2024 (7) TMI 867 - AT - FEMA

Offence under FERA - contravention of section 18(2) and 18(3) read with section 64(2) of FERA, 1973 - company failed to recover the amount of export dues - investigation in the matter was conducted where it was revealed that without the permission of RBI or an extension order for recovering of the export dues, the noticee firm failed to recover the amount and even did not seek further extension for its recovery - appellant has virtually admitted his failure for contravention of 18(3) but it is only in reference to one consignment therefore questions the imposition of heavy penalty of Rs 50 lacs while on the main defaulter Smt Venita, it is only 45 lacs. HELD THAT - We find contravention of section 18(2) and 18(3) of FERA, 1973 because Shri V.K. Singh and Shri Dilip Nihalani colluded and were instrumental in making the exports and they received incentive from the custom authorities in respect of the shipment. The appellant had admitted for preparation of the documents though attended only one shipment. Taking into consideration the overall circumstances and while we find a case for contravention of section 18(2) and 18(3) read with section 64(2) of FERA, find penalty of Rs. 50 lacs to be disproportionate. The penalty of Rs. 45 lacs has been imposed on Smt Venita, proprietrix of M/s Sai International while Rs 50 lacs on the appellant who said to have received Rs. 14 lacs towards work and out of drawback. Thus, to make the penalty rational, we reduce it to Rs. 14 lacs and out of which Rs. 6 lacs have already been deposited to satisfy the condition of pre-deposit. We partly allow the appeal while finding a case for contravention of section 18(2) and 18(3) of FERA, 1973, but penalty of Rs. 50 lac is reduced to Rs. 14 lacs and with the aforesaid, the appeal is disposed of.

Summary

Issues:
Challenge to adjudication order under FERA, 1973 - Contravention of section 18(2) and 18(3) - Imposition of penalty - Application for waiver of pre-deposit - Allegations against appellant and noticee - Denial of cross-examination.

Detailed Analysis:

1. Challenge to Adjudication Order under FERA, 1973:
The appeal challenges the adjudication order dated 26.06.2008 concerning the contravention of section 18(2) and 18(3) of the Foreign Exchange Regulation Act, 1973 (FERA). A penalty of Rs. 50 lacs has been imposed on the appellant, leading to the filing of an appeal seeking relief from the said order.

2. Application for Waiver of Pre-Deposit:
The appellant filed an application for the waiver of the pre-deposit condition. After a series of orders by the Tribunal and the High Court, the appellant deposited a sum of Rs. 6 lacs to meet the pre-deposit requirement, allowing the appeal to proceed for final arguments.

3. Allegations and Defense:
The appellant contests the penalty imposition, arguing that the violation of FERA sections was not justified. The appellant was allegedly involved in handling only one out of three export consignments, acting as a Customs House Agent (CHA) for a specific consignment. The appellant disputes the heavy penalty of Rs. 50 lacs, emphasizing the lack of involvement in all three consignments.

4. Denial of Cross-Examination:
An issue of denial of cross-examination is raised in the written arguments, indicating a procedural challenge in the adjudication process, which could impact the fairness of the proceedings.

5. Contravention of FERA Provisions:
The investigation revealed that the appellant, along with others, contravened section 18(2) and 18(3) of FERA by failing to recover export dues without the necessary permissions. The appellant's role as a CHA in one of the consignments was acknowledged, leading to the imposition of the penalty.

6. Reduction of Penalty:
The Tribunal found the penalty of Rs. 50 lacs to be disproportionate and reduced it to Rs. 14 lacs, considering the appellant's limited involvement and the penalty imposed on the main defaulter. The appellant had already deposited Rs. 6 lacs, satisfying the pre-deposit condition, resulting in a final penalty of Rs. 14 lacs.

7. Final Decision:
The appeal was partly allowed, acknowledging the contravention of FERA provisions but reducing the penalty to Rs. 14 lacs. With the appellant's deposit covering the required amount, the Tribunal disposed of the appeal, providing relief from the initial penalty amount.

This detailed analysis encapsulates the legal judgment's core issues, arguments presented, findings, and the ultimate decision regarding the challenge to the adjudication order under FERA, 1973.