FINAL ORDER

13.11.2025

This Order disposes of the Appeal Nos. FPA-FE-71/CHN/2020 filed by Dr. C. Manoharan, FPA-FE-72/CHN/2020 filed by M/s Nitish Tools Pvt. Ltd. (NTPL), FPA-FE-73/CHN/2020 filed by Smt. M. Thenmozhi, and FPA-FE-74/CHN/2020 filed by Smt. C. Lakshmi, against the Order No. SDE/SRO/CEZO/09/2020(SK) dated 28.07.2020 (Impugned Order) passed by the Special Director, Directorate of Enforcement, Government of India, Chennai. Penalties of Rs.5,00,00,000/- and Rs. 2,00,00,000/- have been imposed on NTPL and on the Appellant Dr. C. Manoharan respectively for contravention of Section 3 (b) of the Foreign Exchange Management Act, 1999 (FEMA) to the extent of Rs. 52,51,15,278/- and Rs.63,43,37,148/- respectively vide the Impugned Order. Further penalty of Rs. 10,00,000/- each has been imposed on Smt. Thenmozhi and Smt. C. Lakshmi for contravention of Section 3 (b) of FEMA read with Section 42 of FEMA.

2. Ld. Counsel for the Appellants stated that the allegation made in the Show Cause Notice (SCN) No. T-4/01/CEZO/SRO/2017 dated 10.02.2017 that the Appellant Shri C. Manoharan has paid amounts totaling Rs. 63,43,37,148/- (Rs. 52,51,15,278/- in respect of M/s Nitish Tools Pvt. Ltd. + Rs. 10,92,21,870/- in respect of M/s SSE-M/s Shree Sai Enterprises) to Shri Sunil of Coimbatore in India during the relevant period under the instructions of his overseas suppliers in China, for the credit of such Overseas suppliers and have thus had contravened the provisions of section 3(b) of FEMA, 1999 rendering himself liable to penalty under Section 13(1) of FEMA, 1999. The allegation related to under valuation of cemented carbide tips, carbide inserts and hollow drill rods imported from China. It was suspected that the difference between the actual price and the value declared to Customs, was paid to the exporter through Hawala.

3. Ld. Counsel for the Appellants argued that the Impugned Order has relied heavily on the investigation conducted by the Directorate of Revenue Intelligence (DRI) and the Order-in-Original passed by the Commissioner of Customs. He stated that 40 pages of the Impugned Order contains material collected by DRI. Since, the Impugned Order is based on the investigations conducted under the Customs Act the same is not sustainable in view of the Judgment in Jain Engineering Company vs. Enforcement Directorate [2016 (343) E.L.T. 149 (Del)]. The Judgment (supra) did not absolve the Respondent Directorate from the responsibility to conduct independent investigations for FERA violations and the admissions made in the Order of the Settlement Commission, could not be used to prove the allegations under FERA. Ld. Counsel denied that NTPL indulged in improper and illegal import. Ld. Counsel further argued that the evidences allegedly to have been recovered from the laptop were not sustainable as provisions of Section 138 C of the Customs Act, 1962 had not been adhered and the required certificate had not been produced. He asserted that the conditions under Sub- Section 2 of Section 138 C of the Customs Act, 1962 were not complied with. Ld. Counsel contended that the Respondent Directorate had failed to meet the requirements of Section 65 B of the Evidence Act.

4. Further, Ld. Counsel contended that there has been no corroboration of any of the evidences collected by DRI during the investigation. Ld. Counsel contended that the case of under valuation cannot be made merely on the basis of the statements which were recorded under duress. Reliance cannot be placed on the retracted statements. He stated that the investigation under FEMA could not bring forth independent evidence. Ld. Counsel contended that Shri Sunil, the alleged Hawala Dealer could not be located and the landlord in fact denied having rented his premises to any person known as Sunil. Ld. Counsel stated that the TT Remittances were neither verified by DRI nor by ED. Ld. Counsel also stated that the Order of the Commissioner of Customs in the case made by DRI has been under c