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2019 (6) TMI 636 - AT - FEMA


Issues Involved:
1. Applicability of Foreign Exchange Management Act (FEMA) vs. Foreign Exchange Regulation Act (FERA)
2. Realization of export proceeds
3. Validity of penalty imposed on directors
4. Delay in initiation of proceedings

Issue-wise Detailed Analysis:

1. Applicability of Foreign Exchange Management Act (FEMA) vs. Foreign Exchange Regulation Act (FERA):

The Tribunal addressed the applicability of FEMA and FERA, noting that the export in question occurred on 29.05.2000, just before FEMA came into force on 01.06.2000. According to Section 49 of FEMA, contraventions under FERA should be taken notice of within two years from the commencement of FEMA, i.e., by 31.05.2002. The Tribunal cited precedents, including Bhupendra V Shah vs. Union of India, which held that contraventions under FERA could not be pursued under FEMA after the sunset period.

2. Realization of Export Proceeds:

The Tribunal reviewed the facts and submissions, noting that the appellant exported goods worth US$ 29,100 but failed to realize US$ 6,558.64. The appellant contended that the shortfall was due to trade discounts and expenses incurred by the buyer, which were communicated to their bank, Dena Bank. The Tribunal found that the appellant had taken reasonable steps to realize the proceeds and had informed the bank about the settlement and requested the shortfall to be treated as a trade discount.

3. Validity of Penalty Imposed on Directors:

The Tribunal examined the penalties imposed on the directors for contravention of Sections 7 and 8 of FEMA, along with relevant regulations. The appellant argued that the penalties were unjustified as the realization shortfall was due to genuine commercial reasons and not willful default. The Tribunal agreed with the appellant, noting that the directors had taken reasonable steps to realize the export proceeds and that the penalty was not warranted.

4. Delay in Initiation of Proceedings:

The Tribunal highlighted the significant delay in initiating proceedings, with the show cause notice issued in 2012 for an export made in 2000. The Tribunal emphasized that while there is no prescribed period for initiating such proceedings, the delay was unreasonable and prejudicial to the appellant. The Tribunal referenced the Supreme Court's decision in LIC vs. Escorts Ltd., which underscored the importance of timely action in such matters.

Conclusion:

The Tribunal allowed the appeals, setting aside the impugned order and the penalties imposed on the directors. It emphasized that the contraventions, if any, were under FERA and could not be pursued under FEMA after the sunset period. The Tribunal ordered the refund of the pre-deposit amount to the appellants and disposed of all pending applications.

 

 

 

 

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