VINOD M. CHITALIA Vs. UNION OF INDIA

JUDGEMENT

(1.) This appeal under Section 35 of the Foreign Exchange Management Act, 1999 ( the FEMA ), is directed against an order of the Appellate Tribunal for Foreign Exchange, dated 27 April 2010. By the impugned order, the Tribunal has sustained the findings of the Special Director in the Enforcement Directorate, holding that the Appellant violated the provisions of Section 3(b) and Section 3(d) of the Act. The penalty which was imposed on the Appellant by the Adjudicating Officer in the amount of Rs.2 crores under the first notice to show cause and in the amount of Rs.3 lakhs under the second notice has been sustained.

(2.) The Special Director in the Directorate of Enforcement issued two notices to show cause on 5 August 2008. The Appellant was the Fifth Noticeein respect of both the notices to show cause. The show cause notices were also addressed inter alia to a Company by the name of Arch Pharmalabs Ltd. and to its Chairman and Managing Director, Deputy Managing Director and Executive Director among other persons. In both the notices, it is alleged inter alia that there was a violation of the provisions of Sections 3(b) and 3(d) of the FEMA. The violation in respect of the first notice was to the extent of Rs.75.39 crores while in the case of the second, of Rs.3.84 crores.

(3.) Information was received by the Directorate of Revenue Intelligence that Arch Pharmalabs Ltd. (APL) was involved in bogus exports in which, the export documents showed that the drug Azithromycin was being exported while in actuality paracetamol which was of a negligible value was substituted. Three export consignments presented by APL for export under the DEPB Scheme under Shipping bills all dated 29 March 2005 in which goods were declared to be Azithromycin were intercepted. Though the FOB value declared was Rs.1.06 crores, on examination the consignment was found to contain Paracetamol of an actual value of Rs.3.25 lakhs. APL was alleged to have received remittances to the extent of Rs.75 crores in respect of a large number of transactions against fabricated export documents. The first show cause notice related to 261 transactions where no goods were actually exported. APL was alleged to have received an amount of Rs. 75.39 crores by way of inward remittances though no export had taken place. The second show cause notice related to a charge in respect of 14 transactions where theviolation was to the tune of Rs. 3.84 crores.