2015 (7) TMI 701 - HC - FEMA

Imposition of penalty - Failure to furnish evidentiary proof of imports regarding foreign exchange in respect of nine remittances in contravention of Sections 8 (3) and 8 (4) of Foreign Exchange Regulation Act, 1973 - Held that - Documents were in respect of imports that took place pursuant to the remittances made in the years 1994 to 1999. The Customs authorities had in 1995 seized some of the files in respect of imports that had taken place in 1994. The SCN was issued only in May 2002. The firm could not have been expected to retain the proof of all remittances for over six years. The explanation given by it for not being able to immediately furnish the exchange control copies of the BoEs was bonafide. In any event, by the time the Appellants were heard by the AT, the certified copies of the documents to prove import of goods against the remittances at Sl. Nos. 9 to 11 and 12 to 14 were furnished. For some reason, the AT does not appear to have noticed this fact. It has not referred to the documents in its impugned order. The ED has not produced any material to doubt the authenticity of the said documents. It was for the ED, if it doubted the genuineness of the said documents, to have further verified them with the authorities concerned. - very basis for issuance of the SCN to the Appellants does not survive. There is no cause of action for the Appellants to be penalised for contravening Sections 8 (3) and 8 (4) of FERA. - Decided in favour of assessee.

Summary

Issues:
Penalty imposed for failure to furnish evidentiary proof of imports regarding foreign exchange in contravention of Sections 8 (3) and 8 (4) of FERA.

Analysis:
The case involved appeals against a common order passed by the Appellate Tribunal for Foreign Exchange (AT) upholding a penalty imposed on a firm and individuals for not providing proof of imports in relation to foreign exchange remittances. The Special Director (SD) of the Enforcement Directorate (ED) had imposed penalties on the firm and individuals for contravention of Sections 8(3) and 8(4) of the Foreign Exchange Regulation Act, 1973 (FERA). The Appellants had initially deposited 25% of the penalty amounts and later furnished Bank Guarantees for the same. A Show Cause Notice (SCN) was issued by the ED, listing imports for which exchange control copies of Bills of Entries (BoEs) were not filed.

The firm had submitted some BoEs, but the SD found them lacking for certain remittances. The Appellants claimed to have filed documents evidencing imports for specific remittances before the AT. However, the AT dismissed the appeals, stating that proof of imports was not provided for certain remittances. The High Court noted that the Appellants had indeed submitted documents showing imports for the relevant remittances, which were overlooked by the AT. The ED did not challenge the authenticity of these documents.

The Court acknowledged the delay in furnishing documents due to various reasons and found the explanation provided by the firm to be genuine. The documents submitted were related to imports from 1994 to 1999, and the Court observed that the basis for penalizing the Appellants under FERA did not exist. As a result, the Court set aside the AO and the impugned order, directing the refund of deposited amounts and discharging the Bank Guarantees. The appeals were allowed with no order as to costs.