1984 (8) TMI 200 - HC - FEMA

Foreign exchange - Seizure and penalty not maintainable, if dealings in foreign exchange of foreign national not proved

Summary

Issues Involved:
1. Contravention of Section 10(1)(b) of the Foreign Exchange Regulation Act, 1947.
2. Contravention of Sections 16(1)(a) and 30(ii) of the Foreign Exchange Regulation Act, 1973.
3. Entitlement to exemption under Clause (iii) of the first proviso to the notification dated 25-9-1958.

Issue-wise Detailed Analysis:

1. Contravention of Section 10(1)(b) of the Foreign Exchange Regulation Act, 1947:
The respondent was accused of having the right to receive foreign exchange from 1967 to 31-12-1973 but refrained from securing the receipt of Belgium Fr. 2,00,000, Sw.Fr. 38,540.20, D.M. 12,000, and DM 5,000, thereby contravening Section 10(1)(b) of the 1947 Act. The Special Director of Enforcement found the respondent guilty and imposed a penalty of Rs. 2,60,000/-. However, the Foreign Exchange Regulation Appellate Board exonerated the respondent of this charge. The High Court agreed with the Appellate Board's findings, noting that the respondent's domicile was in Belgium and he was entitled to the exemption under Clause (iii) of the first proviso to the notification dated 25-9-1958.

2. Contravention of Sections 16(1)(a) and 30(ii) of the Foreign Exchange Regulation Act, 1973:
The respondent was charged with having the right to receive foreign exchange from 1-1-1974 to 31-5-1975 but caused delays in repatriation, contravening Section 16(1)(a) of the 1973 Act. Additionally, the respondent was accused of carrying on an occupation in India without the Reserve Bank of India's permission, violating Section 30(ii) of the 1973 Act. The Special Director imposed a penalty of Rs. 1,00,000/- for the first charge and dropped the second charge. The Appellate Board exonerated the respondent of the first charge, and the High Court upheld this decision, agreeing that the respondent was not a person domiciled in India and thus entitled to the exemption.

3. Entitlement to Exemption under Clause (iii) of the First Proviso to the Notification Dated 25-9-1958:
The central issue was whether the respondent, a Belgian national, was entitled to the exemption provided by Clause (iii) of the first proviso to the notification dated 25-9-1958, which exempts persons not domiciled in India from certain requirements under the Act. The High Court examined the definition of "person resident in India" under Section 2(p) of the Act and the evidence showing the respondent's domicile in Belgium. The court agreed with the Appellate Board's conclusion that the respondent was not domiciled in India and thus entitled to the exemption. The court dismissed the appeal, affirming the Appellate Board's decision to exonerate the respondent on the first two charges and reduce the penalty on the fourth charge.

Conclusion:
The High Court dismissed the appeal, agreeing with the Appellate Board that the respondent was entitled to the exemption under Clause (iii) of the first proviso to the notification dated 25-9-1958. The court upheld the Appellate Board's decision to exonerate the respondent on charges of contravening Sections 10(1)(b) of the 1947 Act and 16(1)(a) of the 1973 Act, and to reduce the penalty for the fourth charge. The court also issued a certificate for appeal to the Supreme Court, recognizing the general importance of interpreting Section 2(p)(iii) of the Foreign Exchange Regulation Act, 1973, as applicable to foreign nationals.