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2016 (2) TMI 476 - HC - FEMAChallenge to the RBI (FEMA) circular - validity and legality - Policy in relation to import of Gold - On or about 14th August, 2013, RBI issued another Circular no. 25, referring to the said Circular no. 15 dated 22nd July, 2013, for clarification / modification in supersession of the earlier instructions, and made it incumbent on all nominated agencies to make exclusively available at least one fifth i.e. 20% of every lot of gold imported to the country, for the purpose of exports and the balance for domestic use. Further conditions were also imposed for such import referred as import of gold on 20/80 principle. The said RBI Circular also stipulated that Premier Trading Houses irrespective of whether they are nominated agencies or not, are permitted to import gold exclusively for the purpose of exports only. Held that - There are the provisions under which the Central Government through its Ministry of Commerce and Zonal Director General (Joint) of Foreign Trade acted. It was empowered to impose conditions while granting or issuing the Certificates. Pertinently, the conditions at page 83 and the power to impose them are not challenged. Unable to agree with Mr. Chagla that a conjoint reading of these provisions in the 1992 Act together with the Customs Act, 1962, would not empower the Director General in this case to impose penalty. As we have already held, the Reserve Bank of India has enough powers and, therefore, there is no basis for the complaint that it lacks jurisdiction or authority to regulate the dealings in foreign exchange. In the instant case, the Reserve Bank of India is doing precisely this and, therefore, it neither interferes nor takes over the powers of the competent authority either under the Act of 1992 or the Customs Act, 1962. Once the certificates in favour of the petitioners were subject to the provisions of the Foreign Trade Policy and the procedure laid down thereunder, the Reserve Bank of India guidelines and Customs Rules and Regulations, then the import of 550 kgs of gold was governed by the same. The show-cause notice alleged that from the import of 550 kgs of gold only 350 kgs of gold was exported and as per the export details 200 kgs of gold was supplied to the domestic unit. This is a violation of the Reserve Bank of India s Circular. Each of the terms and conditions, either in the certificates relied upon by the petitioners or the Reserve Bank of India guidelines are in consonance with the policy of the Government that precious metals having been brought in they ought to be exported so that the cost of imports could be mitigated by the earnings from export. That would save valuable foreign exchange as well. That is how the diversion in the domestic market was termed as a violation of Reserve Bank of India guidelines. We have, therefore, no hesitation in concluding that none of the contentions as raised before us by the petitioners have any merit. The present petitioners raise conflicting pleas and versions only to avoid compliance with the conditions and which are invited by them on their own. The conditions as imposed on them in the Nominated Agency Certificate and which is issued in their favour right from 2010 have never been questioned. In these circumstances, they cannot place any reliance on the Division Bench judgment. Writ Petition fails. Rule is discharged - Decided against the petitioners.
Issues Involved:
1. Legality and validity of RBI Circulars. 2. Compliance with Foreign Trade Policy and RBI guidelines. 3. Power and jurisdiction of RBI and DGFT. 4. Import and export regulations and compliance. 5. Penalty imposition and violation of rules. Issue-wise Detailed Analysis: 1. Legality and Validity of RBI Circulars: The petition challenges the legality and validity of RBI Circulars No.15 dated 22nd July, 2013, No.25 dated 14th August, 2013, and No.133 dated 21st May, 2014, questioning their applicability and the subsequent show-cause notice and order dated 14th January, 2015. The court examined whether these circulars were issued within the jurisdiction of the RBI under the Foreign Exchange Management Act (FEMA), 1999, and whether they were applicable to the petitioners' import transactions. 2. Compliance with Foreign Trade Policy and RBI Guidelines: The petitioners, a Premier Trading House and a Nominated Agency under the Foreign Trade Policy, were required to comply with the RBI guidelines for importing precious metals. The court scrutinized whether the petitioners adhered to the guidelines, specifically the 20/80 scheme, which mandated that 20% of imported gold be reserved for export purposes. The petitioners argued that the circulars were not applicable to their imports as the shipments were handed over before the circulars were issued. However, the court found that the imports occurred after the circulars were in effect, thus requiring compliance. 3. Power and Jurisdiction of RBI and DGFT: The court analyzed the powers conferred upon the RBI and the Director General of Foreign Trade (DGFT) under FEMA and the Foreign Trade (Development and Regulation) Act, 1992. The RBI, as the custodian of foreign exchange, has the authority to issue guidelines regulating the import and export of precious metals to manage foreign exchange reserves and the Current Account Deficit (CAD). The DGFT, responsible for implementing the Foreign Trade Policy, has the authority to suspend or cancel licenses for non-compliance with the policy and RBI guidelines. 4. Import and Export Regulations and Compliance: The court examined the details of the petitioners' imports and the compliance with the RBI Circulars. The petitioners imported 550 kgs of gold between 22nd July, 2013, and 31st March, 2014, but failed to export 200 kgs as required by the circulars. The court held that the petitioners violated the conditions of the RBI Circulars and the Foreign Trade Policy by diverting gold to the domestic market instead of exporting it. 5. Penalty Imposition and Violation of Rules: The court upheld the imposition of a penalty on the petitioners for violating the RBI Circulars and the Foreign Trade Policy. The petitioners were found to have breached the conditions of their Nominated Agency Certificate, which required compliance with RBI guidelines. The court rejected the petitioners' contention that the RBI lacked the authority to regulate imports and impose conditions, affirming that the RBI's guidelines were legally binding and enforceable. Conclusion: The court dismissed the petition, holding that the RBI Circulars were valid and applicable, and that the petitioners failed to comply with the import and export regulations, justifying the penalty imposed by the DGFT. The court emphasized the RBI's role in managing foreign exchange and the necessity of adhering to the guidelines to ensure economic stability.
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