Case: Shri Ashok Chopra & Others Vs. Union of India & Others

J.H. Bhatia, J.1. Being aggrieved by dismissal of their appeals by the Appellate Tribunal for Foreign Exchange, New Delhi, against the order passed by the Assistant Director, Enforcement Directorate imposing penalty of Rs.3,60,000/- on M/s. Natural Granite Exports (the appellant in Appeal No.8 of 2009) and penalty of Rs.1,55,000/- each on the appellants in the remaining two appeals for contravention of Section 9(1)(c) of the Foreign Exchange Regulation Act, 1973 (for short FERA), the appellants have preferred these three appeals. As all the appeals arise out of the common orders and facts, they may be disposed of by this common Judgment. 2. The appellant - M/s. Natural Granite Exports is a proprietorship concern, of which the appellant Ashok Chopra is the proprietor. They carried on business of export in marble. It is the contention of the Enforcement Directorate (the Revenue) that the appellant had imported marble from COGEMAR, an exporter from Italy. The marble of different qualities and descriptions was imported and the same was received by three containers. The value of the total imports as disclosed by the exporter COGEMAR to the authorities in Italy was 48,637,550 Italian Lira. However, the appellants had produced invoice bearing No.548/94 dated 14.6.1994 wherein the quantity of the marble was shown less and the value was shown at 12,640,000/- Italian Lira and that payment was made through State Bank of Saurashtra. The copy of the invoice No.548/94 dated 14.6.1994 issued by COGEMAR showing the value of the imports at 48,637,550/- Italian Lira was secured by an officer of the DRI and it revealed that the appellant had heavily under-invoiced the value of the imports and the remaining amount of 35,997,550/- Italian Lira, equivalent to Rs.7,20,000/-, was paid in cash or a liability w as created in favour of COGEMAR, without obtaining necessary permission from the authorities under FERA and thus they had contravened the provisions of Section 9(1)(c) of FERA, which had restricted certain payments by the Indian resident outside India. The Assistant Director, Enforcement Directorate, after hearing the appellants came to conclusion that they had contravened the provisions of Section 9(1)(c) of FERA and imposed penalty as stated above holding that the firm as well as both the partners are responsible for the said contravention. 3. According to the appellant - M/s. Natural Granite Exports is not a partnership firm, but a proprietorship concern of which Ashok Chopra is a proprietor and in view of this, the proprietor of the proprietorship concern cannot be treated as a separate person from the concern and if the penalty was to be imposed that could be done only against one person and, therefore, the separate order of penalty against Ashok Chopra and Suresh Chopra is illegal. It is further contended that the FERA was repealed as per the provisions of Section 49 of the Foreign Exchange Management Act, 1999 (FEMA) and as per the provisions of Section 49 of FEMA, action could be taken for violation of the provisions of FERA only within two years from the date of enforcement of FEMA. While in this case, the action was taken long after the expiry of two years and, therefore, it is bad in law. It is thirdly contended that the Enforcement Directorate relied on the xerox copy of the alleged invoice received from COGEMAR. Neither the document is duly authenticated nor any other evidence was led to prove the same and, therefore, the evidence of the Assistant Director, Enforcement Directorate as well as the appellate Tribunal cannot be sustained. 4. There is no dispute that M/s. Natural Granite Exports imported marble from COGEMAR, an exporter from Italy by Invoice No.548/94 dated 14.6.1994. The invoice submitted by the appellants before the Customs authorities revealed that they had imported raw marble 700,000 M2 at the rate of 16,000 Italian Lira and the total value of the import was shown to be 12,640,000/- Italian Lira and as per the said invoice, the payment was to be made by cash against documents through State Bank of Saurashtra, Chakala Road, Andheri (East), Bombay into Account No.10194 and this invoice also bears stamp of State Bank of Saurashtra indicating that payment of the same was made through the Bank. In view of this, the imports were cleared at Nhava Sheva Port in favour of Natural Granite Exports. According to the Enforcement Directorate, its officer secured the copy of the invoice no.548/94 dated 14.6.1994 submitted by the exporter COGEMAR to the Italian authorities in respect of the exports to M/s. Natural Granite Exports. It revealed that the raw marble of different quantity and quality was exported. The price of the same was also different according to the nature and quality of the marble. The total quantity was shown to be 1051300 M2 and the total value of the marble was shown to be 48,637,550. It revealed the payment was partly by cash and partly through State Bank of Saurasshtra,Chakala Road, Andheri (East), Bombay into Account No.10194. According to the Enforcement, as per said invoice the actual imports were worth 48,637,550 Italian Lira, while the appellants had secured the invoice bearing the same number and date from COGEMAR for different quality and quantity as well as much less value. As per the invoice, the payment of which was made through State Bank of Saurashtra and which was presented to the Customs Authorities, the value of the imports was 12,640,000/- Italian Lira. Thus, the difference between the two is to the tune of 35,997,550 Italian Lira, equivalent to Indian Rs.7,20,000/-. As per the Enforcement Directorate, the amount of difference between the two invoices was to be paid in cash and either the payment was made in cash or an acknowledgment as made creating a right in favour of COGEMAR to recover that amount in foreign exchange, for which no permission was obtained by the appellant - M/s.Natural Granite Exports from the competent authorities. 5. The learned Counsel for the appellants contended that the Enforcement Directorate relied on the xerox copy of the invoice to show that the value of the imports was more than what was disclosed by the appellants, but neither that invoice was duly authenticated nor any other evidence was led to prove the same. Therefore, said copy of invoice is not sufficient to hold petitioners guilty. 6. On perusal of the orders passed by the adjudicating authority as well as the appellate Tribunal, it appears that the appellants had initially objected to the said invoice on the ground that it did not bear the name of COGEMAR. However, it was found that it actually bears name of COGEMAR and both the invoices were similar except the contents of the same about quality, quantity and price of the goods. The adjudicating authority noted that the Advocate for the appellants had contended that the source of invoice received from the DRI was not disclosed. The adjudicating authority observed that it is not necessary to disclose the source and it is definitely issued by M/s. COGEMAR, Italy, as is clear from the face of the invoice. He also noted that it is not the case of the defence that it is a fabricated document. Once the genuineness of the document is not disputed, merely because the officer, who collected the document is not examined or that the document is not authenticated makes no difference. There is nothing on record to show that the officer of the DRI had any reason to create any false document against the appellants. 7. On perusal of the record, it also appears that about the transaction, based on the invoice No.548/94 dated 14.6.1994, firstly the notice was issued under Section 40 of FERA on 21.8.1996 and thereafter several notices were issued and opportunity was given to the appellants to explain the difference between the two invoices and finally the show cause notice was issued to all the appellants under Section 9(1) on 17.1.2002 and thus action was initiated by the adjudicating authority. It is material to note that FERA was repealed as per Section 49 by FEMA, 1999. Fema came into force on 1.6.2000. As per provisions of Section 49(3) of FEMA, no Court shall take cognizance of an offence under the repealed Act and no adjudicating officer shall take notice of any contravention under section 51 of the repealed Act after the expiry of a period of two years from the date of commencement of FEMA. In view of this provision, no cognizance of offence could be taken and no notice of any contravention under Section 51 of the FEMA could be taken after the expiry of to years from 1.6.2000 when FERA came into force. In the present case, as indicated above, the notices were issued since 21.8.1996 and as the appellants could not satisfy the adjudicating about the difference in the two invoices carrying the same number and date, the adjudicating authority issued the show cause notice on 17.1.2002 and initiated action. Thus, the action was taken by the adjudicating authority within a period of two years after the FERA was repealed. In view of this, we do not find any question of law of law in respect of both these points. 8. On hearing the learned Counsel for the parties and perusal of the record, we find that in FERA Appeal Nos. 6 and No.7 of 2009, filed by Ashok Chopra and Suresh Chopra respectively, the following question of law arises:- Whether the appellants - Ashok Chopra and Suresh Chopra could be individually penalized once M/s. Natural Granite Exports, proprietorship concern was penalized for contravention of Section 9(1)(c) of FERA 9. On perusal of the record, it appears that M/s. Natural Granite Exports is a proprietorship concern and the appellant Ashok Chopra is its proprietor. This fact is clear from a number of documents, particularly Income-tax returns which were submitted by Ashok Chopra as well as the notices issued to M/s. Natural Granite Exports by the officers of the Sales Tax from the year 1994-95 wherein Ashok Chopra was shown to be the proprietor. There is no material to show that M/s. Natural Granite Exports is a partnership firm. From para 20 of the Judgment of the appellate Tribunal it appears that it was argued on behalf of the appellants that both the proprietorship concern and the proprietor cannot be charged separately and cannot be held liable for separate penalty. However, this argument as rejected by the Tribunal observing that the Explanation appended to Section 68 of FERA clearly provides that "company" means any body corporate and includes a firm or other association of individuals and though the proprietorship concern and proprietor both are same, the Tribunal lost sight of the provisions of the FERA, factual matrix including the amount involved in the contravention. 10. Section 68 of FERA provides for offences by companies and for punishment and penalty for the contravention of the provisions of FERA by the companies. Section 68(1) provides that where a person committing a contravention of any of the provisions of the Act and the rules, directions and orders made under the said Act is by company, every person who, at the time the contravention was committed, was in charge of, and was responsible to the company for the conduct of business as well as the company shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. The Explanation to Section 68 provides that "company" means any body corporate and includes a firm or association of individuals and "director" in relation to a firm, means a partner in the firm. In the present case, Natural Granite Exports is not a company nor it is a partnership firm nor Hindu Joint Family (HUF), but it is a proprietorship concern of which Ashok Chopra alone is a proprietor. Therefore, neither it can be treated as a company nor as a firm nor an association of individuals. Ashok Chopra was carrying on the business in the assumed name and style of M/s. Natural Granite Exports and if any contravention of any provisions of law or rules is committed by the said concern, that contravention shall be presumed to have been committed by its proprietor i.e. Ashok Chopra. In view of this, M/s. Natural Granite Exports as the concern and its proprietor Ashok Chopra could not be held guilty separately and penalty could not be imposed on each of them. Imposing penalty on the proprietorship concern as well as on the proprietor would amount to punishing the same person twice for the same contravention. Therefore, when the proprietorship concern is found guilty and penalty is imposed on it, that penalty should be presumed to have been imposed on its proprietor and, therefore, no separate penalty could be imposed on the proprietor as has been done in the present case. 11. It may also be noted that Suresh Chopra is neither a partner nor a proprietor of the said proprietorship concern. However, the concurrent finding of both the Authorities below is that Suresh Chopra was the authorized signatory on behalf of the proprietorship concern and, therefore, besides the proprietorship concern, he, as an authorized signatory, has also contravened the provisions of law. It can be said that he also abetted the contravention of the provisions of FERA by the said proprietorship concern and therefore, the contravention is proved, he can be rightly held guilty for abetment of the same and penalty can be imposed on him separately.

Decision:
1[ds]6. On perusal of the orders passed by the adjudicating authority as well as the appellate Tribunal, it appears that the appellants had initially objected to the said invoice on the ground that it did not bear the name of COGEMAR. However, it was found that it actually bears name of COGEMAR and both the invoices were similar except the contents of the same about quality, quantity and price of the goods. The adjudicating authority noted that the Advocate for the appellants had contended that the source of invoice received from the DRI was not disclosed. The adjudicating authority observed that it is not necessary to disclose the source and it is definitely issued by M/s. COGEMAR, Italy, as is clear from the face of the invoice. He also noted that it is not the case of the defence that it is a fabricated document. Once the genuineness of the document is not disputed, merely because the officer, who collected the document is not examined or that the document is not authenticated makes no difference. There is nothing on record to show that the officer of the DRI had any reason to create any false document against the appellants.On perusal of the record, it also appears that about the transaction, based on the invoice No.548/94 dated 14.6.1994, firstly the notice was issued under Section 40 of FERA on 21.8.1996 and thereafter several notices were issued and opportunity was given to the appellants to explain the difference between the two invoices and finally the show cause notice was issued to all the appellants under Section 9(1) on 17.1.2002 and thus action was initiated by the adjudicating authority. It is material to note that FERA was repealed as per Section 49 by FEMA, 1999. Fema came into force on 1.6.2000. As per provisions of Section 49(3) of FEMA, no Court shall take cognizance of an offence under the repealed Act and no adjudicating officer shall take notice of any contravention under section 51 of the repealed Act after the expiry of a period of two years from the date of commencement of FEMA. In view of this provision, no cognizance of offence could be taken and no notice of any contravention under Section 51 of the FEMA could be taken after the expiry of to years from 1.6.2000 when FERA came into force. In the present case, as indicated above, the notices were issued since 21.8.1996 and as the appellants could not satisfy the adjudicating about the difference in the two invoices carrying the same number and date, the adjudicating authority issued the show cause notice on 17.1.2002 and initiated action. Thus, the action was taken by the adjudicating authority within a period of two years after the FERA was repealed. In view of this, we do not find any question of law of law in respect of both these points.On hearing the learned Counsel for the parties and perusal of the record, we find that in FERA Appeal Nos. 6 and No.7 of 2009, filed by Ashok Chopra and Suresh Chopra respectively, the following question of lawhok Chopra and Suresh Chopra could be individually penalized once M/s. Natural Granite Exports, proprietorship concern was penalized for contravention of Section 9(1)(c) ofOn perusal of the record, it appears that M/s. Natural Granite Exports is a proprietorship concern and the appellant Ashok Chopra is its proprietor. This fact is clear from a number of documents, particularlyreturns which were submitted by Ashok Chopra as well as the notices issued to M/s. Natural Granite Exports by the officers of the Sales Tax from the yearwherein Ashok Chopra was shown to be the proprietor. There is no material to show that M/s. Natural Granite Exports is a partnership firm. From para 20 of the Judgment of the appellate Tribunal it appears that it was argued on behalf of the appellants that both the proprietorship concern and the proprietor cannot be charged separately and cannot be held liable for separate penalty. However, this argument as rejected by the Tribunal observing that the Explanation appended to Section 68 of FERA clearly provides that "company" means any body corporate and includes a firm or other association of individuals and though the proprietorship concern and proprietor both are same, the Tribunal lost sight of the provisions of the FERA, factual matrix including the amount involved in the contravention.Section 68 of FERA provides for offences by companies and for punishment and penalty for the contravention of the provisions of FERA by the companies. Section 68(1) provides that where a person committing a contravention of any of the provisions of the Act and the rules, directions and orders made under the said Act is by company, every person who, at the time the contravention was committed, was in charge of, and was responsible to the company for the conduct of business as well as the company shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. The Explanation to Section 68 provides that "company" means any body corporate and includes a firm or association of individuals and "director" in relation to a firm, means a partner in the firm. In the present case, Natural Granite Exports is not a company nor it is a partnership firm nor Hindu Joint Family (HUF), but it is a proprietorship concern of which Ashok Chopra alone is a proprietor. Therefore, neither it can be treated as a company nor as a firm nor an association of individuals. Ashok Chopra was carrying on the business in the assumed name and style of M/s. Natural Granite Exports and if any contravention of any provisions of law or rules is committed by the said concern, that contravention shall be presumed to have been committed by its proprietor i.e. Ashok Chopra. In view of this, M/s. Natural Granite Exports as the concern and its proprietor Ashok Chopra could not be held guilty separately and penalty could not be imposed on each of them. Imposing penalty on the proprietorship concern as well as on the proprietor would amount to punishing the same person twice for the same contravention. Therefore, when the proprietorship concern is found guilty and penalty is imposed on it, that penalty should be presumed to have been imposed on its proprietor and, therefore, no separate penalty could be imposed on the proprietor as has been done in the present case.It may also be noted that Suresh Chopra is neither a partner nor a proprietor of the said proprietorship concern. However, the concurrent finding of both the Authorities below is that Suresh Chopra was the authorized signatory on behalf of the proprietorship concern and, therefore, besides the proprietorship concern, he, as an authorized signatory, has also contravened the provisions of law. It can be said that he also abetted the contravention of the provisions of FERA by the said proprietorship concern and therefore, the contravention is proved, he can be rightly held guilty for abetment of the same and penalty can be imposed on him separately.