Dismissed

FPA-FE-11/BNG/2015 of Shri B.M. Rakesh v. The Joint Director Directorate of Enforcement, Bangalore

ATFP18 Mar 2025FPA-FE-11/BNG/2015

Case brief

AI extract

What is this about?

The Appellate Tribunal dismissed an appeal against an order imposing a penalty of Rs. 14.20 lakhs and confiscating currency for contraventions of the Foreign Exchange Management Act. The court upheld the findings despite the appellant's retracted statements, relying on corroborative evidence from searches and independent admissions.

What did the court decide?

The appeal was dismissed; the penalty of Rs. 14,20,000 and confiscation of seized currency were upheld.

FPA-FE-11/BNG/2015 of Shri B.M. Rakesh Vs. The Joint Director… — Banking and Recovery | ATFP (2025)

¶1

APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

¶2

FPA-FE-11/BNG/2015

¶3

Shri B.M. Rakesh … Appellant

¶4

Versus

¶5

The Joint Director Directorate of Enforcement, Bangalore

¶6

… Respondent

¶7

Advocates/Authorized Representatives who appeared

¶8

For the Appellant : Mr. Richick Harikant, Adv. Mr. Sumit Kumar, Adv. Mr. Prem Ranjan Kumar, Adv. For the Respondent : Mr. Surrender Kumar, Adv.

¶9

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

¶10

FINAL ORDER

¶11

18.03.2025

¶12

This Order would dispose of the Appeal No. FPA-FE-11/BNG/2015 filed by Shri B. M Rakesh against the Order No. JD/02/BZ/2014-15/(FEMA)/(JDSA) dated 27.05.2014 (Impugned Order) passed by Joint Director, Enforcement Directorate, Bangalore. Penalty of Rs. 14,20,000/- was imposed on the Appellant vide the Impugned Order for contravention of provisions of the Foreign Exchange Management Act 1999 (FEMA). Besides, the imposition of penalty, the seized amount of Indian Currency Rs. 36,72,000/-, Euro 1785 & AED 15 were confiscated. Penalty of Rs. 3,00,000/- has been imposed on one Shri Nemichand Jain who is not an Appellant in the present proceedings. 2. Ld. Adjudicating Authority vide the Impugned Order has found the following contraventions indulged in by the Appellant;

¶13

Section 3 (b) of FEMA to the extent of Rs 1,53,69,010/-by making said payment for the credit of Mr Matteo of M/s ITAL Program and Mr Adamo of BGB Italia, persons resident outside India, culminating in a penalty of Rs. 3,50,000/-.

¶14

FPA-FE-11/BNG/2015

¶15

Page 1 of 10

¶16

(ii) Section 3(c) of FEMA to the extent of Rs.39,00,000/- by having received an amount of Rs.39,00,000/- by order of Mr. Zuhir residing in Dubai and the amount of Rs.36,72,000/-seized from his residential premises is also found to be involved in the contravention of the provisions of section 3 (c) of FEMA and liable for confiscation in terms of provisions of section 13 (2) of FEMA culminating in a penalty of Rs. 10,50,000/- and confiscation of Rs. 36,72,000/-.

¶17

(iii) Section 3 (a) to the extent of Euro 5000 by having purchased the foreign exchange from persons other than authorised person in foreign exchange and by having transferred Euro 1000 to Rita Babini, Export Manager of M/s Turri and the amount of Euro 1785 and AED 15 seized from his residential premises is also found to be involved in the contravention of the provisions of section 3 (a) of FEMA and liable for confiscation in terms of provisions of section 13 (2) of FEMA culminating in a penalty of Rs. 20,000/- and confiscation of EURO 1785 and AED 15. 3. Ld. Counsel for the Appellant prayed that the present case is based on statements without any documentary evidence. While not disputing the seizure of Indian Currency and Foreign Currency, the challenge is made to the grounds on which the seizure has been effected and the reasons on the basis of which contraventions of FEMA have been alleged. Ld. Counsel has argued that constant pressure was kept on the Appellant and the documents which were seized have been mis-interpreted to make the said allegations. He contended that the Appellant is a genuine businessman and came into contact with Ms. Jyothi of M/s Samaavesh, who being an influential person facilitated marketing of the goods imported, to the prospective buyers. Even though initially the foreign suppliers quoted higher rates but the same were brought down due to negotiations conducted by the Appellant. A margin of 5% was kept in invoices which were raised on M/s Samaavesh by the firms/companies of the Appellant viz. M/s Vainatheya International Agency and M/s Vriddhi Interiors. The seizure of currency effected form the place of the Appellant was

¶18

FPA-FE-11/BNG/2015

¶19

Page 2 of 10

¶20

in fact part of sale made by the Appellant to M/s Samaavesh who raised invoices to other companies.

¶21

Ld. Counsel for the Appellant further argued that charge made under Section 3 (c) is unjustified as the charge is based on confessional statements tendered under threat and coercion. The Impugned Order has also wrongly upheld the contravention of Section 3 (a) of FEMA. The Appellant had in fact purchased travelers cheques from M/s Global Forex and Travels through a cheque of Canara Bank which was utilized for the payment to Rita Babini. Similarly, he denied that the contravention of Section 3 (b) had occurred. Ld. Counsel stated that the statements which were recorded had been retracted. He therefore prayed to allow the Appeal.

¶22

Ld. Counsel for the Respondent pleaded that the Impugned Order is a speaking Order based on not only the statements but also recovery and seizure of currency and documents. He explained the modus operandi of the Appellant so as to avoid the high Customs duty on the goods imported by him. The Appellant requested the sellers abroad to show 60% of the value in the invoice so as to avoid duty on 40% of the value. The said 40% was paid to the suppliers through intermediaries located in Dubai by paying his representatives in India through Indian Currency and in turn intermediaries would transfer foreign exchange to the agents abroad. Ld. Counsel stated that even the phone numbers of the intermediaries are on record which also corroborate the veracity of the statements. Ld. Counsel for the Respondent therefore prayed for dismissal of the Appeal.

¶23

We have considered the rival submissions and the material on record. We find that the statements tendered by the Appellant are detailed and spread over several days. The Appellant tendered his statement under Section 37 of FEMA on 22.08.2013, 23.08.2013, 27.08.2013, 29.08.2013, 04.09.2013, 05.09.2013, and 03.10.2013. We also note that on search of the residential premises of the Appellant on 22.08.2013 Indian Currency of Rs. 36,72,000/and foreign currency of EURO 1785 and AED 15 were seized. Besides, the

¶24

FPA-FE-11/BNG/2015

¶25

Page 3 of 10

¶26

currency seizure the documents labelled A, B, C, D1, D2, D3, E, F, G, H1, H2, I and J and a bunch of loose sheets consisting of visiting cards and slips containing account details of transactions and Executive Diary marked K were also recovered and seized. On the same day the search of office premises of the Appellant resulted in recovery of documents comprising of loose sheets marked A, B, C & D and files E, F, G, H, I, J, K, L, M & N and Blue colour diary and Grey colour diary were recovered and seized. The search at office premises of M/s Samaavesh on the same day led to the recovery of documents in files marked A, B, C, D, E & F. The statements made were based on the documents and were explanatory in nature of the recoveries made. Since the statement of the Appellant are corroborated by the independent and cogent recoveries from his own premises, the truth and the voluntariness of the statements cannot be rejected.

¶27

The Appellant in his statements has categorically explained that in order to remain competitive in market he used to negotiate with the overseas suppliers to show less than the actual value of goods imported and the same used to be communicated to him by mail. He further explained that the remittances were sent by TT through his bankers viz. Canara Bank and that he used to arrange to send the differential value between the actual invoice and commercial invoice by paying equivalent Indian Currency in India and used to arrange the equivalent foreign exchange which would get credited to the bank accounts of the overseas suppliers.

¶28

The Appellant in his statements has identified one Mr. Matteo of Ital Program who agreed to raise invoices of 60% of the actual cost provided balance 40% reached him through banking channels. In fact, Mr. Matteo gave the phone number of Mr. Zuhir in Dubai who was in business of arranging transfer of foreign exchange from Dubai to various persons abroad after collecting equivalent amount in Rupees in India. The Appellant contacted Mr. Zuhir to work out the arrangement. The Appellant also identified one Shri Chetan Jain with phone numbers and his relative Dharamraj in Bangalore.

¶29

FPA-FE-11/BNG/2015

¶30

Page 4 of 10

¶31

Shri Chetan Jain introduced him to Haneefa in Dubai who helped him transfer the foreign exchange to Ital Program and BGB Italia in Italy. The Appellant also identified one Mr. Adamo, an agent in Italy.

¶32

The Appellant confirmed his statements dated 22.08.2013 and 23.08.2013 in his statement dated 27.08.2013. The Appellant also confirmed the identity of Shri Nemichand through his election identity card, driving license and photograph as the same person who was known to him as Chetan alias Dharamraj. Ld. Adjudicating Authority after having given thoughtful consideration has found the retraction given by Shri Nemichand of his statement dated 23.08.2013 as belated and after thought and therefore rejected. We also note that it is in reply to the Show Cause Notice (SCN) that the Appellant has denied the contents of his statements and given alternative explanations which do not appear to be convincing. The Appellant has failed to provide corroboration to his denial and alternative explanations. 10. In this regard, the following judgments of the Hon’ble Supreme Court are relevant so as to bring out that even if the statements are retracted these can be relied upon:

¶33

The Hon’ble Supreme Court in the case of Vinod Solanki Vs Union of India

¶34

[(2008) 16 SCC 537] has laid down the situations where the retracted statement of the noticee can be relied upon. In the Judgement (Supra) following has been observed in paragraph 23:

¶35

“23. It is trite law that evidence brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidence, which would lend adequate assurance to the court that it may seek to rely thereupon. We are not oblivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also notice that in some of the cases retracted confession has been used as a piece of corroborative evidence and not as the evidence on the basis whereof alone a judgment of conviction and sentence has been recorded.”

¶36

FPA-FE-11/BNG/2015

¶37

Page 5 of 10

¶38

In K.T.M.S Mohamed Vs. Union of India [(1992) 3 SCC 178] the Hon’ble

¶39

Supreme Court held that merely because statement is retracted, it cannot be regarded as involuntary or unlawfully obtained. In this regard, following observations were made in paragraph 34:

¶40

“34. … But suffice it to say that the core of all the decisions of this Court is to the effect that the voluntary nature of any statement made either before the Custom Authorities or the officers of the Enforcement under the relevant provisions of the respective Acts is a sine qua non to act on it for any purpose and if the statement appears to have been obtained by any inducement, threat, coercion or by any improper means then statement must be rejected brevimanu. At the same time, it is to be noted that merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise, etc. to establish that such improper means has been adopted. However, even if the maker of the statement fails to establish his allegations of inducement, threat, etc. against the officer who recorded the statement, the authority while acting on the inculpatory statement of the maker is not completely relieved of its obligations in at least subjectively applying its mind to the subsequent retraction to hold that the inculpatory statement was not extorted. It thus boils down that the authority or any court intending to act upon the inculpatory statement as a voluntary one should apply its mind to the retraction and reject the same in writing. It is only on this principle of law, this Court in several decisions has ruled that even in passing a detention order on the basis of an inculpatory statement of a detenu who has violated the provisions of the FERA or the Customs Act, etc. the detaining authority should consider the subsequent retraction and record its opinion before accepting the inculpatory statement lest the order will be vitiated.”

¶41

The findings made by the Ld. Adjudicating Authority in paragraph 3.11 and 3.12 of the Impugned Order are being reproduced as follows which clearly bring out the contraventions of the provisions of FEMA by the Appellant (who is referred as Noticee No. 1 and Shri Nemichand has been referred as Noticee No. 2) ;

¶42

FPA-FE-11/BNG/2015

¶43

Page 6 of 10

¶44

“ 3.11 In view of the material evidence discussed above, I find that Shri B.M. Rakesh has made payments in Indian rupees to the extent of Rs 76,39,010 to unknown persons in India, as per the instructions of Mr. Zuhir residing in Dubai, for arranging transfer of equivalent amount of foreign exchange(Euro 1.32.687.66) to and for the credit of Mr Matteo of M/s ITAL Program and Mr Adamo of BGB Italia, persons resident outside India; that the Noticee No.1 had made payments in rupees to the extent of Rs 77,30,000 to Shri Nemichand Jain of Bangalore for arranging transfer of equivalent amount in foreign exchange (Euro 90,000) to and for the credit of Mr Matteo of M/s ITAL Program and Mr Adamo of BGB Italia, persons resident outside India with the assistance of Shri Poonam of Mumbai and Haneefa of Dubai; that the Noticee No.1 received a payment of Rs 39,00,000 otherwise through an authorised person, by order of Shri Zuhir, residing in Dubai and further that Shri B.M.Rakesh also appears to have dealt in foreign exchange by having purchased total foreign exchange of Euro 5000 without permission from Reserve Bank of India from persons other than an authorised person and having transferred foreign exchange of Euro 1000 to Rita Babini Export Manager of M/s Turri while on visit to Italy. It is also clear that the Noticee No.1 made various payments aggregating to Rs 76,39,010 to unknown persons in India, sent by Mr. Zuhir and also made various payments aggregating to Rs 77,30,000 to Shri Nemichand @ Chetan Jain @ Dharmaraj sent by Shri Hanifa residing in Dubai for the credit of Mr Matteo of M/s ITAL, Program and Mr Adamo of BGB Italia who are persons resident outside India. It is also evident that Shri Nemichand had received the total payment of Rs.77,30,000/- from Shri B.M. Rakesh as per the instructions of the said Haneefa residing in Dubai and made the said payments for the credit of Mr Matteo of M/S ITAL Program and Mr. Adamo of BGB Italia with the assistance of Shri Poonam and Shri Hanifa of Dubai,

¶45

3.12 I find the defense sought to be placed by Noticee No.1 and Noticee No.2 does not hold water for the following reasons:There is a clear cut admission on the part of Noticee No.1 that he had under invoiced his imports from abroad and paid the differential cost of the products imported by paying the same in Indian currencies to the extent of Rs.76,39,010/- to unknown persons herein India, for arranging transfer of foreign exchange totaling to Euro 1,08,293.66 for the credit of Mr. Matteo of M/s. ITAL Program

¶46

FPA-FE-11/BNG/2015

¶47

Page 7 of 10

¶48

and Mr. Adamo of BGB Italia, both persons resident outside India. It is also an admitted fact that Noticee No.1 had made payments in rupees to the extent of Rs.77,30,000/- to Noticee No.2 for arranging transfer of Euro 90,000 for the credit of Mr. Matteo of M/s. ITAL Program and Mr. Adamo of BGB Italia, both persons resident outside India with the assistance of Shri Poonam of Mumbai and Haneefa, a person resident in Dubai. It is also clear that only after receiving the full amounts covering the cost of imports from Noticee No.1, partly through official channels and partly through non banking channels, and then the imported goods came into India. The pleas that there is no loss of foreign exchange cannot be a defense. The preamble to FEMA lays down that the Act is to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. If everyone starts remitting money for their imports through non banking channels, it would definitely deleteriously affect the orderly development and maintenance of foreign exchange market in India. The other assertion that the seized amount of Rs. 36,72,000 is not involved in contravention of the provision of section 3 (c) of FEMA can be accepted in the Noticee No.1 had submitted proof that the said amounts representing his commission has been received through banking channels from abroad. But no such proof is furnished by Noticee No.1 even now. After giving seven statements before the Assistant Director of Enforcement regarding his import and issues of payment for those imports spread over a period of two months, his attempt to pretend that he was not aware of the contents of his statement can at the best be described as an afterthought to escape from the clutches of law. The assertion that the purchase of EURO 5000 is not an offence under section 3 (a) cannot be accepted as section 3 (a) of FEMA prohibits purchase of foreign exchange from any person other an authorized dealer. It a purchase memo to the effect is produced to the effect that the same was purchased from an authorized dealer in foreign exchange would be credible defense. But no such purchase memo evidencing licit acquisition of Euro 5000 is produced before me. In fact Noticee No.1 had clearly stated that he had purchased Euro 4000 @ 78.50 from one Mr. Ram, near Shringar Shopping Complex, MG Road, Bangalore by paying cash of Rs. 3,14,000/- and spent about Euro 2200 during his trip to Italy between 30-06-2013 and 10-07-2013 and exchanged few Euros at

¶49

FPA-FE-11/BNG/2015

¶50

Page 8 of 10

¶51

Dubal International Airport Duty Free Shop for AED and after purchasing some chocolates, the balance foreign exchange of AED 15 and Euro 1785, which he had kept in the steel almirah was seized. I find that the statement of Noticee No.1 is independently corroborated by the presence of the telephone number of 00971504624383 of Zuhir, a person resident outside India, at page marked 10 of documents marked A seized from his office premises. As regards the Euro 1000 paid by him in cash as an advance payment to Rita Babini, Export Manager of M/s. Turri, during his visit to Italy in April, 2012, Noticee had stated that since the order did not materialize, he forfeited the said advance; that he had purchased the said 1000 Euros at the rate of Rs 65 per Euro at Shringar Complex, Bangalore and independent supporting documents is available at sheet no. 1 of file marked D seized from his premises. As regards the contention of the Noticee No.2 that no proof has been adduced that Shri Haneefa has been a person resident outside India, it is to be pointed out both Noticee No.1 and Noticee No.2 have confirmed that Shri Haneefa of Dubai had arranged credit of foreign exchange to the overseas suppliers of Noticee no.2 and infact, Noticee No.1 had claimed that he had spoken to the said Shri Haneefa of Dubai also. I am of the view that mere belated retraction alone does not preclude the adjudicating authority from relying on that retracted statement. I find that the version of the Noticee No.2 is independently corroborated by the version of Noticee No.1. As regards the identity of Shri Chetan or Dharmaraj assumed by Noticee No.2, no proof can be adduced except by the person, who assumes such pseudo identity. Noticee No.2 himself has admitted that he had assumed those identities. Further Noticee No.1 had confirmed the identity of Noticee No.2 by stating that he was the person to whom he got Euro 90,000 transferred to his overseas suppliers abroad during June to August, 2013. Each other call records also shows that there were exchange of calls between Noticee No.1 and Noticee No.2, which stands as an independent corroboration. Noticee No.2 further contends that he acted as a postman only in those transactions, by quoting his very statement, which he claims that has been retracted by him. Hence, from the findings based on evidence available on record, I reject all the contentions raised by Noticee No.1 and Noticee No.2 in their respective reply.”

¶52

FPA-FE-11/BNG/2015

¶53

Page 9 of 10

¶54

In view of the aforementioned discussion and analysis, we do not find any reason to intervene with the Impugned Order. We uphold the penalty imposed on the Appellant and the confiscation of the Indian Currency and the Foreign Currency vide the Impugned Order. We therefore dismiss the Appeal.

¶55

(Justice Munishwar Nath Bhandari) Chairman

¶56

(Balesh Kumar)

¶57

Member

¶58

New Delhi, 18^th March, 2025

¶59

‘J’

¶60

FPA-FE-11/BNG/2015