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2012 (8) TMI 216 - HC - FEMAImposition of penalty - whether the appellant had violated Section 9(1)(b) of FERA - transaction to sell the flats to the two directors were non resident Indians - Held that - Apart from the statement of the appellant recorded to the effect that the two directors in whose name the receipt was received were persons resident outside India there is no material on record to suggest that on the date of receiving the amount, the appellant was aware of this fact and even from the statement recorded also cannot be inferred that the appellant on the date of issuing the receipts was aware of this fact. The Appellate Tribunal has drawn adverse inference against the appellant solely on the ground that the appellant has not produced the agreement entered into by the appellant with the two directors as apart from issuing receipts, no agreement was entered into - it was adverse on the part of Tribunal to arrive at a conclusion that an agreement must have been entered into by and between the appellant and the two directors and impose penalty of Rs.34 lacs upon the appellant - the Prothonotary and Senior Master is directed to refund the amount of Rs.7.50 lacs with accrued interest to whom the assessee has deposited with the direction of Court - in favour of assessee.
Issues:
1. Interpretation of appellate Tribunal's jurisdiction under FEMA and FERA. 2. Repeal of FERA and transition to FEMA. 3. Validity of penalty imposed under FERA. 4. Adverse inference drawn by the Appellate Tribunal. Interpretation of appellate Tribunal's jurisdiction under FEMA and FERA: The appeal raised substantial questions of law regarding the appellate Tribunal's jurisdiction under the Foreign Exchange Management Act, 1999 (FEMA) and the Foreign Exchange Regulation Act, 1973 (FERA). The key issues included whether the Tribunal could exercise revisional powers over FERA orders post-repeal, and if FEMA saved the revisional powers conferred under FERA for the Tribunal. Additionally, the scope of revisional powers under FEMA and the necessity for manifest illegality or miscarriage of justice were questioned. Repeal of FERA and transition to FEMA: The case involved a Director of a company who received payments from an Indian company for flat sales, leading to FERA proceedings. With FERA's repeal in 2000 and FEMA's enactment, a revision petition was filed challenging the Deputy Director's order. The Tribunal imposed a penalty under FEMA, triggering the appeal. Validity of penalty imposed under FERA: The appellant contested the penalty under FERA Section 9(1)(b) for receiving payments on behalf of non-resident Indians without RBI exemption. The Tribunal inferred guilt based on lack of agreement evidence, disregarding the appellant's claim of no formal agreement. The Court found the inference unjustified and quashed the penalty. Adverse inference drawn by the Appellate Tribunal: The Appellate Tribunal's adverse inference, due to missing agreement evidence, was deemed erroneous. The Court ruled that without proof of an agreement, penalizing the appellant was unjust. The Tribunal's decision was criticized for being speculative, leading to the appeal's success and the penalty's annulment. In conclusion, the judgment clarified the Tribunal's jurisdiction post-FERA repeal, addressed the validity of penalties under FERA/FEMA, and criticized the Tribunal's adverse inference methodology. The appellant's appeal succeeded, with the penalty overturned, emphasizing the importance of evidence-based decisions in legal proceedings.
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