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Issues involved: Appeal u/s 35 of FEMA against penalty reduction u/s FERA for alleged contravention of section 8(3) and 8(4) of FERA read with section 49(3) and 49(4) of FEMA.
Summary: Background: The appellant, a partnership firm, imported Chloramphenicol from China using foreign exchange acquired under FERA in 1998. Customs warehoused the goods, but due to financial difficulties, two consignments were not cleared and auctioned in 2002. Appellate Tribunal's Decision: Tribunal upheld that foreign exchange was used for intended purpose but penalized for not clearing warehoused goods, presuming non-use of foreign exchange. Reduced penalty from Rs. 6 lakhs to Rs. 2 lakhs. Legal Analysis: Section 8(4) of FERA requires goods to be brought into India within a reasonable time, matching the value, quality, and quantity specified during foreign exchange acquisition. Failure to do so presumes non-use of foreign exchange for intended purpose. Court's Decision: Court held that goods were indeed brought into India, and failure to clear all consignments does not negate the use of foreign exchange for intended purpose. Refusal to accept that goods must be personally cleared by appellant. Upheld appeal, set aside penalty, and directed refund of Rs. 2 lakhs to the appellant. Conclusion: The court ruled in favor of the appellant, stating that the foreign exchange was used for its intended purpose, and there was no violation of section 8(4) of FERA. Penalty was set aside, and the appellant was directed to be refunded the deposited amount.
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