Case: Vinod M. Chitalia Vs. Union of India

November 2005 and 25 December 2005, from that given to DRI(Customs dept.) on 25 April 2005, as recorded in the order of the Tribunal in the matter of APL. (See para 16 at page 240 of the Appeal Memo) Therefore there is in fact no retraction of any particular statement by Manoj Jain. It is pertinent to note that the Appellant in his grounds of appeal before the Tribunal had not taken any specific ground with regard to retraction of statement by Manoj Jain. (Page 208 of the Appeal Memo) In the circumstances, in the present case, there is no question of retraction of the statement made by Manoj Jain Director of APL Limited to the DRI. Consequently, the question of the original statement being made to the DRI under threat cannot arise. In any event it is to be noted that in the impugned Order, (at para 21 at page 270 of the Appeal Memo) it is recorded that the changed statement was made only four months after the earlier statement made by Manoj Jain to DRI and in any event the same is corroborated by other evidence. The Tribunal has also recorded a finding of fact that there is nothing on record to indicate that any force was used to record the statements of the Appellant or Manoj Jain - Director of APL Limited or other persons.20. The statements made to DRI can be used in the present proceeding as they pertain to the same transaction. It must be borne in mind that under Section 108 of the Customs Act, 1962 the statements recorded before the DRI are deemed to be in a judicial proceeding within the meaning of Section 193 and 228 of the Indian Penal Code, 1860. The solemnity and sanctity attached to the statement made in a judicial proceeding therefore attaches to the statement made under the Customs Act to the DRI. Therefore there is no prohibition in relying upon statements made under the Customs Act 1962 for the purposes of the adjudication proceeding under the FEMA, more so when reliance is placed upon documents to the complaint made to the Adjudicating Authority.21. Section 3(b) provides that no person shall make any payment to or for the credit of any person resident outside India in any manner. In the present case, there is a complete absence of any legitimate consideration, such as the supply of goods against which an inward remittance as high as Rs. 75.39 crores was received. Hence, the only possible inference that would arise is that the inward remittance of Rs.75.39 crores was matched by a hawala transaction involving transactions through a person resident outside India. Similarly, under Section 3(d), no person shall enter into any financial transaction in India as consideration for or in association with the acquisition or creation or transfer of a right to acquire any asset outside India. Money is a form of assets. The acquisition of money outside India is the acquisition of an asset. This acquisition would be subject to the FEMA and has to be in accordance with law. The Appellant was a party to financial transactions in India which constituted a consideration for the receipt of inward remittances amounting to Rs. 75.39 crores from abroad which were not backed by any lawful consideration involving a genuine export of goods. The adjudicating authority has found that the amount which was received by APL through banking channels was not actually due to them against any goods exported. This amount as held by the adjudicating authority, represented an amount transmitted from India through unauthorised channels to show a legitimate inward remittance.In assessing these findings, the Court cannot be oblivious of the fact that clandestine transactions of the nature involved in the present case, are within the peculiar knowledge of persons such as the Appellant, who are parties to those transactions. The burden which is cast upon the adjudicating authority to establish a violation must be assessed from a robust and common sense perspective. Clandestine violations take place under the cloak of secrecy. To impose a burden of establishing in an adjudication proceeding, every conceivable link of an unlawful transaction would result in a manifest failure of justice and would defeat the underlying purpose of the Act. The standard of proof in an adjudication proceeding cannot be equated with the rigorous standard in a criminal trial. The proof required in an adjudication proceeding is on a preponderance of possibilities. The Department has discharged the burden cast upon it of proving the breach of Sections 3(b) and 3(d).22. Before concluding, it is necessary for us to refer to the fact that the Tribunal, in a passing reference to the earlier decision has observed that APL, its Chairman and Directors were not persons entitled to be exonerated of the charges by the Tribunal. The issue as to the complicity of APL, its Chairman and Directors stands governed by the earlier decision of the Tribunal. Surprisingly, no appeal has been filed by the Union of India or by the Enforcement Directorate against the earlier decision of the Tribunal dated 31 August 2009 and the limitation for filing such an appeal under Section 35 may perhaps have expired by now. Counsel for the Respondents also has no explanation as to why no appeal was filed in the earlier case. Be that as it may, those observations of the Tribunal cannot be construed as affecting the rights of any third parties who were not before the Court, since the Tribunal was and this Court is concerned only with the involvement of those who are parties to the appeal proceedings. Independently, the evidence against the Appellant is sufficient to sustain the finding of breach of Sections 3(b) and 3(d). The penalty is not disproportionate, but is commensurate with the gravity of the charge, the nature of the misconduct and the role attributed to the Appellant.23. For the aforesaid reasons, we are of the view that no question of law would arise in the appeal.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]17. The Settlement Commission under Section 127H of the Customs Act, 1962 has power to grant immunity to any person who has made an application to it for settlement. The immunity is from prosecution under the Customs Act, 1962 and also either wholly or in part from the imposition of a penalty or fine under the Customs Act. Therefore the immunity is only from penalty under the Customs Act and not in respect of any other Act including the FEMA. Further Section 127J of the Customs Act 1962 states that an order of the Settlement Commission shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any proceeding under this Act or any other law for the time being in force. Therefore the orders of the Settlement Commission are considered to be conclusive of the matters stated therein and cannot be challenged in any other proceeding under any other law including FEMA. In the light of the aforesaid provision the order of the Settlement Commission dated 7 June 2006 in respect of the findings of fact recorded therein is conclusive.18. In any event, the Appellant herein is barred from raising the issue of his involvement in manipulating documents to enable foreign exchange procurement to the tune of Rs.75 crores as remittances without effecting physical export. This is for the reason that the Appellant would be bound by the principle of issue estoppel. The principle ofbars a Court from exercising its jurisdiction to determine a lis, if it has attained finality between the parties. On the other hand the doctrine of issue estoppel is invoked against a party from raising an issue in a subsequent proceeding, if the same has been decided in an earlier lis by a competent court (See Bhanu Kumar Jain). (2005) 1 SCC 787.   Similarly in Ishwar Datta, (2005) 7 SCC 190     the Supreme Court held that issue of estoppel would arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided. Then in a subsequent proceeding involving a different cause of action to which the same issue is relevant it cannot be reopened. On the basis of the above decision, it is clear that even on the principle of issue estoppel, the impugned Order was correct in relying upon a finding in the order of the Settlement Commission dated 7 June 2006 which has been accepted by the Appellant and has the necessary ingredient for imposition of penalty under the FEMA.Before the Tribunal it was urged on behalf of the Appellant that the statement of Manojof APL Ltd. has been retracted and therefore, the earlier statement cannot be considered to be voluntary and true (Paragraph 20 page 269 of the Appeal Memo). It is pertinent to note that the retraction which was urged by the Appellant before the Tribunal was on the basis that different statements were given to the Enforcement Directorate on 23 and 25 November 2005 and 25 December 2005, from that given to DRI(Customs dept.) on 25 April 2005, as recorded in the order of the Tribunal in the matter of APL. (See para 16 at page 240 of the Appeal Memo) Therefore there is in fact no retraction of any particular statement by Manoj Jain. It is pertinent to note that the Appellant in his grounds of appeal before the Tribunal had not taken any specific ground with regard to retraction of statement by Manoj Jain. (Page 208 of the Appeal Memo) In the circumstances, in the present case, there is no question of retraction of the statement made by Manoj Jain Director of APL Limited to the DRI. Consequently, the question of the original statement being made to the DRI under threat cannot arise. In any event it is to be noted that in the impugned Order, (at para 21 at page 270 of the Appeal Memo) it is recorded that the changed statement was made only four months after the earlier statement made by Manoj Jain to DRI and in any event the same is corroborated by other evidence. The Tribunal has also recorded a finding of fact that there is nothing on record to indicate that any force was used to record the statements of the Appellant or Manoj JainDirector of APL Limited or other persons.20. The statements made to DRI can be used in the present proceeding as they pertain to the same transaction. It must be borne in mind that under Section 108 of the Customs Act, 1962 the statements recorded before the DRI are deemed to be in a judicial proceeding within the meaning of Section 193 and 228 of the Indian Penal Code, 1860. The solemnity and sanctity attached to the statement made in a judicial proceeding therefore attaches to the statement made under the Customs Act to the DRI. Therefore there is no prohibition in relying upon statements made under the Customs Act 1962 for the purposes of the adjudication proceeding under the FEMA, more so when reliance is placed upon documents to the complaint made to the Adjudicating Authority.Before concluding, it is necessary for us to refer to the fact that the Tribunal, in a passing reference to the earlier decision has observed that APL, its Chairman and Directors were not persons entitled to be exonerated of the charges by the Tribunal. The issue as to the complicity of APL, its Chairman and Directors stands governed by the earlier decision of the Tribunal. Surprisingly, no appeal has been filed by the Union of India or by the Enforcement Directorate against the earlier decision of the Tribunal dated 31 August 2009 and the limitation for filing such an appeal under Section 35 may perhaps have expired by now. Counsel for the Respondents also has no explanation as to why no appeal was filed in the earlier case. Be that as it may, those observations of the Tribunal cannot be construed as affecting the rights of any third parties who were not before the Court, since the Tribunal was and this Court is concerned only with the involvement of those who are parties to the appeal proceedings. Independently, the evidence against the Appellant is sufficient to sustain the finding of breach of Sections 3(b) and 3(d). The penalty is not disproportionate, but is commensurate with the gravity of the charge, the nature of the misconduct and the role attributed to the Appellant.23. For the aforesaid reasons, we are of the view that no question of law would arise in the appeal.