THE HONOURABLE SMT. JUSTICE RENUKA YARA CIVIL MISCELLANEOUS SECOND APPEAL Nos.32 and 33 of 2014

COMMON JUDGMENT:

Heard Sri Y. Sreenivasa Reddy, learned counsel for the appellants and Sri Anil Prasad Tiwari, learned Standing Counsel for Directorate of Enforcement for respondent. Perused the entire record.

2. These Civil Miscellaneous Second Appeals are preferred by the appellants aggrieved by the common order dated 20.08.2014 passed by the Appellate Tribunal for Foreign Exchange, 15^th Floor, Hindustan Times House, K.G. Marg, New Delhi, (‘Appellate Tribunal’), in Appeal Nos.132 and 133 of 2011, wherein applications filed by the appellants seeking stay of the common adjudicating order dated 13.10.2011 in Order No.SDE/SKS/VI/9/2011 passed by the Special Director of Enforcement, Enforcement Directorate, Government of India, New Delhi, (‘Adjudicating Authority’), were disposed of.

3. The brief facts of the case are that the Assistant Director, Directorate of Enforcement, Hyderabad Zonal Office, lodged a complaint under Section 16 (3) of the Foreign Exchange Management Act, 1999 (hereinafter referred to as ‘the Act’) against both the appellants herein for contravention of provisions of the Act and Rules thereunder, more particularly, Section

3(d) read with Section 42 of the Act. M/s. Vasavi Impex is a proprietary concern and the appellant-B. Sanjay is the proprietor and appellant-T. V. Madhusudhan Rao is its authorized signatory. Appellant-T.V. Madhusudhan Rao, assured appellant-B. Sanjay that he would get 25 to 30% interest per annum on the amount of Rs. 3,00,000/- invested in stone cutting tools business. Appellant-T.V. Madhusudhan Rao, was proprietor of M/s. Mark Stonex, which was trading in granite cutting tools, which was established prior to M/s.Vasavi Impex. Granite cutting tools were imported from China and were locally sold. While so, on 17.12.2007 officials of the Directorate of Enforcement searched the residence of appellant-T.V. Madhusudhan Rao and on 18.12.2007 they seized a laptop, Rs.5,00,000/- and certain documents. The statement of appellant-T.V. Madhusudhan Rao was recorded on 18.12.2007 and again on 07.01.2008 which show that he was importing granite cutting tools from China and selling them locally. The said tools were purchased in the name of M/s. Vasavi Impex, which stood in the name of appellant-B.Sanjay. Appellant-T.V. Madhusudhan Rao being the authorized signatory looked after the entire business and the supplier in China appointed them as sole representative in Andhra Pradesh for importing cutting tools. The business started in the year 2007 and granite cutting tools were imported for four to five times from M/s.Quanzhou Zahongzhihzui Diamond Tool Co. Ltd., China, by under valuing the prices and the difference totally amounting to USD 4 lakhs approximately. The amount in Indian currency was paid to one Prakash from Begum Bazar, who used to pay the same to one Hukum in Chennai for onward payment to the suppliers in China. An amount equivalent to USD 80,000/- was paid to said Prakash of Begum Bazar in October, 2007 and amount equivalent to 250 USD was sent through a friend for payment to the suppliers at China. The documents which were seized in the premises of appellant-T.V. Madhusudhan Rao contain the actual C&F prices quoted by the supplier. The said prices were given by the supplier’s representatives when they visited India. The said prices related to the year 2006 and they were subsequently reduced by 5% to 10% of the actual price. While so, the value declared to the customs were 25 to 50% less than the actual value. The amounts were paid in personal capacity of appellant-T.V. Madhusudhan Rao as there was no segregation of the amount between various concerns looked after by him and that the appellant-B. Sanjay had signed the papers for opening of the concern.

4. Further, on the basis of the said complaint the Adjudicating Authority issued show cause notice No.T-4/5-Hyd/2009 (SCN-II) dated 23.11.2009 followed