2023 (5) TMI 1384 - AT - FEMA

Penalty imposed on contravention under FEMA provisions - outward remittances in 39 tranches abroad in the guise of advance for imports - quantum of penalty imposed under FEMA 1999 as unreasonable - HELD THAT -On reading of Section 13(1) FEMA it is obvious that the maximum amount of penalty which can be imposed under the Section is three times the amount of contravention involved. From the language of the Section it is clear that the Section has not prescribed either a fixed amount of penalty or minimum amount of penalty. It therefore, follows that the amount of the penalty which is to be imposed by the Adjudicating Authority is a matter of discretion which, of course, is necessarily required to be exercised judiciously after taking into account the facts of the case and the evidence placed before him. The appellant has failed to place any reason in the pleadings as to show that the discretion has not been exercised judiciously by the Adjudicating Authority. The question as to when a penalty is to be regarded as either low or high is at best answered subjectively. In this case Adjudicating Authority has complied with the provisions of the Section by imposing penalty for contravention of section 10(6) FEMA r/w Regulation 6(1) of Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations 2000 and as well as imposing penalty for contravention of section 3(b) of FEMA. For contravention of each of these Sections he has chosen to impose penalty slightly over fifty percent thus totaling a penalty of over hundred percent. Any insistence to impose higher penalty for contraventions of each of the Section arising from the same set of transactions may introduce element of subjectivity. In any case, there is no such requirement under the statute as long as each contravention has been examined and if found established has attracted penalty. The reading of the Adjudication Order, therefore, reflects objectivity and judiciousness on the part of the Adjudicating Authority. In the present case the statute (FEMA) itself provides for a penalty up to thrice the sum involved in such contravention and thereby gives explicit scope to the Adjudicating Authority to exercise his discretion, albeit judiciously, for imposition of penalty. In view of the appeal having failed to bring out the reasons that why the penalty imposed is low and as to how the Adjudicating Authority has not exercised his discretion judiciously, I observe that the order of the Adjudicating Authority cannot be interfered with.

Summary

Issues:
Appeal for enhancement of penalty imposed under FEMA 1999 for contravention of provisions involving outward remittances without corresponding imports.

Analysis:
The judgment pertains to an appeal filed by the Union of India against an Adjudication Order imposing a penalty of Rs. 21,00,00,000 on the respondent for contravention of provisions of FEMA 1999. The appeal sought enhancement of the penalty, arguing that the amount imposed was unreasonably low despite the upheld charges. The respondent failed to appear for multiple hearings, leading to an ex-parte decision based on available records. The Adjudicating Authority found the respondent guilty for outward remittances without corresponding imports, contravening FEMA provisions. The penalty was imposed under Section 10(6) and Section 3(b) of FEMA, 1999. The appeal contended that the penalty was unreasonably low and cited Section 13(1) of FEMA, which allows penalties up to thrice the contravention amount.

The judgment analyzed Section 13(1) of FEMA, emphasizing that the penalty amount is at the discretion of the Adjudicating Authority, to be exercised judiciously based on case facts and evidence. It noted that the Authority had imposed a penalty slightly over the total amount involved in the contraventions, complying with the statutory provisions. The judgment referenced a Supreme Court case to highlight that statutes like FEMA provide a maximum penalty limit, allowing discretion for the Authority to determine the penalty amount. It concluded that the Adjudicating Authority had acted judiciously, and the appeal failed to demonstrate any reasons for interference with the penalty decision.

In light of the discussions and observations, the judgment dismissed the appeal, stating that the Adjudicating Authority's order could not be interfered with due to the lack of reasons presented in the appeal to challenge the penalty imposition. The judgment upheld the penalty decision based on the Authority's compliance with statutory provisions and the exercise of discretion in determining the penalty amount.