2005 (2) TMI 819 - HC - FEMA

Penalty - breach of non-furnishing of the original Bills of Entry - contravention of Sections 8(3) and 8(4) of Foreign Exchange Regulation Act, 1973 - HELD THAT - Petitioners submit that original Bills of Entry had also been tendered but they were not having the receipt for the same as the same had been misplaced and was not traceable. However, petitioners had duly furnished the copies of Bills of Lading, Invoices. The photocopy of Exchange Control copy of the Bill of Entry duly carried endorsement by the Customs Authorities of the clearance of the goods. Mr. Sharma also submitted that the Bank itself had failed to comply with the procedure. Thus, there was hardly any doubt left regarding genuineness of the transactions which fact is not even disputed by the respondents. In these circumstances, the omission of the petitioners is merely a procedural irregularity. Thus, the impugned order is not sustainable and is liable to be set aside and is quashed. Counsel for the petitioner submits that as a genuine recompense for the lapse committed by the petitioners in not furnishing original receipt for Bill of Entry, they would deposit a sum of ₹ 5000/- in the Prime Minister's National Relief Fund for Tsunami Victims. Let this be done in two weeks. Petition stands allowed in the above terms.

Summary

Issues: Impugning penalty imposed under Foreign Exchange Regulation Act, 1973 for failure to furnish original Exchange Control copy of Bill of Entry within prescribed period.

Analysis:

Issue 1: Impugning Penalty Imposed
The petitioners challenged the penalty imposed by the Adjudicating Officer under Sections 8(3) and 8(4) of the Foreign Exchange Regulation Act, 1973, for not furnishing the original Exchange Control copy of the Bill of Entry within the stipulated timeframe. The Adjudicating Officer found a procedural violation under para 7A.20 of the Exchange Control Manual, despite the goods being imported, remittance made through Letters of Credit, and payment via normal banking channels. The penalty of Rs. 5 lakhs on the firm and Rs. 50,000 on each partner was imposed based on non-submission of the Exchange Control copy of the Bill of Entry within three months from the date of remittance.

Issue 2: Procedural Violation
The Adjudicating Officer held that the petitioners failed to provide proof of submission of the Exchange Control copy of the Bill of Entry within the prescribed period, as required by para 7A.20 of the Exchange Control Manual. The prescribed procedure mandated the Bank to issue reminders to the importer for producing the Exchange Control copy, and no provision existed for the imposition of penalties for non-furnishing of the Bill of Entry copy. The petitioners argued that the penalty was arbitrary and unwarranted, emphasizing a failure to exercise jurisdiction as per the law.

Issue 3: Discretionary Exercise of Penalty
The respondents contended that the Adjudicating Officer exercised discretion for the admitted breach of not furnishing the original Bills of Entry, acknowledging no violation of FERA provisions. The petitioners asserted that they had submitted the original Bills of Entry, but due to misplacement, they lacked the receipt. They provided copies of Bills of Lading, Invoices, and a photocopy of the Exchange Control copy of the Bill of Entry endorsed by Customs Authorities, highlighting the Bank's failure to comply with procedures.

Issue 4: Judicial Consideration of Penalty
The Court referred to the Supreme Court's judgment in M/s Hindustan Steel Ltd. Vs. The State of Orissa, emphasizing that penalties should not be imposed merely because lawful, but must be exercised judiciously considering all relevant circumstances. The Court noted the genuine nature of the transactions, with no dispute on their authenticity, categorizing the petitioners' omission as a procedural irregularity rather than a substantive violation.

Conclusion:
The Court found the penalty imposed unsustainable and quashed the impugned order. As a gesture of recompense, the petitioners were directed to deposit Rs. 5000 in the Prime Minister's National Relief Fund for Tsunami Victims within two weeks. Ultimately, the petition was allowed on the specified terms, overturning the penalty imposed for the procedural lapse in furnishing the original Bill of Entry receipt within the stipulated period.