2024 (12) TMI 535 - AT - FEMA

Penalty imposed for contravention of provisions of 10(6) of FEMA - Remittance of Foreign Exchange to Overseas Banks for the import of various goods Computer electronic Goods, Floppy drive, CD-ROM, Dot matrix Print Head, electronic goods etc but the said Company failed to submit Bills of Entry for the said import - HELD THAT - It is an admitted fact that during the investigation of the case, the appellant has managed to trace the documents of import qua the thirty remittances, and accordingly, the complaint was filed before the Adjudicating Authority for the remaining five instances pertaining to only ANZ Grindlays Bank. Out of the said five remittances, the appellant was able to furnish the invoices, packing list and airways bill copies for the three remittances, to prove the import of electronic goods which are annexed with the present appeal. Out of the said bunch of documents, the Air Way Bills Air Cargo Arrival Notice-cum-Invoices clearly reflects the name of consignee as ANZ Grindlays Bank Ltd. and also notified to importer M/s Wipro Ltd. Therefore, it points towards a direction that said bank was duly intimated regarding the import of consignments, qua three remittances. The lapse on the part of the said bank (if any) for not intimating the RBI is no ground to presume the contravention on the part of the Appellant Company, simply because the Appellant Company was unable to trace out the remaining import documents of the 2 remittances for USD 30000 and USD 8550 (total USD 38550), as the matter pertains 13-14 years prior to the passing of the impugned order. Appellant M/s Wipro Ltd. cannot be penalized for the negligence on the part of the erstwhile ANZ Grindlays Bank for not sending the intimation to RBI regarding the import of goods, or, alternatively, lapse on the part of the RBI for not noting the information received from the concerned bank and for not properly maintaining its records, seeing the fact that out of 35 instances complained by RBI, the Appellant Company is able to prove the import of goods with respect to 30 instances during the investigation of the case. Just because Appellant Company is unable to trace out and file the proof qua the remaining two instances for total sum of USD 38550, benefit of doubt needs to be given to the Appellant Company on account of lapse on the part of the concerned bank i.e. erstwhile ANZ Grindlays Bank, in light of Judgment of Innovative Tech Pack Ltd. v. Special Director of Enforcement 2017 (1) TMI 826 - DELHI HIGH COURT Accordingly, the present appeal is hereby allowed and thereby the impugned order is hereby set-aside for imposing penalty for the remaining five remittances of erstwhile ANZ Grindlays Bank.

Summary

Issues Involved:
1. Alleged contravention of Section 10(6) of FEMA and Regulation 6(1) of the FEM (Realisation, Repatriation, and Surrender of Foreign Exchange) Regulations, 2000.
2. Delay in proceedings and its impact on the appellant's ability to produce import documents.
3. The responsibility of banks in maintaining records and notifying the Reserve Bank of India (RBI) about foreign exchange utilization.

Issue-wise Detailed Analysis:

1. Alleged Contravention of FEMA and Regulations:
The appeal was filed against the order imposing a penalty of Rs. 20,00,000/- on the appellant company for failing to submit Bills of Entry as proof of import for foreign exchange remittances made through various banks, specifically Standard Chartered Bank (formerly ANZ Grindlays Bank). The Directorate of Enforcement alleged that the appellant company did not submit the Exchange Control Copy of Bills of Entry or surrender the foreign exchange within the stipulated period, thereby contravening Section 10(6) of FEMA and Regulation 6(1) of the Foreign Exchange Management (Realisation, Repatriation & Surrender of Foreign Exchange) Regulations, 2000. The appellant argued that they had submitted proof for 30 out of 35 remittances and were able to provide additional documentation for three out of the five disputed remittances during the appeal.

2. Delay in Proceedings:
The appellant contended that the proceedings were initiated after an undue delay of 13-14 years, which hindered their ability to retrieve and present the necessary import documents. The appellant argued that the delay violated the principles of natural justice, as it was unreasonable to expect retention of documents for such an extended period. The appellant relied on a precedent from the Delhi High Court, which emphasized that penalties should not be imposed merely because it is lawful to do so, especially when compliance is sought after an unreasonable delay. The appellant successfully traced documents for three remittances and argued for the benefit of doubt for the remaining two, citing the lapse on the part of the erstwhile ANZ Grindlays Bank in maintaining records.

3. Responsibility of Banks:
The appellant argued that the lapse in record-keeping by the erstwhile ANZ Grindlays Bank and the subsequent failure to notify the RBI should not result in a penalty against them. The appellant pointed out that Standard Chartered Bank, the successor of ANZ Grindlays Bank, did not possess the relevant records due to the transition and closure of the predecessor bank. The Tribunal acknowledged that the appellant could not be penalized for the negligence of the bank, especially when the appellant had demonstrated compliance for the majority of the transactions. The Tribunal found that the appellant had made reasonable efforts to provide proof of import and granted the benefit of doubt for the two remittances where documentation was not traceable, thereby setting aside the penalty imposed by the Adjudicating Authority.

Conclusion:
The Tribunal allowed the appeal, recognizing the appellant's efforts to comply with the regulations and the unreasonable delay in proceedings. It set aside the penalty imposed for the five remittances through ANZ Grindlays Bank, acknowledging the lapse on the part of the bank and the appellant's inability to produce documents after such a long period. The judgment emphasized the importance of exercising discretion judicially and considering all relevant circumstances in quasi-criminal proceedings under FEMA.