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2025 Supreme(Online)(ATFP) 13062
APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Balesh Kumar, Member, Rajesh Malhotra, Member
Smt. Mamta Gupta – Appellant
Versus
The Joint Director Directorate of Enforcement Chennai – Respondent
FPA-FE-74/CHN/2017
For the Appellants/Petitioners: Prem Ranjan Kumar, Ruchik Harikant
For the Respondents: Pranav Mishra
Statements recorded under Customs Act can be relied upon in FEMA proceedings; retracted statements admissible if not proven involuntary; passive partners not liable under Section 42 FEMA.
Headnote:(A) Foreign Exchange Management Act, 1999 - Sections 3(b), 16(3), 37, 39, 42 - Customs Act, 1962 - Section 108 - Penalty for contravention of Section 3(b) - Reliance on investigation under Customs Act - Admissibility of retracted statements - Presumption under Section 39 - Liability of passive partners.
(B) Statements recorded under Customs Act can be relied upon in FEMA proceedings as they pertain to same transaction and are deemed judicial proceedings - Deliberate non-cooperation of noticees in FEMA investigation cannot be used to their advantage later.
(C) Retracted statements - Mere retraction does not render statement involuntary; maker must prove inducement, threat or coercion; authority must apply mind to retraction.
(D) Documents seized under any law, including from digital devices, are presumed true under Section 39 FEMA unless contrary proved - Forensic examination reports admissible. (E) Order of customs appellate tribunal setting aside customs demand on technical grounds (defective show cause notice due to provisional assessment) does not affect FEMA proceedings - FEMA focus is on illegal fund transfer, not duty assessment - No similar statutory requirement under FEMA. (F) Liability under Section 42 - Partners not involved in day-to-day affairs and only name partners are not liable - Penalty of Rs.1,00,000/- each set aside.
Facts of the case:
Appeals against order of adjudicating authority imposing penalties for contravention of Section 3(b) FEMA for making payments to overseas suppliers through hawala channels in connection with imports of plastic granules. Investigation by customs authorities revealed misdeclaration and undervaluation; statements recorded, digital devices seized. Noticees did not cooperate in subsequent FEMA investigation. Customs appellate tribunal later set aside customs order due to procedural defect. Appellants argued that FEMA proceedings could not rely on customs investigation and that statements were retracted.
Findings of Court:
The tribunal upheld the impugned order for three appellants, finding that reliance on customs investigation was permissible, retractions were properly rejected, digital evidence was admissible, and the customs appellate order did not undermine FEMA findings. Penalty on two name partners set aside as they were not in charge of affairs.
Issues: (1) Whether FEMA proceedings can rely on investigation conducted under the Customs Act? (2) Whether retracted statements can be relied upon? (3) Whether the customs appellate order affects FEMA penalty? (4) Whether passive partners are liable?
Ratio Decidendi: There is no bar to using evidence gathered under Customs Act for FEMA proceedings. Retracted statements can be used if not shown to be involuntary; burden on maker. Customs appellate order based on technical defects specific to Customs Act does not negate substantive findings under FEMA. Section 42 FEMA only applies to persons in charge of conduct of business; name partners not involved in management are not liable.
Result: Appeals of two name partners allowed; penalties set aside. Appeals of other three appellants dismissed; penalties confirmed.
FINAL ORDER
24.12.2025
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.
2. Ld. Counsel for the Appellants stated that the Impugned Order is bad in law and has violated the principles of natural justice. The Order is arbitrary and passed hastily without proper investigation. Ld. Counsel contended that no investigation whatsoever was conducted to find out any evidence. The entire case has been made out on the basis of the statements recorded by DRI Officers. Ld. Counsel argued that no separate and independent investigation has been conducted under FEMA to hold the charge of Section 3 (b) made under FEMA as established. Ld. Counsel further argued that in so far as the Appellants Shri S. Gowrishankar and Smt. Mamta Gupta are concerned no penalty can be imposed upon them, since the Impugned Order itself observes that it was Shri Dhiraj Gupta and Shri Kamlesh Gupta who were looking after the affairs of the imports made by the Appellant M/s Shami Impex. Smt. Mamta Gupta is wife of Shri Kamlesh Gupta, who held the power of attorney from Smt. Mamta Gupta, the partner in M/s Shami Impex. Smt. Mamta Gupta had also vide letter dated 20.04.2016 stated that she was in no way concerned with the business activities of M/s Shami Impex. She also had conveyed that this position of her was accepted by DRI and Customs. Ld. Counsel stated that Shri S. Gowrishankar was also not involved in any business or imports of the Firm. He too was a namesake partner.
3. Ld. Counsel for the Appellants also contended that with respect to the Show Cause Notice (SCN) and the Complaint, two Annexures viz Annexure A and Annexure B were issued. Ld. Counsel further contended that the Annexure B of the Complaint under Section 16 (3) of FEMA is equivalent to Annexure II of the SCN issued by DRI. He stated that there exists no evidence with respect to the 49 consignments listed in Annexure B. Ld. Counsel contended that this is an admitted fact even with respect to Annexure II of the SCN issued by DRI. Ld. Counsel further contended that the evidence being relied upon by the Respondent Directorate with respect to 41 consignments listed in Annexure-A was collected during the course of investigation under the Customs Act and not under FEMA. Ld. Counsel stated that statements made by Shri Dhiraj Gupta and Shri Kamlesh Gupta were subsequently denied and cannot be relied upon.
4. Ld. Counsel for the Appellants also argued that the Customs, Excise and Service Tax, Appellate Tribunal, Chennai (CESTAT) vide Order dated 11.07.2024 in Appeal Nos. C/42137,42138,42139,42140 & 42141/2013 filed by the present Appellants, allowed the Appeals and set aside the Order against the Appellants under the Customs Act. Consequently, the confirmation of the demand for the Customs duty, the confiscation of the goods and the penalties imposed on the Appellants were set aside. Ld. Counsel therefore argued that since the underlying case made against the Appellants fell then the Impugned Order against the Appellants cannot hold. He therefore, pleaded to allow the Appeals.
5. Ld. Counsel for the Respondent stated that the Impugned Order is speaking Order and was issued after providing a number of opportunities to the Appellants for rep
