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2026 Supreme(Online)(ATFP) 86
APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
BALESH KUMAR, Member, RAJESH MALHOTRA, Member
M/s Safa Sea Food – Appellant
Versus
The Special Director, The Directorate of Enforcement, Chennai – Respondent
MP-FE-80/CHN/2024 (A.D.) | FPA-FE-04/CHN/2017 | MP-FE-304/CHN/2023 (Exemp.) | MP-FE-305/CHN/2023 (Exemp.) | FPA-FE-105/CHN/2023
For the Appellants/Petitioners: Mr. T. Sundar Ramanathan, Adv., Ms. Sukanya Viswanathan, Adv.
For the Respondent:Mr. Varun Mishra, Advocate
FEMA provisions extend to the Exclusive Economic Zone through existing laws, and penalties apply for failure to comply with foreign exchange realization regulations.
Headnote:(A) Foreign Exchange Management Act, 1999 - Sections 3(b), 6(3)(d), 8, and 42(1) - Penalties imposed for contraventions related to foreign exchange management - Cumulative penalty of Rs. 40,00,000/- against Appellant Firm and Rs. 8,00,000/- against individual partner was assessed for various violations involving improper realization of export proceeds and failure to comply with regulations regarding loans. (Paras 1, 4, 36)
(B) Sovereignty and jurisdiction - The court addressed the application of FEMA to the Exclusive Economic Zone (EEZ) - Court concluded that existing notifications extending provisions of the Customs Act are sufficient to invoke FEMA for transactions originating from the EEZ, thus rejecting the argument of lack of jurisdiction. (Paras 22, 24, 29)
Facts of the case:
The Appellants engaged in deep-sea fishing and exports under agreements with foreign entities. They faced penalties for failing to realize full export proceeds due to deductions made for operational costs, which were contested as 'not export' payments, arguing the EEZ’s regulatory status. (Paras 3, 4, 12)
Findings of Court:
The court found evidence of contraventions of FEMA, noting that deductions from payments were not permissible and indicated the violations of reporting requirements. The assessments of jurisdiction concerning the EEZ were clarified. (Paras 27, 36)
Issues: The main issues included the applicability of FEMA in EEZ, the definitions and implications of exports, and the conditions under which loan classifications could be made. (Para 21)
Ratio Decidendi: Court held that provisions of FEMA apply to the EEZ indirectly through extended laws and that the Appellant's actions regarding foreign proceeds were in breach of legal obligations, affirming penalties for circumventing prescribed procedures. (Paras 21, 35)
Result: Appeals partly allowed with penalties reduced to Rs. 5,00,000/- for the Firm and Rs. 50,000/- for the individual Appellant. (Paras 38, 39)
| Table of Content |
|---|
| 1. background facts of the case (Para 3 , 21 , 22) |
| 2. appellants' arguments relating to eez (Para 4 , 5 , 6 , 7 , 8 , 9) |
| 3. court observations on extension of laws (Para 10 , 25 , 26) |
| 4. respondent's argument on legality of fema (Para 12 , 13 , 14 , 15) |
| 5. court's reasoning and ratio decidendi (Para 24 , 28 , 31) |
| 6. reduction of penalties and final order (Para 36 , 37) |
FINAL ORDER
29.01.2026
This Order disposes of the Appeals Nos. FPA-FE-04/CHN/2017 filed by M/s Safa Sea Food (SSF) and FPA-FE-105/CHN/2023 filed by Shri Syed Nadeem Ahmed, against the Order No. JD/CEZO/03/2016 dated 28.11.2016 (Impugned Order), passed by the Joint Director, Enforcement Directorate, Government of India, Chennai. The Ld. Adjudicating Authority (AA) imposed the cumulative penalty of Rs. 40,00,000/- on the Appellant Firm comprising of the following:
a. Rs. 10,00,000/- for the contravention of Section 8 of the Foreign Exchange Management Act, 1999 ( FEMA ) read with Regulations 8, 9 (1) & 13 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 and Regulation 3 of the Foreign Exchange Management (Realisation, Repatriation & Surrender of Foreign Exchange) Regulations, 2000 to the extent of Rs. 1,43,49,666/-.
b. Rs. 10,00,000/- for the contravention of Section 3 (b) of FEMA to the extent of Rs. 1,43,49,666/-.
c. Rs. 20,00,000/- for the contravention of Section 6 (3) (d) of FEMA read with Regulations 5 (3) & 6 (3) with Para 1 to Schedule III of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations 2000 to the extent of Rs.2,05,71,600/-.
The individual Appellant Shri Syed Nadeem Ahmed, who was the active partner of the Appellant Firm was penalized for the aforementioned contraventions in terms of Section 42 (1) of FEMA . Correspondingly the penalty amounts imposed on him were Rs. 2,00,000/-, Rs. 2,00,000/- and Rs. 4,00,000/- totaling Rs. 8,00,000/-.
2. The Hon’ble High Court of Madras vide Order dated 05.12.2018 had directed the Appellants to make pre-deposit of Rs. 5,00,000/- which has been complied with.
3. Briefly the facts of the case are that SSF had obtained necessary permission from the Ministry of Agriculture, Government of India on 18.09.2008 to acquire Tuna Long Liners Vessels (TLL). SSF imported TLL from M/s Top Fortune International, Taiwan under trade credit. Further SSF entered into an Agreement with M/s Eastward Exim and Shipping Pvt. Ltd., Seychelles for sale of fish caught by their TLLs. For the fish catches made in the Indian Exclusive Economic Zone (EEZ), SSF raised three invoices. As per the agreement, M/s Eastward Exim and Shipping Pvt. Ltd., Seychelles made payment to SSF after deducting the charges for bunkers and baits etc. and towards the repayment of loan agreement. Thus, the value of the total export was US $ 7,46,114, of which indirect payment to the suppliers was US $ 4,65,624 and the direct export proceeds received by SSF was US $ 3,54,910, which was deposited in their Exchange Earner’s Foreign Currency (EEFC) Account. The amount of the export proceeds which were adjusted against the charges towards baits, bunker etc. by the buyer M/s Eastward Exim and Shipping Pvt. Ltd., Seychelles was US $ 2,96,240 (Rs. 1,43,49,666/-). The Reserve Bank of India (RBI) vide letter dated 05.11.2013 informed that no approval / regularization was accorded to the Appellant Firm, SSF for allowing adjustment by the buyer of the said charges from the value of the export invoices. The Appellant also failed to make payment towards the import of TLL, even under the deferred payment system as detailed in the Letter of Permission (LoP) of the Ministry of Agriculture, Government of India. The failure to make payment was to the tune of US $ 3,72,000 (equivalent to Rs.2,05,71,600/-). Accordingly, the Show Cause Notice (SCN) was issued to the Appellant firm and to the individual Appellant on 02.03.2015 on the basis of the complaint under Section 16 (3) of FEMA filed on 26.02.2015.
4. Ld. Counse
