2017 (9) TMI 491 - HC - FEMA

Offence under Foreign Exchange Management Act, 1999 - penalty imposed - reason to believe for default - Held that - From the perusal of the SCN, it is clear that the, details furnished by the respondent department in the SCN, were vague and sketchy at best, for the appellant to trace back the contentious transaction of DM16000, which happened eight years back with respect to the time when the first letter was sent to the appellant Company by the respondent Department. As during the course of adjudication proceedings, it was observed that out of the seven contentious remittances, two were repetition. Strong inference can be drawn from there, to show that there was a lot of laxity on part of the respondent department to even ascertain, prima facie, the authenticity of the contentious remittances, in relation to which they started the adjudication proceedings. Considerable doubt is thus, cast upon the claims of the respondent with respect to the remittance in question (DM16000) also, as there can be a likelihood situation that the appellant company never made such a remittance as has been claimed by their learned counsel since the time the appellant company established their first communication with the respondent department, in relation to the allegations against them with respect to the then seven contentious remittances. The contention of the respondent that since the appellant company has been able to justify six remittances, then they should have been able to justify the one in question also, is superfluous and without merit. Thus it is evident that the respondent department has failed to establish the violation beyond reasonable doubt, on the account of the appellant. For the reasons abovementioned, the impugned order dated 04.04.2016 is quashed and set aside. The appeal is allowed.

Issues:
- Appeal against imposition of penalty under FERA for contravention of Section 8(3) and Section 8(4)
- Failure to furnish proof of import in relation to remittance of foreign exchange
- Adjudication proceedings and penalties imposed by authorities
- Appellate Tribunal's decision to partially allow the appeal and impose a penalty
- Burden of proof on the appellant and principles of natural justice
- Lack of specific details in Show Cause Notice (SCN) and vague allegations
- Appellant's efforts to clarify remittance details and lack of cooperation from authorities
- Legal arguments and reliance on case laws by both parties

Analysis:
1. The appeal was filed against a penalty imposed under FERA for contravention of Section 8(3) and Section 8(4) due to failure to provide proof of import for foreign exchange remittances. The respondent department alleged non-compliance with FERA regulations and issued a Show Cause Notice (SCN) to the appellant company.

2. Adjudication proceedings resulted in penalties being imposed on the appellant, which were challenged before the Appellate Tribunal. The Tribunal set aside the initial penalty and remanded the matter for fresh adjudication, leading to a second round of adjudication where penalties were imposed and proceedings dropped for some remittances.

3. The Appellate Tribunal's final decision imposed a penalty for contravention of FERA sections but set aside findings for certain remittances. The appellant argued against the penalty, citing lack of specific details in the SCN and the burden of proof falling on the respondent department.

4. Legal arguments included the appellant's efforts to clarify remittance details and lack of cooperation from authorities in providing necessary information. The appellant relied on case laws to support their position, while the respondent highlighted the appellant's alleged lack of proactive clarification efforts.

5. The court analyzed the relevant FERA sections, burden of proof principles, and case laws to determine that the respondent department failed to establish the violation beyond reasonable doubt. The vague details in the SCN and lack of cooperation from authorities cast doubt on the authenticity of the contentious remittance, leading to the quashing of the impugned order and allowance of the appeal.

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