2019 (1) TMI 190 - AT - FEMA

Approval of RBI for transfer of technology in excess of USD 1,00,000 - rectification of the advance payment - invocation of provisions of FERA - Held that - The whole case hinges on the RBI s approval for the excess amount not being available. From the RBI s letter dated 18.11.2002, it is apparent that the RBI was seized of the matter and had not rejected their case. It would be in the fitness of things to have consulted the RBI before the impugned order was passed more so because the genesis of the case was an information received from the RBI. The matter is remanded back to the original authority to get the necessary response/reply from the RBI and pass a fresh speaking order after giving the appellants an opportunity of being heard.

Summary

Issues involved:
- Appeal against order passed by Special Director, Enforcement Directorate regarding violation of FERA regulations
- Non-receipt of RBI approval for excess remittance
- Interpretation of FEMA notification enhancing remittance limit
- Discrepancies in remittance process through HSBC bank
- Need for consultation with RBI before passing impugned order

Analysis:
1. Appeal against Enforcement Directorate's Order:
The appellants filed appeals against the order passed by the Special Director, Enforcement Directorate, alleging that they were not at fault for the violations of FERA regulations. They argued that the provisions of FERA were wrongly invoked against them due to circumstances beyond their control, specifically related to the non-receipt of RBI approval for excess remittance.

2. Non-receipt of RBI Approval:
The central issue in this case revolved around the non-receipt of RBI approval for the excess remittance made by the appellants. Despite their efforts to rectify the advance payment and seek approval from RBI, the approval was not received, leading to a situation where the legality of the remittance was in question.

3. Interpretation of FEMA Notification:
The appellants relied on a FEMA notification dated 05.09.2003, which raised the limit of permissible remittance from USD 1,00,000 to USD 10,00,000. They argued that this notification should be applied retrospectively, citing a Supreme Court judgment for support. This raised the question of whether the enhanced limit should be considered in their case.

4. Discrepancies in Remittance Process:
The respondent pointed out discrepancies in the remittance process, highlighting that the remittance was made through HSBC bank instead of the State Bank of India as directed by RBI. Additionally, the remittance details did not clearly indicate the 15% advance payment against the contracts, raising concerns about the lack of proper documentation and approval for the remittances made.

5. Consultation with RBI:
The judgment emphasized the importance of consulting with RBI before passing the impugned order, especially considering that the genesis of the case was based on information received from RBI. The Tribunal remanded the matter back to the original authority to obtain a response from RBI and pass a fresh order after giving the appellants an opportunity to be heard. The adjudicating authority was instructed to dispose of the case within six months, considering the timeline of events dating back to 2002.

In conclusion, the judgment focused on the procedural aspects of obtaining RBI approval for remittances, the implications of FEMA notifications on remittance limits, and the necessity of proper documentation and consultation with regulatory authorities in cases involving foreign exchange regulations.