FINAL ORDER

27.11.2025

This Order disposes of the Appeal No. FPA-FE-64/BNG/2015 filed by Shri M. V. Swabhanu Proprietor of M/s Mithra Electronics against the Order No. JD/01-BZ/2015-16/FEMA/JD(JK)/579 dated 25.06.2015 (Impugned Order), passed by the Joint Director, Enforcement Directorate, Government of India, Bangalore. Penalty of Rs. 1,10,00,000/- was imposed on the Appellant Shri M. V. Swabhanu, vide the Impugned Order for the contravention of Section 3 (d) of the Foreign Exchange Management Act, 1999 (FEMA).

2. Ld. Counsel for the Appellant argued that the Impugned Order has been passed contrary to facts and to evidence. He stated that the allegation relating to the Hawala transfer of funds abroad by the Appellant is based upon the surmise and conjecture of the Respondent Directorate that the Appellant indulged in under valuation of imports. Ld. Counsel stated that no proceeding was initiated by the Customs Department. Moreover, the Appellant has relied upon the evidence of the values of the contempourneous imports in this regard. The Appellant has filed an affidavit dated 14.11.2025 as permitted by the Tribunal, which clearly shows that the imports made by the Appellant were at higher unit price than the unit price of the contemporaneous imports. Ld. Counsel further argued that the statements tendered by the Appellant have been retracted. The grounds for rejection of the retractions in the Impugned Order are incorrect and baseless. The Ld. Adjudicating Authority (AA) has inferred from the statements of the Appellant which were taken under coercion. Moreover, no independent document was produced as evidence to corroborate the statements. Ld. Counsel contended that the reliance upon the E-mail communication between the Appellant and the foreign buyer is incorrect as there is no mention that it relates to imports of goods by the Appellant. Ld. Counsel for the Appellant has further argued that the evidence recovered from the electronic record like computer printout, CDs and pen drive etc. cannot be used since no compliance has been made to the provisions of Section 65 (B) of the Evidence Act 1872. Ld. Counsel for the Appellant stated that the cross examination was sought of certain Officers of the Respondent Directorate. However, no such opportunity was granted. In this regard, he cited the Judgment in the case of M/s Telestar Travels Pvt. Ltd. vs. Special Director of Enforcement [(2013) TOIL-17-SC-FEMA]. Ld. Counsel submitted that no penalty is imposable in view of the Apex Court decision in Hindustan Steel Ltd. vs. State of Orissa [(1978) ELT J159 (SC)]. He pleaded that if in case Appeal is decided against the Appellant the penalty may be reduced, in view of the economic condition of the Appellant. Ld. Counsel for the Appellant therefore pleaded to allow the Appeal.

3. Ld. Counsel for the Respondent stated that on 22.01.2010 the business premises of Shri Ramakrishna Setty viz M/s R. K. Enterprises was searched. Besides recovery of Rs. 20,00,000/-, bunch of loose sheets were also seized. Shri Ramakrishana Setty in his statement admitted that at the instance of one Shri Selvam of Malaysia, he would receive Indian Currency from unknown persons for distribution to certain persons in India. Consequently, residential and business premises of the Appellant were searched on 23.01.2010. During the search certain documents, loose sheets and copy of E-mail were recovered and seized. The Appellant in statement dated 23.01.2010 stated that he resorted to under valuation of goods imported by him as to overcome the competition in the domestic market. He also stated that he transferred funds abroad equivalent to differential value through Shri Ramakrishna Setty. He admitted that he would communicate with Shri Setty on his mobile number. He also admitted that the invoices of the goods imported were made by the Chinese suppliers as per his instructions. Shri Ramakrishna Setty in his statement dated 23.01.2010 explained the details of receipt and