1996 (9) TMI 645 - AT - Money Laundering

Summary

Issues Involved:
1. Pre-deposit requirement and financial hardship.
2. Adjudication process and consideration of evidence.
3. RBI's role in granting write-offs and extensions.
4. Legal interpretation of Section 18(2) of the Foreign Exchange Regulation Act, 1973.
5. Remand for fresh adjudication.

Issue-wise Detailed Analysis:

1. Pre-deposit Requirement and Financial Hardship:
The appellant argued that requiring a pre-deposit of the penalty would cause undue hardship as the impugned order was "ex facie untenable in law." The Tribunal agreed, noting that the evidence presented by the appellant indicated that the pre-deposit would indeed cause undue hardship. Consequently, the Tribunal waived the requirement of pre-deposit and proceeded to hear the appeal on its merits.

2. Adjudication Process and Consideration of Evidence:
The Tribunal found that the Adjudicating Officer did not consider the appellant's contention that the RBI had written off the outstanding amounts. The Officer also ignored the appellant's evidence and efforts to realize the outstanding amounts. The Tribunal emphasized the necessity for the adjudicating authority to have all relevant material before making a decision. It criticized the selective information provided by the bank and the lack of comprehensive investigation by the Enforcement Directorate.

3. RBI's Role in Granting Write-offs and Extensions:
The Tribunal highlighted that the RBI had granted write-offs and extensions for the outstanding amounts, which were not considered by the Adjudicating Officer. It was noted that the RBI had approved write-offs for significant amounts and had granted extensions for others. The Tribunal underscored the importance of the RBI's permissions, stating that once the RBI grants a write-off or extension, there is no contravention of Section 18(2) of the Foreign Exchange Regulation Act.

4. Legal Interpretation of Section 18(2) of the Foreign Exchange Regulation Act, 1973:
The Tribunal referred to previous judgments, including Taj Traders & Transport Co. Ltd. v. Director of Enforcement and Rajnis International v. Director of Enforcement, to clarify the legal position. It stated that non-realization of export proceeds within the prescribed period does not constitute a contravention if the RBI has granted an extension or write-off. The Tribunal also emphasized that the burden of proof lies with the Department to substantiate the charge of contravention, which cannot be determined until the RBI has refused the extension or write-off.

5. Remand for Fresh Adjudication:
The Tribunal decided to remand the case for fresh adjudication, instructing the Adjudicating Officer to consider all the relevant evidence, including the RBI's permissions and the efforts made by the appellant to realize the outstanding amounts. The Tribunal provided specific guidelines for the fresh adjudication, emphasizing the need to consider the legal position and the evidence comprehensively to avoid legal errors.

Conclusion:
The appeal was allowed, and the impugned order was set aside. The case was remanded for fresh adjudication with specific instructions for the Adjudicating Officer to consider all relevant evidence and legal positions comprehensively. The appellant was directed to file a compilation of RBI's write-off permissions and related evidence before the adjudicating authority.