2008 (7) TMI 1119 - AT - FEMA

Summary

Issues Involved:
1. Failure to furnish evidentiary proof of utilization of foreign exchange.
2. Compliance with Section 8(3) and Section 68 of the Foreign Exchange Regulation (FER) Act, 1973.
3. Burden of proof and presumption of culpable mental state.
4. Vicarious liability of individual directors.

Issue-wise Detailed Analysis:

1. Failure to furnish evidentiary proof of utilization of foreign exchange:
The appellant company was penalized for failing to provide evidence of utilizing the foreign exchange remitted to M/s TRES Corporation, Taiwan, in contravention of Section 8(3) r/w Section 68 of the FER Act, 1973. The appellant contended that the remittance was for technical know-how under an RBI-approved collaboration agreement, and the technology was used to import and export goods. However, the respondent argued that investigations revealed no transfer of technology or training occurred after the remittance.

2. Compliance with Section 8(3) and Section 68 of the FER Act, 1973:
Section 8(3) mandates that foreign exchange acquired for a specific purpose must not be used otherwise. The Tribunal noted that the appellant company's claim of receiving know-how and training was unsupported by evidence, especially since the agreement stipulated delivery of technical documents only after full payment. The Tribunal emphasized that the burden of proof lies with the appellant to demonstrate the actual utilization of the foreign exchange.

3. Burden of proof and presumption of culpable mental state:
The Tribunal referred to Section 106 of the Indian Evidence Act, which places the burden of proving facts within the special knowledge of a person on that person. The Tribunal cited precedents, including Trimukh Maroti Kirkan v. State of Maharashtra and Collector of Customs v. D. Bhoormull, to highlight that the prosecution need not prove its case with mathematical precision. The appellant's failure to provide evidence of utilizing the foreign exchange led to an adverse inference against them. Additionally, Section 59 of the FER Act presumes a culpable mental state, and Section 71(2) places the burden of proof on the person prosecuted to show that the foreign exchange was used for the permitted purpose.

4. Vicarious liability of individual directors:
The Show Cause Notice clearly indicated that the individual appellant was responsible for the company's conduct during the relevant period. The Tribunal noted that no efforts were made to counter the charges against the individual director. Citing Everest Advertising (P.) Ltd. v. State, Govt. of NCT of Delhi and S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, the Tribunal emphasized that vicarious liability requires proof that the individual was both in charge of and responsible for the company's conduct.

Conclusion:
The Tribunal dismissed the appeals, finding no merit in the appellants' contentions. The pre-deposited penalty amounts were appropriated, and the appellants were directed to pay the remaining penalties within seven days, failing which the Enforcement Directorate would recover the amounts in accordance with the law.