Case Law Details
Manak Kala Vs Union of India & Anr. (Delhi High Court)
Conclusion: Assessee could not be held guilty for violation of provisions of Section 9(1)(b) of FERA, on the sole basis of the statement of Sh. Ashish Jain, which was retracted later on as none of the orders of the authorities, namely, the Adjudicating Authority, the Appellate Authority or the Tribunal refer to any cogent material to substantiate the allegation of the commission of an offence under Section 9(1)(b) of FERA.
Held: Search was conducted at the residence of one Sh. Satish Kumar Sharma @ Pappu. An aggregate amount of ₹8,25,000/- and various documents were seized. It was alleged that the said documents disclosed distribution of certain Hawala payments. According to the Enforcement Directorate, the said documents disclosed that certain payments had been made to one Ashish. Inquiries revealed that the telephone connection corresponding to the said telephone number (528214) was installed in the office of M/s Anukampa Tours and Travels (P) Ltd. and one Sh. Ashish Jain was employed with the said concern. The business premises of M/s Anukampa Tours and Travels was searched and Indian currency amounting to ₹7,95,000/-and various documents were found in the said premises. It was alleged that on that date, Sh. Ashish Jain made a statement that he was employed with M/s Anukampa Tours and Travels for the last one and a half years and was an employee of Sh. Manak Kala (the appellant herein). He stated that Sh. Manak Kala had a travel agency in Jaipur under the same name and that he had instructed him to receive payments, which came from Dubai and distribute them under the instructions of some persons resident in Dubai. On the next day of the search, he retracted his statement. Though no incriminating documents were found, a show-cause notice was issued initiating proceedings under section 51 of the Foreign Exchange Regulations Act(FERA) violation and an amount of Rs 7,95,000/- was confiscated. The Appellant had stated before the Adjudicating Authority that Ashish Jain had retracted his statement as the same had been recorded forcibly and under coercion but it was not entertained and Penalty of Rs.75,00,000 was imposed and further ordered confiscation of the sum of ₹7,95,000/- being the amount seized under Section 63 of FERA. On further appeals. It was held that neither the Adjudicating Authority (Deputy Director, Enforcement Directorate) nor the appellate authority (Special Director, Appeals) had applied their minds on the question whether the statement made by Ashish Jain was voluntary in view of its retraction on the very next day. In fact, the Tribunal had proceeded on the basis that it was accepted by the Appellate Authority (Special Director, Appeals) that the statement of Ashish Jain had no evidentiary value. The statement of Sh. Ashish Jain could not be relied upon as, first of all, it was retracted on the very next day. And, secondly, the statement was very vague and bereft of any particulars, inasmuch as, it did not name or describe any person from whom funds had been received and whom the said funds had been distributed to. As noticed, neither the adjudicating authority nor any of the appellate authorities, including the Tribunal, had applied their minds as to whether the said statement was voluntary or not. Thus, the question whether the appellant could be held guilty for violation of provisions of Section 9(1)(b) of FERA, on the sole basis of the statement of Sh. Ashish Jain, must be answered in the negative. None of the orders of the authorities, namely, the Adjudicating Authority, the Appellate Authority or the Tribunal refer to any cogent material to substantiate the allegation of the commission of an offence under Section 9(1)(b) of FERA. Thus, the confiscation of the amount of ₹7,95,000/- from the office of the appellant was unsustainable. The amount seized from the premises of the appellant were liable to be returned to the appellant with repayment of interest at the rate of 6% per annum from the date of seizure till the date of payment.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. The appellant has filed the present appeal under Section 35 of the Foreign Exchange Management Act, 1999 (hereafter ‘FEMA’) read with Section 54 of the Foreign Exchange Regulation Act, 1973 (hereafter ‘FERA’) impugning an order dated 28.02.2016 (hereafter ‘the impugned order’) passed by the Appellate Tribunal for Foreign Exchange (hereafter ‘the Tribunal’) in Appeal No. 62/2014 captioned ‘Sh Manak Kala v. Special Director (Appeals), Enforcement Directorate’.
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