Cross-examination Can’t Be Claimed as a Rule in Summary Proceedings Before AA Unless a Statement is Recorded

Case Details: Prakash Chandra Yadav v. Special Director, Directorate of Enforcement, Delhi - [2024] 163 taxmann.com 128 (SAFEMA - New Delhi)

Judiciary and Counsel Details

• Munishwar Nath Bhandari, Chairman & Balesh Kumar, Member
• Santosh Chaurihaa, Ms Suman Mishra, Ms Pratiksha & Ms Divya, Advs. for the Appellant.
• Varun Mishra, Adv. for the Respondent.

Facts of the Case

In the instant case, the Adjudicating Authority passed an order imposing a penalty of Rs.5 lakhs on the appellant finding contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973 for receipt of an NRE cheque of Rs.30 lakhs by the appellant from an NRI.

Consequently, through this appeal, the appellant sought to overturn the penalty, arguing that he had received a cheque in Indian currency, not foreign currency, and thus, Section 8(1) of FERA, 1973, was not applicable.

Furthermore, the appellant submitted that he was acquitted by the Additional Chief Metropolitan Magistrate on the ground that there was no material to prove the transfer of an amount from the NRE account. Given this acquittal in the prosecution case, the appellant contended that the impugned order should be set aside.

Also, since the opportunity for cross-examination was not provided to the NRI, it was contended that the Adjudicating Authority committed grave illegality while denying the opportunity.

SAFEMA Held

The Appellate Tribunal SAFEMA noted that the documents received by the respondent, including certified true copies of the account opening documents, account transcriptions, cheques, and vouchers from an NRE account of the NRI, indicated that certain deposits of foreign exchange and subsequent withdrawals were made from this NRE account, which ultimately went to the appellant’s account, possibly as Indian currency.

It was noted that the NRE account was not opened with a deposit of Indian currency that was then transferred to the appellant, which means it cannot be excluded from the purview of Section 8(1) of FERA.

The Appellate Tribunal SAFEMA further stated that the cross-examination could not be sought of a person who never deposed a statement before the Court or authority and in the instant case it was a fact that the NRI could not be produced before the Adjudicating Authority and thereby there was no question of recording of his statement.

The Appellate Tribunal ruled that “In those circumstances when the witness was not available and could not be produced in proceedings, and his statement was not recorded even during the course of the investigation, the question of cross-examination would not arise. Further, the conclusion drawn by the Additional Chief Metropolitan Magistrate Court could not be made binding when the respondent had sufficiently proved their case.”

Accordingly, the penalty for alleged contravention was justified, and the appeal against AA’s order was set aside.