IGNIS Technology Solutions Pvt. Ltd. Vs Special Director (Appellate Tribunal Under SAFEMA Delhi)
SAFEMA Tribunal Upholds FEMA Contravention for Unsubstantiated Software Import, Slashes Penalties on Company and Director
The Appellate Tribunal under SAFEMA partly allowed the appeals of M/s IGNIS Technology Solutions Pvt. Ltd. and its CEO Nihar Ranjan Samantara against penalties imposed under FEMA for failure to establish import of software against foreign remittances of USD 7.525 million (₹33.42 crore) to a UAE entity. The Tribunal held that the appellants failed to produce credible evidence proving that the software was actually imported despite claiming that it had been received electronically. It found that the certificates relied upon by the appellants neither satisfied the RBI requirements for non-physical imports nor established actual receipt of the software. The Tribunal also noted serious doubts regarding the credibility of the overseas supplier, including the fact that the purchase agreement pre-dated the supplier’s incorporation in the UAE.
The Tribunal rejected the contention that the adjudicating authority had merely relied on findings recorded under other statutes such as the PMLA and CBI proceedings. It observed that, even independently of those investigations, the appellants had failed to furnish satisfactory proof of import to the authorised dealer bank as required under FEMA and the RBI Master Circular governing non-physical imports. The Tribunal further held that the company’s CEO and Director, Nihar Ranjan Samantara, was vicariously liable under Section 42(1) of FEMA, as he had signed the remittance documents, admitted that the software received was of no value, and failed to demonstrate that he had exercised due diligence to prevent the contravention.
However, considering the financial distress pleaded by the appellants, the Tribunal exercised its discretion to substantially reduce the penalties while affirming the finding of contravention. The penalty on IGNIS Technology Solutions Pvt. Ltd. was reduced from ₹7 crore to ₹1 crore, and the penalty on Nihar Ranjan Samantara was reduced from ₹70 lakh to ₹7 lakh. Accordingly, the appeals were partly allowed only to the extent of reduction of penalty, while the finding of FEMA violation was sustained.
Cases Discussed
- Xerox Modi Corp. Ltd. vs. Special Director of Enforcement Directorate (Delhi HC), (2015) 54 taxmann.com 311 Delhi
- Andaman Timbers Industries vs. Commissioner Central Excise Kolkata (SC), Civil Appeal No. 4228 of 2006, Judgment dated 02.09.2015
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
This Order disposes of the Appeals Nos. FPA-FE-04/CHN/ 2021 filed by M/s IGNIS Technology Solutions Pvt. Ltd. (ITSPL) and FPA-FE-05/CHN/2021 filed by Shri Nihar Ranjan Samantara (Chief Executive Officer & Director), against the Order No. SDE/ SRO/BGZO/07/2020(SK) dated 30.06.2020 (Impugned Order), passed by the Special Director, Enforcement Directorate, Government of India, Chennai. The Ld. Adjudicating Authority (AA) imposed penalty of Rs. 7,00,00,000/- on the Appellant Company M/s IGNIS Technology Solutions Pvt. Ltd. for the contraventions of Section 10 (6) of the Foreign Exchange Management Act, 1999 (FEMA) read with Regulation 6 (1) of the Foreign Exchange Management (Realization Repatriation and Surrender of Foreign Exchange) Regulations, 2000. Further penalty of Rs. 70,00,000/-was imposed on Shri Nihar Ranjan Samantara CEO and Director, of the Appellant Company, vide the Impugned Order, for the aforementioned contraventions in terms of Section 42 (1) of FEMA.
2. Ld. Counsel for the Appellants submitted that it was during the course of investigation in some other matter relating to one Shri G Dhananjaya Reddy under the Prevention of Money Laundering Act, 2002 that the Respondent Directorate initiated investigation against the Appellant Company and the individual Appellant under FEMA. Ld. Counsel stated that Shri G Dhananjaya Reddy cheated the Appellants as well. Ld. Counsel contended that the Appellant Company was in genuine business as reflected in a year wise revenue break-up of the Appellant’s business with M/s. Warner Chappel Music Inc. This confirms that the Appellant had been engaged in bona fide business activity and previously as well had been dealing in such services. In the course of their business with M/s. Warner Chappel Music Inc., the Appellant required specific kind of Computer Software. While the Appellant Company was exploring entities from whom the software could be procured, it came across a company namely, M/s Supreme Software Technology FTZ, UAE, which had been working on a software with specifications which met their requirement. The Appellant conducted all the due diligence and due process before purchase of the software.
3. Ld. Counsel for the Appellants further submitted that a copy of the correspondence was shared with the Authorised Dealer Bank (AD), which reflects that the proposal and details of the software were shared with the AD Bank and the Appellant Company kept the Bank aware of all the whereabouts of the software. Thereafter, the Appellant Company applied for a term loan of Rs. 25 Crores and cash credits of Rs. 5 Crores from United Bank of India, Electronic city Branch, Bangalore. The Bank approved the loan of the Appellant after going through the details of software etc. and proposal of the Appellant Company. The Appellant in order to procure software “Project Help Desk Suite’ from M/s. Supreme Software Technologies FZC, Sharjah, UAE entered into a purchase agreement dated 15.02.2010. The software was provided by M/s. Supreme Software Technologies and an amount of USD 75,25,000 was remitted to the entity for the said purpose.
4. Ld. Counsel further submitted that a copy of the letter was forwarded to the AD Bank along with its enclosures being Telegraphic Transfer Receipt of United Bank of India, Agreements between M/s. Supreme Software Technologies and Appellant Company, Purchase invoices, Intimation of Software receipts sent to Customs Department. Ld. Counsel informed that these have been made part of the Appeal Paper Book. He further stated that M/s. S. Janardhan & Associates (Chartered Accountants) made all the requisite verification of the related facts and records and thereafter vide its report dated 31.03.2010, it certified that “based on the inputs provided to us and the information gathered by us, we certify the fair value of the captioned products as USD 7.5 million.” Ld. Counsel contended that neither the investigator nor the Ld. AA chose to examine the valuers namely Sh. Vijay Bhatia and Shri Balakrishna M. Even Shri Sanjaya Swain the expert on software was not examined. Thus, vital evidence placed on record by the Appellant was chosen to be ignored and disregarded. Ld. AA failed to give a fair hearing to the Appellants. The Impugned Order is perverse and passed in violation of the principles of natural justice. Ld. Counsel submitted that after the purchase of the Software in October-December 2010, the Appellant Company started testing it internally and found some minor bugs which were rectified. The software was found to be fully functional but was deficient in terms of some features.
5. Ld. Counsel for the Appellant submitted that the Appellants came under the radar of CBI due to the nefarious activities of Sh. Dhananjay Reddy, a trusted person of the Appellant’s Director, who had had conducted certain defaults behind the back of the Appellant’s Director. The Appellant had informed the Ld. AA that the CBI had seized the documents of the Appellant and even the efforts undertaken by the Appellant to get the documents by making request to the CBI Court were not effective, as the documents had gone for governmental expert analysis at that time. The Appellant thereafter was left with no option but placed a request before the Ld. AA to exercise its power vested in it for calling of records from the CBI in order to expedite the matter. However, the Ld. AA arbitrarily closed the right of the Appellant to hear the matter and directed the Appellant to produce the documents within 15 days.
6. Ld. Counsel for the Appellants contended that there is no violation of the provisions of either the Act or the RBI guidelines. The Appellant had submitted the complete documentary proof in respect of the import of software and had coordinated with the United Bank of India from time to time and the Customs Authority during and after the import in due compliance of law. It is imperative to note that till date no action has been taken by the Customs Authority against the Appellant in respect of import of software, which clearly established the claim of the Appellant that a valid software was imported into India. A report dated 31.03.2010 obtained from the Chartered Accountant and the report dated 28.11.2014 of the independent IT expert Shri Sanjaya Swain as also referred to above, clearly reflect that the software was imported into India. Even so in compliance to the Master Circular, the Appellants had also forwarded all the documents pertaining to the import of the software to the Customs Authority vide letter dated 16.11.2010 which is duly endorsed by the Customs officials. This clearly reflects the bona fide of the Appellant and the genuineness of the import. The Ld. AA has further commented on the quality of the software which is beyond its scope and powers. There is no question of surrendering any foreign exchange when the import had been undertaken and the foreign exchange had been validly utilized for the purpose for which it was declared by the Appellant. The Ld. AA has failed to appreciate the documents submitted in respect of import. The AD Bank stated that “it appears that no software was imported”. Ld. Counsel contended that the above-said comment of the AD Bank is without any basis. Without giving any opportunity of cross examination, ignoring the Judgment dated 02.09.2015 in the matter of Andaman Timbers Industries vs. Commissioner Central Excise Kolkata (Civil Appeal No. 4228 of 2006), Ld. AA has failed to appreciate that the Department has failed to discharge onus of proof. The Respondent had merely relied on the averments in the CBI chargesheet which are yet to be proved in the Court of law and thus the entire action being illegal, the resultant Order deserves to be set aside. Ld. AA failed to appreciate that statements recorded under different acts cannot be blindly used under FEMA. Moreover, blindly and merely relying on investigation conducted by other agencies for some other purposes has made the Impugned Order incomplete and unfair. Ld. AA failed to realise that if the AD Bank would have found any deficiency in the transaction and/or it’s documentation, it would have confronted the Company about it, however nothing of that sort was ever done. In the case of Xerox Modi Corp. Ltd. vs. Special Director of Enforcement Directorate ((2015) 54 taxmann.com 311 Delhi), the Hon’ble Delhi High Court has held under paragraphs 30 and 31 that:
“Where all remittances made by the Appellant have been explained and there was likelihood that the Appellant Company had utilised remittances for import as claimed by it, violation of provisions of FEMA had not been established and impugned order imposing penalty was quashed.”
Ld. Counsels therefore pleaded to allow the Appeals.
7. Ld. Counsel for the Respondent Directorate submitted that the Branch Manager, of United Bank of India, Bangalore vide his letter No. UBI/ELC/ADV/IGNIS/2018 dated 15.02.2018 has confirmed that the bank had remitted amount totaling USD 75,25,000 (equivalent to Rs.33,42,10,330/-) on behalf of M/s Ignis Technology Solutions Pvt. Ltd. to M/s Supreme Software Technologies FZC (UAE) for import of goods on 9 different occasions and the Appellant Company M/s Ignis Technology Solutions Pvt. Ltd. did not appear to have received the goods and had not submitted the bills confirming the receipt of the goods to the Bank. Ld. Counsel further stated that in furtherance of a conspiracy, Shri G. Dhananjaya Reddy got opened two Companies in the name of M/s. Supreme Software Technologies FZC, Sharjah, UAE and M/s. DSR Impex, FZC in Sharjah Airport International Free Zone (SAIF), Sharjah, UAE on 02.03.2010 through Shri N. Ravichandran, Managing Director of M/s. Elsoft Technologies Pvt. Ltd. and Shri K. Seshasayanam, then employee of M/s. Nexxoft Infotel Limited. They opened Bank accounts in the name of M/s. Supreme Software Technologies FZC in Bank of Baroda, Dubai Main branch and in the name of M/s. DSR Impex in Bank of Baroda, Sharjah on the instructions of Shri Dhananjaya Reddy. Shri N. Ravichandran was authorised to operate both the accounts. All the expenses for opening of companies and their bank accounts were borne by Shri G. Dhananjaya Reddy. Both the Companies had not hired/ purchased any office in Sharjah, UAE and were allotted only post box numbers. The said Companies were not engaged in manufacturing/development/trading activity including that of software. However, the agreement dated 15.02.2010 between the Appellant Company and M/s. Supreme Software Technologies FZC, UAE preceded the date of issuance of licence for M/s. Supreme Software Technologies FZC, UAE on 02.03.2010 by Saif Zone Authorities. All the documents in respect of the two Companies, including cheque books, were handed over by S/Shri N. Ravichandran and Seshasayanam on their return to India to Shri G. Dhananjaya Reddy.
8. Ld. Counsel for the Respondent submitted that the Impugned Order is well reasoned and speaking. A number of opportunities were given to the Appellants to file replies to the Show Cause Notice (SCN) dated 26.02.2018 and personal hearings were also granted. It is matter of record that the Appellants failed to file replies. Relied upon documents were supplied to the Appellants. On 23.10.2019 charges in the SCN were explained by the Ld. AA to Shri Amarnath Aggarwal, Advocate for the two Appellants. Shri J P Udgata, Advocate appeared on behalf of the Appellants on 09.01.2020. The Ld. AA pointed out to him that no proof of having imported software from M/s. Supreme Software Technologies, UAE against the remittance of US$ 75,25,000 was produced by the Appellant Company. He was further informed that the personal hearing with respect to the two Appellants were concluded, however, the Ld. Advocate could submit proof of import with a period of 15 days. Ld. Counsel for the Respondent stated that there has been no violation of principles of natural justice.
9. Ld. Counsel for the Respondent submitted that during the course of investigation the statement of the individual Appellants Shri Nihar Ranjan Samantara was recorded under Section 37 of FEMA on 16.02.2015. He admitted having been signatory in the United Bank of India current account and term loan account of the Appellant Company. He had signed the application form for the loan along with Shri Henri Amalraj. Afterwards all the banking transactions were managed by Shri G Dhananjaya Reddy and his friends/employees. Shri Nihar Ranjan Samantara also stated that the loan was obtained from the United Bank of India for the import of IP Project Helpdesk Suite from M/s. Supreme Software Technologies, UAE for which the total amount of Rs. 33,42,10,330/- was remitted. The software supplied by M/s. Supreme Software Technologies, UAE was through FTP site by file transfer protocol. The software which was received was of no value. Shri Nihar Ranjan Samantara further stated that he had informed Shri G Dhananjaya Reddy about the same, who promised to make it workable. Ld. Counsel further stated that the statement of Shri Amurtharaj Henry Amlaraj recorded on 10.06.2015 under Section 50 of the Prevention of Money Laundering Act, 2002 (PMLA) revealed that Shri Amalaraj signed 8 set of documents for remittance through RTGS, of which first four sets were signed by him along with Shri Nihar Ranjan Samantara in the presence of Shri G. Dhananjaya Reddy. However, for the other four sets of documents, he subsequently found that the signature of Shri Nihar Ranjan Samantara were forged since he had handed over these documents to one Shri Sudheer, an associate of Shri G. Dhananjaya Reddy.
10. Ld. Counsel for the Respondent submitted that in furtherance of conspiracy, Shri Nihar Ranjan Samantara and Shri G. Dhananjaya Reddy submitted an agreement dated 15.02.2010 executed between M/s. Supreme Software Technologies represented by Shri N. Ravichandran and the Appellant Company regarding sale/purchase of permanent license of software IP Project Help Desk Suite. This agreement was submitted to M/s. United Bank of India in support of request for credit facility. Ld. Counsel contended that as on 15.02.2010, M/s. Supreme Software Technologies, FZC, UAE was not even in existence. The licence for the Company was issued by SAIF Zone Authorities only on 02.03.2010. The agreement entered between M/s. Supreme Software Technologies represented by Shri N. Ravichandran and the Appellant Company was valid for 90 days only i.e. up to 15.05.2010. As per the agreement, there was no mention in it regarding any advance remittance and on the contrary payment was required to be made after the receipt of software/product. In furtherance of conspiracy, the Manager of M/s. United Bank of India permitted nine remittances totalling to US$ 75,25,000 (amounting to Rs. 33,42,10,330/-) to the current account number 90010200009399 held in the name of M/s. Supreme Software Technologies FZC, Sharjah with Bank of Baroda, Main Brach, Dubai, from the term loan account and cash credit account of the Appellant Company. The Amount totalling US$ 74,24,928/- got credited to the account of M/s. Supreme Software Technologies FZC, Sharjah.
11. Ld. Counsel for the Respondent Directorate submitted that the amount remitted to M/s. Supreme Software Technologies FZC, Sharjah was in fact diverted and siphoned off. The amount of US$ 20,10,000 (Rs.8,88,70,716 after deduction of charges) was diverted to the account of M/s. Valuemart Info Technologies Ltd., which was under the control of Shri G. Dhananjaya Reddy. The amount of US$ 25,24,000 (Rs.11,18,71,177 after deduction of charges) was diverted to the account of M/s. Nexxoft Infotel Limited, operated by Shri G. Dhananjaya Reddy. The amount of US$ 14,29,454 (Rs. 6,31,18,540 after deduction of charges) was diverted to the account of M/s. Elsoft Technologies Private Limited operated by Shri N. Ravichandran on the instructions of Shri G. Dhananjaya Reddy. The amount of US$ 11,60,000 was diverted to the account of M/s. Proliant LLC maintained with Bank of America N.A. Tampa, Florida and the amount of AED 14,65,800 (US$ 4,00,000) was diverted to the account of M/s. DSR Impex, maintained with Bank of Baroda, UAE. Thus, from the amount remitted by the Appellant Company, the amount of US$ 59,63,454 (equivalent to Rs. 26,38,82,839/-) was remitted back to India to the bank accounts of M/s. Valuemart Info Technologies Limited, M/s. Nexxoft Infotel Limited and M/s. Elsoft Technologies Private Limited. The amount of US$ 15,60,000 (equivalent to Rs. 6,90,30,000/-) was diverted to the accounts of M/s. Proliant LLC in USA and to the account of M/s. DSR Impex in Dubai.
12. Ld. Counsel for the Respondent cited the following from Paragraph 4.5 of the Impugned Order:
“4.5 ……….But for me, I find that Noticee-2 (Shri Nihar Ranjan Samantara) has not disputed these four transactions. Nor did he file any FIR with police to the effect that his signatures were forged for sending four remittances. It only shows that Noticee-2 was aware and content with the transactions that were initiated on behalf of Appellant Company. I find from the copies of Form A 1 furnished by Appellant Company that Noticee-2 and Noticee-3 vouched the import particulars i.e. the value of the goods, classification of the item to be imported and the mode of shipment, which in these remittances were declared to be through electronic mode. They also declared to the Authorised Dealer that the invoice value of the goods which was declared in that form was the real value of goods to be imported into India and also undertook to submit proof of import the Authorised Dealer ……….
………. I find from the copy of letter dated 15.02.2018 of M/s. United Bank of India that they remitted US$ 75,25,000 (equivalent to Rs.33,42,10,330/-) on behalf of Noticee 1 Company to M/s. Supreme Software Technologies FZC, UAE for import of goods on nine different occasions; that Noticee 1 did not appear to have received the goods and they did not submit proof confirming the receipt of the goods to them and that they had complained to Reserve Bank of India and CBI.”
13. Ld. Counsel for the Respondent Directorate contended that after due application of mind, the Ld. AA has made the following findings in Paragraph 4.7 of the Impugned Order:
“4.7 ………. I find from the audited financial of Noticee-1 Company, M/s. GRV & PK, Chartered Accountants, had observed that “the Company has got computer software as work in progress, for which there is no valuation report available. In view of the above, we are in position to give our opinion as the valuation/realization of capital work in progress (Software) of Rs. 35,47,81,507/-. The first remittance to M/s. Supreme Software Technologies FZC, UAE was made by Noticee 1 Company on 12.10.2010. Noticee 1 seems to have submitted a valuation report dated 31.10.2010 of S. Janardhan & Associates, Chartered Accountant on “Project Help Desk Suite an IT Request Management System, a Proprietary Software IP of Techstar Inc, Dallas, Texas, USA, in which the valuation had been furnished by the Chartered Accountant as US$ 7.5 million. There is no mentioned of this software being purchased from M/s. Supreme Software Technologies FZC, UAE anywhere. A certificate from one Sanjaya Swain, IT Architect, IBM India Pvt Limited dated 28/11/2014 was enclosed stating the CD marked “Help Desk-Original” provided by Noticee-1 Company contained several program files written in “.Net” language and the programs were functional, but another CD marked “Help Desk+Plus” was not working and cannot serve any extra purpose of the help desk. At whose behest and for what purpose this so-called independent expert’s view was obtained is not clear. Copy of agreement dated 18/01/2011 for acceptance of delivery of source codes of “Project Help Desk Suite” Software between Noticee 1 Company and M/s. Supreme Software Technologies FZC, Sharjah in which Noticee -1 acknowledges the receipt of source code of the said software. Copy of letter dated 27.12.2010 of Noticee 1 addressed to United Bank of India, enclosing therewith a copy of letter dated 16.11.2010 addressed to the Commissioner of Customs, Air Cargo Complex, Bangalore, stating the Noticee-1 had received 10 modules of Project Help Desk Suite through non-physical means via data communication. But these documents were to seen in the back drop of findings of CBI that it was a clear case of round tripping. According the findings of CBI it was made clear that out of the amount of US$ 75,25,000 (Rs. 33,42,10,330/-) remitted to the account of M/s. Supreme Software Technologies FZC, Sharjah, from the accounts of Noticee 1, amounts totalling to US$ 59,63,454 (equivalent to Rs. 26,38,82,839/-) were remitted back to India to the bank accounts of M/s. Valuemart Info Technologies Limited, M/s. Nexxoft Infotel Limited and M/s. Elsoft Technologies Private Limited, while the amounts totalling to US$15,60,000 (equivalent to Rs. 6,90,30,000/-) were diverted to the accounts of M/s. Proliant LLC in USA and to the account of M/s. DSR Impex in Dubai. When that being so, even for assuming for argument’s sake Noticee 1 received the software “Project Help Desk Suite” from M/s. Supreme Software Technologies FZC, Sharjah, it could not be of the value of US$ 75,25,000 remitted by Noticee-1 Company. As already pointed out, Noticee -2 in his statement dated 16.02.2015, inter alia, deposed that the software was supplied by M/s. Supreme Software Technologies FZC, UAE, through FTP site by file transfer protocol. However, the software received by them was of no value; that they informed Shri G. Dhananjaya Reddy about the same and that he (Dhananjaya Reddy) promised to make it workable. I also find that M/s. GRV & P K, Chartered Accountants, had observed that “the Company has got computer software as work in progress, for which there is no valuation report available. In view of the above, we are in position to give our opinion as the valuation/realization of capital work in progress (Software) of Rs. 35,47,81,507/- (though the amount mentioned is not relatable to the amount remitted for this software). Even the so-called independent expert had stated that programs contained in CD marked “Help Desk+Plus” was not working and cannot serve any extra purpose of the help desk. As mentioned earlier, M/s. United Bank of India had asserted that Noticee -1 did not appear to have received the goods and they did not submit proof confirming the receipt of the goods to them and that they had complained to Reserve Bank of India and CBI. Noticee-1 is under obligation to satisfy the Authorised Dealer that they had imported the software of said description and value and it is clear from the letter dated 15/02/2018 of M/s. United Bank of India that Noticee 1 had not submitted documents to their satisfaction.”
Ld. Counsel therefore prayed to dismiss the two Appeals.
14. We have considered the rival submissions and the material on record. It is undisputed that the remittance of USD 75,25,000 (equivalent to Rs.33,42,10,330/-) was made by the Appellant Company M/s Ignis Technology Solutions Pvt. Ltd. to M/s Supreme Software Technologies FZC (UAE) for import of goods. The two sides have contested whether against the said remittance the import of software occurred or not.
15. The documentary proof which has been submitted by the Appellant is the ‘Intimation of Software received via Data Communication Channel’ with ‘Ref. RBI Circular No. 9 dated 24.08.2006’ to the Commissioner of Customs, Air Cargo Complex, Bangalore International Airport, Bangalore made on 16.11.2010 by the Appellant Company bearing the receipt stamp dated 29.11.2010 of the Indian Customs, Air Cargo Complex, Bangalore. The Appellant has made it part of the Appeal Paper Book. The Intimation mentions nine Modules along with the Invoice Numbers, all dated 30.09.2010, reflecting various amounts which cannot be read being not legible in the copy placed as part of the Appeal Paper Book. We also could not find the RBI Circular No. 9 dated 24.08.2006 referred to in the Intimation. However, the RBI/2007-2008/24- Master Circular No. 08/2007-08 dated 02.07.2007, which appears to be applicable in the present case since the imports of the software has been claimed by the Appellants to have been made in 2010. The afore cited Master Circular states the following:
“C. Non Physical Imports
(i) Where imports are made in non-physical form, i.e., software or data through internet / datacom channels and drawings and designs through e-mail/fax, a certificate from a Chartered Accountant that the software / data / drawing/ design has been received by the importer, may be obtained.
(ii) AD bank should advise importers to keep Customs Authorities informed of the imports made by them under this clause.”
Even if condition (ii) above is held to be fulfilled, the necessity of required certification by a Chartered Accountant as stipulated in condition (i) of the Master Circular cannot be ignored. The Appellants have claimed that the certification has been provided by S Janardhan & Associates, Chartered Accountant on 31.03.2010 and by Shri Sanjay Swain, IT Architect, IBM India Pvt. Ltd. on 28.11.2014. We find that the two documents’ Annexures A-13 and A-14 have been made part of the Appeal Paper Book. On perusal of the document dated 31.03.2010, we find that it was issued before the import of the software which occurred on 30.09.2010 as per the reference of invoices made in the said Intimation. Moreover, M/s S Janardhan & Associates, Chartered Accountant have categorically stated that the necessary certification is the Valuation Report of ‘Project Help Desk Suite’ for the purpose of acquisition of the product and for arranging finance for such acquisition. It is therefore clear that the document dated 31.03.2010 cannot certify that the software/data/drawing/design has actually been received by the importer. The second document dated 28.11.2014 is much subsequent to the claimed dates of import. In fact, it is on record that CBI had filed chargesheet bearing No. 03/2014 on 05.11.2014 in the matter closely related to the present proceedings under FEMA. Moreover, the certificate dated 28.11.2014 was based upon the examination of the CD marked ‘Held Desk-Original’ and another CD marked ‘Help Desk + Plus’. While from the first CD, Shri Swain found the programs as functional, the programs from the second CD were found as not working. The CDs were provided by the Appellant Company to Shri Swain. We do not find that from the content and the circumstances under which this Certificate has been issued, we can regard it as proof of the software having been imported in September/October, 2010. On the other hand, we find that the Ld. AA has made the following specific finding in Paragraph 4.7 of the Impugned Order:
“4.7 ………. I also find that M/s. GRV & P K, Chartered Accountants, had observed that “the Company has got computer software as work in progress, for which there is no valuation report available. In view of the above, we are in position to give our opinion as the valuation/realization of capital work in progress (Software) of Rs. 35,47,81,507/- (though the amount mentioned is not relatable to the amount remitted for this software). Even the so-called independent expert had stated that programs contained in CD marked “Help Desk+Plus” was not working and cannot serve any extra purpose of the help desk. As mentioned earlier, M/s. United Bank of India had asserted that Noticee -1 did not appear to have received the goods and they did not submit proof confirming the receipt of the goods to them and that they had complained to Reserve Bank of India and CBI. Noticee-1 is under obligation to satisfy the Authorised Dealer that they had imported the software of said description and value and it is clear from the letter dated 15/02/2018 of M/s. United Bank of India that Noticee 1 had not submitted documents to their satisfaction.”
We therefore observe that that the leaving aside consideration of evidences collected during the course of investigation under other Acts, it cannot be denied that the proof of having imported the software against the remittances made, does not exist. We will also like to observe that the fact that M/s. Supreme Software Technologies FZC, UAE was issued licence in UAE on 02.03.2010 yet it signed an agreement with the Appellant Company on 15.02.2010 raises questions about credibility of its transactions in September/October, 2010 with the Appellant Company.
16. We do not find that the Impugned Order has been issued without application of mind based upon ‘blindly’ following the investigations conducted under Acts other than FEMA. The discussions in the preceding Paragraph of this Order clearly brings out that the Appellants have failed to establish that the import of the said software had in fact happened in September/October, 2010 or thereafter. First and foremost, mere Intimation to the Customs Department cannot be regarded as proof of import of the software which purportedly is supposed to have happened through Data Communication Channel and not through any medium like CD or USB. Moreover, Intimation cannot by any stretch of imagination be regarded as acceptance of the contents therein by the Customs Department. Hence, nothing further having been heard from them cannot be regarded by the Appellants as no challenge having been made to their claimed position of import having occurred. We find that the Ld. AA has examined the certifications submitted by the Appellants and thereafter rejected the same as proof of import of the software. As already observed by us that even our conclusion has been on similar lines which is independent of the findings made under the other Acts. We do not find any substance in the pleading of the Appellants that examination of the valuers and the experts would have added value to ascertain the merit of their case. We reiterate that the dates on which the two certificates were issued and that too given their contents were sufficient to hold these two certificates, as inadequate to prove that import of the software did occur. In view of the aforementioned it was not necessary for the Ld. AA to call for records from CBI. The Appellants have raised the issue about cross-examination having not been granted by the Ld. AA. However, there is nothing on record as to whom the Appellants wanted to cross-examine and as to whether such prayer was made to the Ld. AA. We cannot therefore agree with this as well as having caused prejudice to the interest of the Appellants.
17. We find that the individual Appellant Shri Nihar Ranjan Samantara was the CEO and Director of the Appellant Company during the relevant time. The Ld. AA has made the following finding with respect to the individual Appellant:
“I find from the records of the case that Noticee -2 was the Chief Executive Officer, shareholder and Director of Noticee 1 Company when the contravention was committed by the Company. Documents show that he was one of the joint authorized signatories of Noticee 1 Company, along with Noticee -3, for operating its accounts with M/s. United Bank of India. Noticee -2 and Noticee -3 only had signed all the requisitions for outward remittances including Form Al for remitting foreign exchange to the tune of US$ US$75,25,000 (equivalent to Rs. 33,42,10,330/- to M/s. Supreme Software Technologies FZC, UAE. The conduct of Noticee -2 indicate that he was in-charge of and was responsible for the conduct of Noticee -1 Company during the relevant period. Hence, I have no hesitation arriving at the conclusion that Noticee -2 has contravened the provisions of Section 10 (6) of FEMA, 1999 read with Regulation 6(1) of the Foreign Exchange Management (Realization, Repatriation & Surrender of Foreign Exchange) Regulations 2000 to the extent of US$75,25,000 (equivalent to Rs. 33,42,10,330/ in terms of Section 42 (1) of FEMA, 1999 and accordingly hold him guilty.”
We find that the individual Appellant cannot take the plea that the contravention occurred without his knowledge, in view of the evidence that he signed the papers relating to remittances made abroad and his own statement under Section 37 of FEMA, which is admissible evidence, that the software received was of no value, as well as having informed Shri G Dhananjaya Reddy about the same. We also do not find any evidence that he exercised all due diligence to prevent such contravention. We therefore hold him liable for penalty by virtue of his vicarious liability under Section 42 (1) of FEMA for the contraventions found established against the Appellant Company.
18. Ld. Counsel for the Appellants had pleaded at the stage of obtaining waiver from the pre-deposit of the penalty amounts that the Appellant Company and the individual Appellant are in financial duress. We therefore reduce the penalty on the Appellant Company to Rs. 1,00,00,000/- and on the individual Appellant to Rs. 7,00,000/-.
19. In view of the aforementioned discussions and analysis, we partly allow the Appeals Nos. FPA-FE-04/CHN/ 2021 filed by M/s IGNIS Technology Solutions Pvt. Ltd. and FPA-FE-05/CHN/2021 filed by Shri Nihar Ranjan Samantara. Applications pending, if any, are disposed of accordingly.
