2016 (2) TMI 1107 - AT - FEMA

Contravention under Section 8 of FEMA, 1999 - liable for the acts or omissions committed by company representative - Held that - Since the appellant Ole Peter Tollefson has not filed any proof that he actually secured loan from bank in Spain therefore in view of the admission of the execution of the disputed invoice by the appellant, no other inference except that it related to export of building material can be inferred. The appellant company will thus be legally liable for the acts or omissions committed by its representative who happens to be its director and practically all in all in the company. No interference in the findings of the Adjudicating Authority in respect of liability of the appellant company and appellant Ole Peter Tollefson is warranted. Thus it is of the view that the penalty imposed against the appellant company appears to be on the higher side therefore it will be just, fair and proper if the penalty upon the appellant company is reduced to ₹ 4 lakhs instead of ₹ 6 lakhs while maintaining the penalty of ₹ 1.20 lakhs against the appellant Ole Peter Tollefson. In view of the above, the appeal is dismissed in respect of findings of contravention under Section 8 of FEMA, 1999 r/w relevant regulations and the order of the Adjudicating Authority is affirmed in this respect, however the amount of penalty imposed against appellant company is modified and reduced to ₹ 4 lakhs from ₹ 6 lakhs as has been imposed vide the adjudication order. The amount of penalty imposed against the appellant Ole Peter Tollefson is maintained. It has been informed that total penalty imposed by the Adjudicating Authority has been deposited by the appellants with the Enforcement Directorate. After the expiry of the period of appeal, the surplus amount of ₹ 2 lakhs shall be refunded to the appellant company. Copies of the judgment be sent to both the parties.

Summary

Issues Involved:
1. Alleged failure to repatriate payments received from overseas parties.
2. Alleged use of company resources for personal transactions.
3. Contravention of Section 8 of FEMA, 1999.
4. Penalty imposition and its appropriateness.

Detailed Analysis:

1. Alleged Failure to Repatriate Payments Received from Overseas Parties:
The Enforcement Directorate alleged that M/s. Norscot Trading (P) Ltd., Mumbai, failed to repatriate payments amounting to US $ 883748.50 and Euro 111250 received from M/s. Dolfin Drilling Ltd., Scotland. The documents seized from Ole Peter Tollefson's residence indicated that these amounts were credited to his personal foreign bank accounts instead of the company's accounts. The Adjudicating Authority dropped the charges related to US $ 883748.50 based on Tollefson's statement and the agency agreement with Dolfin Drilling Ltd. However, the Tribunal noted that the Enforcement Directorate did not appeal against this finding, thus it was not within the Tribunal's purview to scrutinize it further.

2. Alleged Use of Company Resources for Personal Transactions:
The seized documents included invoices and monthwise figures of commissions, indicating that the payments were directed to Tollefson's personal accounts. The Adjudicating Authority found that Tollefson used the company's stationery for personal transactions, including an invoice for Euro 111250 for building materials exported to Spain. Despite Tollefson's claim that the invoice was for securing a bank loan in Spain, the Tribunal found no proof of such a loan application. The Tribunal inferred that the invoice related to an actual export transaction, thus requiring repatriation of the amount to India.

3. Contravention of Section 8 of FEMA, 1999:
The Adjudicating Authority held that M/s. Norscot Trading (P) Ltd. and Ole Peter Tollefson contravened Section 8 of FEMA, 1999, by failing to repatriate the export proceeds. The Tribunal supported this finding, noting that the invoice's contents, including freight charges, indicated an export transaction. The Tribunal emphasized that the company was liable for repatriating the amount involved, as the invoice was on the company's letterhead and signed by Tollefson.

4. Penalty Imposition and Its Appropriateness:
The Adjudicating Authority imposed a penalty of Rs. 6 lakhs on M/s. Norscot Trading (P) Ltd. and Rs. 1.20 lakhs on Ole Peter Tollefson. The Tribunal found the penalty on the company to be on the higher side and reduced it to Rs. 4 lakhs while maintaining the penalty on Tollefson. The Tribunal directed that the surplus amount of Rs. 2 lakhs, already deposited by the appellants, be refunded to the appellant company after the expiry of the appeal period.

Conclusion:
The Tribunal affirmed the Adjudicating Authority's findings of contravention under Section 8 of FEMA, 1999, and upheld the liability of M/s. Norscot Trading (P) Ltd. and Ole Peter Tollefson. The penalty on the company was reduced, and the order was modified accordingly. The Tribunal's decision emphasized the company's responsibility to repatriate export proceeds and the consequences of using company resources for personal transactions.