FINAL ORDER

13.08.2024

FPA-FE-95-97/CHN/2005, FA-FE-415-417,484-485&487/CHN/2004

A batch of appeals have been filed under Section 17 of the Foreign Exchange Management Act, 1999 (in short ‘the Act of 1999) against the order dated 05.03.2004 passed by the Special Director, Directorate of Enforcement, Chennai. By the order under challenge, the following penalties have been imposed on the appellants for contravention of Section 8(1), 8(3), 8(4) read with Section 64(2) of the Foreign Exchange Regulations Act, 1973 (in short `the Act of 1973’):

(i) Penalty of Rs.10,00,00,000/- (Rupees Ten Crores only) on M/s ORJ Electronic Oxides Ltd.

(ii) Penalty of Rs.1,00,00,000/- (Rupees One Crore only) on Shri ORJ Jaffer Batcha.

(iii) Penalty of Rs.1,00,00,000/- (Rupees One Crore only) on Shri V. Sundaram.

(iv) Penalty of Rs.20,00,00,000/- (Rupees Twenty Crores only) on Shri N.M. Parthasarthy.

(v) Penalty of Rs.10,00,000/- (Rupees Ten lakh only) on M/s Sundaram Finance Ltd.

(vi) Penalty of Rs.1,00,000/- (Rupees One lakh only) on Shri K.M. Shankar.

(vii) Penalty of Rs.1,00,000/- (Rupees One lakh only) on Shri S. Srinivasan.

2. So far as M/s ETKIF America Inc and M/s ETK Exports Consultants are concerned, they have preferred the present appeals against the Prohibitory Orders issued by the Respondent Directorate in terms of Section 37(3) of FEMA 1999 read with Section 132 (3) of the Income Tax Act, 1961 dated 09.05.2001. The case of each noticee and now appellants before us would be dealt with separately. However, while arguing the appeals, the learned counsel for the appellants prayed for placing reliance on the facts of the appeal in the case of Dr. N.M. Parthasrthy (since deceased) represented by legal heirs. Accordingly, while dealing with legal and factual aspects, we would be referring to the facts narrated by the counsel for the appellants from the case file of Dr. N.M. Parthasarthy Vs. Directorate of Enforcement, Chennai (FPA-FE-417/CHN/2004).

Brief facts of the case narrated by the appellants

3. The learned counsel for the appellants submits that M/s ORJ Electronic Oxides Ltd is having its factory in District Pudukottal (Tamil Nadu) and M/s ETK Softech is having its factory at Ranipet (Tamil Nadu). They obtained permission to establish 100% export-oriented unit for manufacturing of electronic grade iron oxide. The permission was given by the Secretariat of Industrial Approvals (SIA) and MEPZ, Chennai. M/s ORJ Electronics Oxides Ltd acquired foreign exchange amounting to USD $ 72,00,000/- and M/s ETK Softech Pvt Ltd acquired foreign exchange amounting to USD $ 71,64,993/- for the purpose of import of capital goods respectively. The machinery were to be imported from M/s International Product & Technology Exchange Inc., New Jersey, USA (`IPTE’ for short), however, it was shipped from Singapore.

4. The agreement forimport of capital goods was executed between M/s ORJ Electronic Oxides and IPTE in the month of March, 1994 to define the scope of work. It was for delivering a turnkey plant for manufacture of iron oxide. The scope of work was to supply of detailed engineering and Auto CAD drawings besides online support of CAD/Manuals/Software for a period of five years. Later on, in the year 1995, a further communication was made to reiterate the same arrangement but ultimately the contract materialized in the year 1997. Invoice was generated on 11.02.1997 prior to three months of the shipment. It was related to supply of turnkey iron oxide plant.

5. The Venturi Scrubber, wet air oxidation equipment and concentrating solar collections were exported by M/s ETK International Ferrites Ltd. (M/s ETKIF, Ranipet) to IPTE Inc, C/o Travindo Trading Pvt Ltd, Singapore under Shipping Bill dated 09.04.1997 for USD $ 1,71,300/-. It is to be bought forth that Shri N.M. Parthasarthy was the Chairman and Managing Director of M/s ETKIF, Ranipet. The said machineries were re-exported to India from IPTE, Singapore to M/s ORJ Electronic Oxides Ltd vide invoice dated 16.02.1997