2007 (8) TMI 769 - HC - FEMA

Summary

Issues Involved:
1. Contravention of provisions u/s 10(6) read with Sections 10(5) and 42(1) of the Foreign Exchange Management Act, 1999.
2. Rejection of applications for waiver of pre-deposit of penalty amounts.
3. Evaluation of undue hardship and safeguarding the interest of revenue.

Summary:

Issue 1: Contravention of Provisions u/s 10(6) read with Sections 10(5) and 42(1) of the Act
The petitioners, companies engaged in export business, purchased foreign exchange under LERMS but surrendered it through authorized money changers due to unplanned foreign trips. They received summons for alleged contravention of the Act and penalties were imposed by the second respondent. The petitioners contended there was no contravention as they did not misuse the foreign exchange and had surrendered it within the specified period.

Issue 2: Rejection of Applications for Waiver of Pre-Deposit
The third respondent rejected the petitioners' applications for waiver of pre-deposit, citing no prima facie case and sound financial condition of the companies. The petitioners argued that the penalties were excessive given the technical nature of the contravention and their financial hardship.

Issue 3: Evaluation of Undue Hardship and Safeguarding the Interest of Revenue
The court referred to the Supreme Court judgment in Benara Valves Ltd. case, emphasizing the need to consider undue hardship and safeguard the interest of revenue. The third respondent's decision to reject the waiver applications was upheld as it was in line with the principles laid down by the Supreme Court. The court noted that the petitioners had not substantiated their claim of undue hardship.

Conclusion:
The matter was remitted to the third respondent for fresh consideration upon the petitioners making the pre-deposit of Rs. 30 lakhs and Rs. 20 lakhs respectively within two weeks. The third respondent was directed to dispose of the appeals on merits independently. The writ petitions were dismissed except for setting aside a portion of the third respondent's observation. No costs were awarded, and connected Miscellaneous Petitions were closed.