubai. The allegation was for not shipping the Indian Black Tea to the destination as per the Bills of Lading and, therefore, there was violation of the RBI Scheme and contravention of the provisions of the Act of 1973.

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The counsel for the appellant submitted that Show Cause Notice was issued to the exporters along with others. However, the allegations against them are different than against the appellant and accordingly he would be restricting his arguments on the alleged contraventions by the appellant. It was submitted that the shipping company is to ship the export on the instructions of the exporter and in the instant case, the initial direction was to ship the Indian Black Tea to Moscow but while the containers were on the way, a direction was given by the exporter to divert the shipment to Dubai and accordingly the appellant was left with no option but to follow the instructions. Accordingly, the shipment was diverted to Dubai. Since the appellant acted on the instructions of exporter to export the containers to Dubai instead of Moscow, the appellant

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could not have been penalized for the contravention of the provisions of the Act of 1973.

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The allegation of abetment could not have been made against the shipping company when they simply acted on the instructions of the exporter yet heavy penalty of Rs.8 lakhs has been imposed. The prayer was accordingly made to cause interference in the impugned order. To support the arguments, the learned counsel for the appellant made reference of the judgment of the Delhi High Court in the case of R.M. Malhotra Vs. Enforcement Directorate and Ors. dated 04.02.2008 where the judgment of the Apex Court in the case of Ramesh Kumar Vs. State of Chhattisgarh reported in 2001 (9) SCC 618 and the judgment of State of Haryana Vs. Jaswinder Singh reported in 2003 (109) Cr. Law Journal Page 10 were referred.

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The appeal was contested by the respondent. It is submitted that the contraventions of the provisions of the Act of 1973 by the appellant were found proved by the Deputy Director who has passed the elaborate order after considering each aspect of the matter.

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Four containers of Indian Black Tea were shipped to Moscow but the importer along with the shipping company designed it to ship the containers of Indian Black Tea to Dubai instead of Moscow. The active role of the appellant in doing so was found by the Deputy Director in its order. It is taking note of the Income-Tax Return where freight of the shipment was shown for Dubai instead of Moscow and that too prior in time. It was admitted by the appellant

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that the freight of shipment to Dubai was less than to Moscow. The aforesaid aspect was meticulously considered by the Deputy Director before passing the order. It has also considered the role of the appellant because shipment of Indian Black Tea was under the Scheme where there was no room available to change the destination. The prayer was accordingly made to dismiss the appeal.

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We have considered the rival submissions of the parties and perused the record.

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Before recording the finding on the issues raised by either parties, it would be relevant to refer the facts of this case. It is a case where M/s Century International shipped consignments consisting of four containers of Indian Black Tea. The shipping documents were prepared for its shipment to Moscow for delivery to M/s Termoecostroi. During the course of transshipment, written instructions were issued to the appellant company to divert and deliver the containers at Dubai. According to the appellant, diversion of the shipment was on the instructions of the exporter and accordingly there was no illegality in their action or it cannot be said to be a case of abetment at their instance. The appellant was not knowing that export was made under the State Credit Scheme. 9. The allegation against the appellant is that despite issuing the Bills of Lading for shipment to Moscow, it was diverted to Dubai in violation of the RBI guidelines and even in contravention of the provisions of the Act of 1973. The facts on record further shows that the appellant accepted the bookings and they issued to the

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shippers with a note “Received for Shipments”. The containers were initially shipped from Cochin to Colombo in a feeder vessel for connecting with the mainline vessel to be discharged at Moscow. While the containers were lying at Colombo awaiting to be connected by the respective mainline vessel for Moscow Discharge, it was diverted to Dubai on the instruction of the exporter and C&F agent. If the aforesaid facts are simpliciter taken note of, the appellant had acted on the written instructions of the exporter to divert the containers to Dubai instead of Moscow. However, the facts are not so simple as stated by the counsel for the appellant. 10. The argument of the appellant was not accepted by the Deputy Director taking note of the Bills of Lading issued by them containing details inter alia regarding consignor, consignee/notify party, port of destination, number and type and seal number of the container, contract number, letter of credit number, etc. The appellant submitted copies of original Bills of Lading which is M/s Indem General Trading LLC, Dubai and M/s G.S. International, Dubai at the time of taking delivery of the consignment. Those Bills of Lading were “First Originals” containing seal of M/s Greenways Cochin clearly mentioning therein freight payable at Destination, Stamps of M/s Indian General Trading LLC, Dubai and M/s G.S. International, Dubai are borne on the reverse of the Bills of Lading, which contains all the details like container number, quantity and particulars of commodity name of the vessel, contract number and date, letter of credit number, name of the Russian buyer, etc. Since the shipping agent issued the Bills of Lading with all the required

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details, the plea that appellant was not aware of the scheme of exports, etc. and that the containers were merely diverted at Dubai on instructions of the exporters cannot be accepted.

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We find that detailed discussion about the role of the appellant has been taken note of by the Deputy Director which is sufficient to show that the appellant played an active role in diversion of the cargo and thereby facilitated the exporter committing violation of the provisions of the Act of 1973 and the RBI guidelines. The fact aforesaid would be borne out from the following.

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The original Bills of Lading were issued by M/s. Greenways, Coimbatore and thereafter instruction for diversion of cargo were received in the Coimbatore Cochin office of M/s. Greenways Based thereupon the containers were reportedly diverted to Dubai. Since both the events took place at the cargo booking point, then why the earlier Bills of Lading were not cancelled and fresh Bills of Lading showing the names of M/s. Indem General Trading LLC Dubai and M/s. GS. International, Dubai were not issued. In the present case, the goods were diverted and delivered at Dubai instead of Moscow, but the Bills of Lading continued to show the picture as if consignments had gone to Moscow. The actions of the shipping agent in diverting and delivering the goods well fitted with the design of the exporter.

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We note the copies of original Bills of Lading, two letters of instructions furnished by M/s. Greenways, copies of the returns filed before the RBI and Income Tax authorities and copies of delivery order and equipment interchange Receipts for delivery of

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FPA-FE-672/KOL/2003

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the cargo at Dubai furnished by M/s. Greenways. For the container Nos. EISU 1412574 and EMCU 2373485, Bills of Lading Nos. were UGMU 103800001479 and UGMU 103800001517 respectively,both dated 29.6.1978. The exporter said to have given instruction for diversion of cargo to Dubai vide letter dated 10.7.98. The containers were loaded on the vessel MV LamphanNavee (LN 17). The ship sailed on 9.7.98 from Cochin and immediately a day after, instruction for diversion was given. The shipping agent filed the income tax return on 7.8.98 declaring the collectible freight amount at destination Dubai as US$.1050/- per container. The cargo was discharged at Dubai on 26.07.98 (Ex vessel shalamar), Similarly for two other containers bearing Nos. UGMU 1412574 and EMCU 2256107 the concerned Bill of Lading Nos. were UGMU 103800001568 dated 8.7.98 and UGMU 103800001576 dated 9 7.98 respectively. The exporter said to have given instruction for diversion of cargo to Dubai vide letter dated 16.7.98. The containers were loaded on vessel MV LamphanNavee (LN 18). The ship sailed on 16.7.98 from cochin and on the same day it was to be diverted to Dubai without any change in Bill of Lading. The shipping agent filed the income tax return on 14.8.98 declaring the collectible freight amount at destination Dubai as US$ 1050/- per container The cargo was discharged at Dubai on 18.8.98 (Ex vessel Uni Ahead). The Income Tax Return was filed before discharge of ship. On chronological examination of the details, we find that M/s Greenways became part of modus of diversion of cargo to Dubai instead of Moscow (though the Bills of Lading showed destination

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as Moscow) and lesser amount of freight collection only for Cochin to Dubai. A careful analysis of the available records reveals that the containers in fact were shipped from Cochin to Dubai. The containers were lying in Colombo when the shipping agents received instructions from M/s. Century International for diversion of the containers to Dubai immediate to sailing of ship.

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This fact is supported by the written submission of M/s Century International submitted on 3.9.03 wherein it has been mentioned that in case containers would have gone to Colombo, there would be manifest transshipment filed at Colombo, which was missing. Moreover, the Delivery order and documents for release of goods at Dubai reveals that the vessels were for shipping from Cochin to Dubai. The exporter also stated that the vessels mentioned in the documents i.e. copies of Delivery order etc. namely Shalamar and Uni-Ahead did not touch Colombo and in any event there could not be any transshipment on the said vessel at Colombo. The documents clearly show that the vessels were bound for Dubai only.

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The facts mentioned above shows that right from issuing the Bills of Lading, the appellants were well aware of the facts that the containers were to be shipped for Dubai and thereby the appellant company facilitated M/s Century International to carry out transactions in violation of the provisions of the Act of 1973 and RBI guidelines. It is necessary to add that Shri Sanjay Agarwal in his statement denied any instructions to the shipping company to

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divert the consignment. The following facts are relevant for the aforesaid and are given as under.

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M/s. Century International during the adjudication proceedings submitted that the copies of letters dated 10.7.98 and 16.7.98 purportedly issued by them on their letter head and furnished by M/s. Greenways were forged and not issued by them nor they had given any instruction for the diversion. In support of their claims they pointed out that the impression on the letter dated 16.7.98 indicates that it was faxed on 10.7.98, which was absurd and the letter heads were computer generated. There was no instruction from their side to divert the cargo. However, the fact of off-loading the cargo in Dubai stands conceded and accepted by both the exporter and shipping agent. The dispute is to the effect that the shipping agent claims that the cargo was diverted at the request of the exporter, while the exporter claimed that the cargo were ultimately delivered to Moscow via Dubai and Bandarabbas and the shipping agent, to evade Income Tax to the Government of India, furnished documents showing disposal of the cargo at Dubai The exporter failed to furnish any documentary evidence to show that the buyer in Moscow. 1.c. M/s. ARINA, Moscow or M/s. Termoecostroi, Moscow (notify party) received the cargo. However, in spite of non-delivery of the goods the sale proceeds were drawn against the letter of credit from Rupee Credit fund. There appears to be no action by the buyer in Moscow against the exporter or the shipping agent. The dispute between the exporter and shipping agent arose after initiation of enquiry by the Department.

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The detailed facts mentioned above shows role of the appellant in shipping the consignment to a destination different than mentioned in the Bills of Lading and other documents. It was in connivance of the exporter and the appellant not only actively participated in the contravention but abetted it and, therefore, we find no reason to cause interference in the impugned order. Accordingly, appeal would fail and is dismissed.

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(Justice MunishwarNath Bhandari) Chairman

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(Balesh Kumar) Member

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New Delhi, 13.08.2024 `srd’

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FPA-FE-672/KOL/2003 of M/s Green Ways Shipping Agency Pvt. Ltd. v. The Special Director, Directorate of Enforcement, Kolkata

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FPA-FE-672/KOL/2003 of M/s Green Ways Shipping Agency Pvt. Ltd. v. The Special Director, Directorate of Enforcement, Kolkata

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