S. Gowrishankar Vs Joint Director (Appellate Tribunal Under SAFEMA Delhi)
FEMA Penalties Upheld Despite CESTAT Relief: SAFEMA Tribunal Backs ED on Hawala & Undervaluation
The Appellate Tribunal under SAFEMA, New Delhi, vide final order dated 24.12.2025, dismissed appeals filed by Shri S. Gowrishankar, Shri Dhiraj Gupta, M/s Shami Impex, Shri Kamalesh Gupta and Smt. Mamta Gupta against Order No. JD/CEZO/Z-1/06/2017 dated 30.06.2017 passed by the Joint Director, Directorate of Enforcement, Chennai, imposing penalties for contravention of Section 3(b) of the Foreign Exchange Management Act, 1999.
The Tribunal rejected the plea that no independent investigation was conducted under FEMA and held that investigations and statements recorded under the Customs Act, 1962 by DRI can validly be relied upon in FEMA proceedings. Relying on Vinod M. Chitalia v. UOI (Bombay HC), it was reiterated that statements recorded u/s 108 of the Customs Act carry judicial sanctity and can form the basis of adjudication under FEMA, particularly when the contravening parties deliberately avoid participation in FEMA investigations.
On the argument that penalties could not survive after CESTAT, Chennai set aside the Customs demands and penalties, the Tribunal held that the CESTAT order was passed on technical grounds relating to provisional assessment and defective SCN, and not on merits. FEMA proceedings, which focus on illegal transfer of foreign exchange and hawala payments, operate independently and are not vitiated by such technical defects under the Customs Act.
The Tribunal upheld reliance on confessional statements, digital evidence examined by GEQD, Hyderabad, seized documents and slip pads, invoking the statutory presumption u/s 39 of FEMA. Belated retractions were rejected, following Supreme Court rulings in Vinod Solanki and K.T.M.S. Mohamed, holding that mere retraction does not render statements involuntary unless coercion is proved.
The contention that “namesake” partners could not be penalised was also rejected, with the Tribunal noting their admitted role in signing documents and facilitating operations, coupled with non-cooperation during investigation. Finding the adjudication order reasoned and evidence-backed on the standard of preponderance of probabilities applicable to FEMA proceedings, the Tribunal confirmed all penalties and dismissed the appeals.
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
This Order disposes of the Appeals Nos. FPA-FE-70/CHN/2017 filed by Shri S. Gowrishankar, FPA-FE-71/CHN/2017 filed by Shri Dhiraj Gupta, FPA-FE-72/CHN/2017 filed by M/s Shami Impex, FPA-FE-73/CHN/2017 filed by Shri Kamalesh Gupta and FPA-FE-74/CHN/2017 filed by Smt. Mamta Gupta, against the Order No. JD/CEZO/Z-1/06/2017 dated 30.06.2017 (Impugned Order) passed by the Joint Director, Directorate of Enforcement, Government of India, Chennai Zonal Office. The Ld. Adjudicating Authority (AA) imposed the penalties of Rs. 1,00,000/- on Shri S. Gowrishankar, of Rs.15,00,000/-on Shri Dhiraj Gupta, of Rs. 3,00,000/- on M/s Shami Impex, of Rs. 15,00,000/- on Shri Kamalesh Gupta and of Rs.1,00,000/- on Smt. Mamta Gupta for the contravention of Section 3 (b) of the Foreign Exchange Management Act, 1999 (FEMA), vide the Impugned Order.
