The Bombay High Court directed to refund the amount attached from the assessee in the absence of proven offence under section 9(1) (b ) of the Foreign Exchange Regulation Act, 1973 (FERA).
Shri Abdul Aziz Ahmed Ansari, the petitioner owned Cloth Stores by the name Zaibash Cloth Stores at Madanpura, Mumbai. On 12th May 1988, the officers of the Enforcement Directorate ( E.D.), raided Petitioner’s Cloth Stores and seized cash from his cash box in Indian currency an amount of Rs. 1,78,000/- and a few other documents.
A Show Cause Notice was issued by the Assistant Director of Enforcement, to the Petitioner, alleging contravention of Section 9(1)(b) and Section 9(1)(d) of the Foreign Exchange Regulation Act, 1973 (FERA). The said Show Cause Notice stated that the Petitioner had received Rs.45,000/- from persons residing outside India and made payment on behalf of a person, who was residing outside India.
The Assistant Director of Enforcement passed an order on the Show Cause Notice dated 6 October 1989, thereby holding the Petitioner guilty of the offences under Section 9(1)(b) and Section 9(1)(d) of FERA, and imposed penalty of Rs.15,000/- on each of the counts.
The Enforcement Officer accordingly deducted Rs.30,000/- from Rs.1,78,000/-, which was seized from the Petitioner’s Cloth Stores and the balance amount of Rs.1,48,000/- was forwarded to the Income Tax Department.
On 16 May 1995, the Deputy Director of the Enforcement Directorate passed an Order thereby holding the Petitioner guilty under Section 9(1)(d), r/w Section 64(2) of FERA and imposed a penalty of Rs.22,000/- on the Petitioner. The charges under Section 9(1)(b) were dropped.
It was further submitted that the penalty imposed on the Petitioner was very harsh and unjust. She further stated that two Show Cause Notices dated 5 May 1989 and 25 May 1990 were issued by E.D. based on the same facts and concerning the same seizure. She further submitted that there was no evidence on record to hold the petitioner guilty.
The Assistant Director of E.D. by its Order dated 6th October 1989 held the Petitioner guilty of offences under Sections 9(1)(b) and 9(1)(d) of the FERA and on the ground that Rs.45,000/- was received from a person residing outside India and imposed a penalty of Rs.15,000/- on each of the Sections. Therefore, the E.D. deducted an amount of Rs.30,000/- from the seized amount of Rs.1,78,000/- and a balance of Rs.1,48,000/- was sent to the Income Tax Department.
An Appeal preferred before the FERA Appellate Board by the Petitioner was subsequently transferred to the FEMA Appeal Tribunal, which heard the Appeal in the absence of the Petitioner as the Petitioner showed his helplessness to appear in Delhi due to financial constrain.
The Petitioner was successful in setting aside the first Show Cause Notice however, after the Petitioner was successful in setting aside the first Show Cause Notice; a second Show Cause Notice was issued as regards the same seizure of Rs.1,78,000/- in cash from the Cloth Stores of Petitioner.
The Petitioner could have utilized the said amount, the value of which at the relevant time was substantial. Considering from all angles, the Respondents could not have retained the said amount depriving the Petitioner of his legitimate entitlement.
While allowing the appeal, the division bench comprising G S Kulkarni & Rajesh S Patil ordered that “ an amount of Rs.1,48,000/- shall be refunded by the respondent to the petitioner within a period of four weeks from today with simple interest at the rate of 6% per annum from 12 May 1988.”
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