Held by Hon’ble Appellate Tribunal under SAFEMA
In the matter of
Sh. Kamal Singh Vs The Assistant Director, Directorate of Enforcement, Mumbai (MP-FE-200/MUM/2024 (A.D.) FPA-FE-25/MUM/2011)
The Appellant claimed a rebate under excise by presenting fake shipping bills and other documents. Later on, the Appellant filed an application for settlement before the Settlement Commission wherein the Appellant was directed to refund the rebate received and no penalty was imposed. Later on, a penalty of INR 25 Lakhs was imposed on the Appellant for non-compliance of provisions of Section 7 of FEMA read with Regulation 16 of Foreign Exchange Management (Export of Goods and Services) Regulation, 2000 as the Appellant failed to export goods within 1 year from date of receipt of Advance.
The Appellant contended that the entire export was carried out by agents and goods were removed from the appellant’s premises under the Self Removal Procedure (SRP). The exports were duly made to the best of the appellant’s knowledge as the proceeds were also received. The Respondent’s department took almost 6 years to lodge a Complaint against the Appellant and not a shred of new evidence was unearthed by the Respondent during the said 6 years. The fundamental right of speedy trial is enshrined in our Constitution and that grave prejudice has been caused to the Appellant.
The Hon’ble Appellate Tribunal held that the order of the Settlement Commission is categorical that no immunity was either sought or provided to the Appellant under FEMA. The immunities granted under other Acts won’t have an impact on the proceedings under FEMA. Although there is no limitation period prescribed under FEMA, the respondent has to act within a reasonable time. The Appellant cannot avoid responsibility for the contraventions of FEMA provisions by not making shipment within 1 year from the date of receipt of advance remittances. The Penalty is imposable in the present case and the appellant cannot escape his liability by laying the blame on agents. The penalty amount was reduced from INR 25 Lakhs to INR 5 Lakhs
1. Brief Facts of the case:
- Mr. Kamal Singh (Prop. Siddha Exports) (“The Appellant”) claimed a rebate of central excise of INR 28,61,529/- by producing fake shipping bills, ARE-1s, and other export-related documents. However, such goods were never actually exported.
- The Appellant received USD 10,54,310.36(FOB Value) against such fake export and the same is substantiated through a Bank Realisation Certificate.
- The Appellant made an application for settlement before the Settlement Commission for settlement of the case.
- In a statement given under the FEMA Act, the Appellant contended that he did not physically make exports. Rather the same was done through the agents and he only signed the documents relating to export after the receipt and credit of foreign inward remittances.
- Accordingly, the Appellant received USD 10,54,310.36 as an advance payment for bogus shipping bills and the Appellant failed to make any exports against these remittances.
- By not making a Shipment within one year from the date of receipt of the advance, the Appellant has contravened the provisions of section 7 of the Foreign Exchange Management Act, 1999 read with Regulation 16 of the Foreign Exchange Management (Export of Goods and Services) Regulation, 2000 and accordingly the show cause notice was issued.
- The proceedings initiated by the issue of the said show cause notice culminated in the impugned order imposing a penalty of Rs. 25 Lakhs.
- The Appellant filed an appeal challenging the order of the Ld. AA.
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2. Relevant Legal Extract
The Relevant Legal Extract is reiterated below:
a. Section 7 of FEMA is reiterated below for reference:
“7. Export of goods and services.—
(1) Every exporter of goods shall—
(a) furnish to the Reserve Bank or such other authority a declaration in such form and such manner as may be specified, containing true and correct material particulars, including the amount representing the full export value or, if the full export value of the goods is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in a market outside India;
(b) furnish to the Reserve Bank such other information as may be required by the Reserve Bank to ensure the realization of the export proceeds by such exporter.
…”
b. Regulation 16 of Foreign Exchange Management (Export of Goods and Services) Regulation, 2000
“16. Advance payment against exports. –
(1) Where an exporter receives advance payment (with or without interest), from a buyer outside India, the exporter shall be under an obligation to ensure that-
(i) the shipment of goods is made within one year from the date of receipt of advance payment;
…”
3. Contention of the APpellant
The Appellant contended that:
a. Victim of Fraud:
- It is a peculiar case where the appellant was a victim of fraud but he has been penalised.
- The entire export was carried out by agents and goods were removed from the appellant’s premises under the Self Removal Procedure (SRP). The exports were duly made to the best of the appellant’s knowledge as the proceeds were also received.
b. Settlement of Dispute by Settlement Commission
- Later on, the appellant came to know that the documents had been forged and consequently, he approached the Settlement Commission.
- The Settlement Commission observed that the appellant had voluntarily approached and had been deceived. It held that the amount of rebate had to be returned but did not hold the appellant liable for payment of any penalty.
- The export was duly made to the best of the belief of the appellant and the proceeds were also realised.
c. Undue Delay in Conduct of Proceedings to prevent the Appellant from Settlement
- The Respondent department took almost 6 years, from the date of receiving information from the Customs & Excise Department, to lodge a Complaint against the Appellant and not a shred of new evidence was unearthed by the Respondent during the said 6 years.
- In the given case, the adjudicatory proceedings shall be deemed to have commenced from 17.09.2004, i.e., when the Respondent received the information from the Excise Department.
- The respondent deliberately waited for the order of the Settlement Commission and initiated proceedings only after the Settlement Order had been passed.
- Further, the Respondent maliciously withheld the information forwarded by the Additional Commissioner to prevent the Appellant from impleading the FEMA authorities during the settlement proceedings.
- Because of this the FEMA authorities were not impleaded by the Appellant and therefore immunity was not granted thereby by the Hon’ble Settlement Commission under the FEMA.
- The impugned order is liable to be quashed if there is an inordinate delay even after having prior information.
- The fundamental right of speedy trial is enshrined in our Constitution and that grave prejudice has been caused to the Appellant.
4. Contention of the Respondent
The Respondent contended that:
- The Appellant has admitted in his statements dated 20.09.2004 and 21.09.2004 that the said Shipping Bills were fake and no exports had ever taken place against such Shipping bills.
- The appellant had himself approached the Settlement Commission by making an application for settlement.
- Therefore, there is no dispute regarding the fact that the 15 shipping bills were fake.
- Since the appellant has already admitted his contraventions by himself applying for settlement, he cannot now make submissions contrary to submissions made before the Settlement Commission.
- Further, the only contention of the Appellant is that the present issue had already been settled by the Settlement Commission, granting thereby, unconditional immunity to the Appellant from the penal provisions.
- Although the case has been settled by the Settlement Commission. However, no immunity is granted from the provisions of FEMA and the same is specifically mentioned in the Final Order of the Settlement Commission.
- Therefore, the ground of the appellant that the final order of the Settlement Commission gave him immunity from all the penal provisions does not have legs to stand.
5. Analysis and Findings by Hon’ble SAFEMA
The Hon’ble Appellate Tribunal makes the following analysis:
a. Immunity under the Order of Settlement Commission
- As per the order of the Settlement Commission, no immunity was either sought or provided to the Appellant under FEMA,1999. The immunities granted under other Acts won’t have an impact on the proceedings under FEMA.
- The orders of the Settlement Commission are conclusive of the matters stated therein and cannot be challenged in any other proceeding.
- The findings of the Settlement Commission state that remittance against the exports were received without any actual export of goods and all the export documents bear the signatures of the appellant. There was no written arrangement between the appellant and the Agents. These findings have, therefore, become conclusive in light of the Ld. Settlement Commission’s order.
b. Undue Delay in Conduct of Proceedings to prevent the Appellant from Settlement
- Concerning the significant delay caused by the respondent, The officers of Central Excise & Customs conducted a search on 13.08.2004 at the Appellant’s premises and a complaint was filed by the Respondent on 27.07.2010.
- The Show cause notice was served on 6/8/2010 and was duly received by the Appellant on 11/09/2010.
- The Adjudicating Authority imposed the penalty of INR 25 Lacs vide order dt. 19.01.2011.
- Although there is no limitation period prescribed under FEMA, the respondent has to act within a reasonable time.
- It is that the remittance against the said exports was received in advance without any actual export of goods.
- The exports are made in the name of the Appellant and he was responsible for ensuring the realization of the export proceeds and cannot evade responsibility for the lapses.
- The Appellant cannot avoid responsibility for the contraventions of FEMA provisions by not making shipment within 1 year from the date of receipt of advance remittances.
- The Penalty is imposable in the present case and the appellant cannot escape his liability by laying the blame on agents.
- The order of the Settlement Commission indicates that the applicant had made a full disclosure of its duty liability and had also subsequently paid the liabilities as directed by Ld. Settlement Commission.
- Therefore, the ends of justice would met if the amount of penalty levied is reduced to Rs. 5 Lakhs.
6. Order
The Hon’ble Appellate Tribunal Held that:
- The orders of the Settlement Commission are conclusive of the matters stated therein and cannot be challenged in any other proceeding. The Penalty is imposable in the present case and the appellant cannot escape his liability by laying the blame on agents.
- Considering the facts, the penalty levied is reduced to INR 5 Lakhs from INR 25 Lakhs.
