2025 (1) TMI 947 - AT - FEMA

Contravention under FERA Act - Failure to recover the export dues within the stipulated period of six months from the date of the export therefore it contravened Section 18(2) r/w Section 18(3) of the Act 1973 was made - Penalty imposed - HELD THAT - Considering status of the appellant an export proceeds agent prepared the document by charging Rs. 750 per export documents. He is not shown to be part of the M/s Sparkle Gems Industries (P) Ltd. Bombay yet penalty of Rs. 50 lakhs have been imposed on him while imposing penalty of 85 Lakhs on the company. No material to allege contravention of Section 18(2) and Section 18(3) of the Act of 1973 by the appellant. The respondents have failed to show appellant s involvement in contravention of the presence of the Act of 1973. A scratchy order has been passed against the appellant in ignorance of his position which cannot be considered to be of the nature where contravention of Section 18(2) and Section 18(3) of the Act of 1973 could have been alleged against him. We cause interference of the impugned order quo the appellant and accordingly the impugned order is set aside against the appellant. The appeal is allowed with the aforesaid. The appellant has deposited 0% of the amount towards pre-deposit. The respondents would release the amount aforesaid in favour of the appellant.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the appellant contravened Section 18(2) and Section 18(3) of the Foreign Exchange Regulation Act, 1973 by failing to realize export proceeds within the stipulated period.
Whether the penalty imposed on the appellant was justified given his role as an export proceeds agent.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Contravention of Section 18(2) and Section 18(3) of the Act of 1973

Relevant legal framework and precedents: Section 18(2) and Section 18(3) of the Foreign Exchange Regulation Act, 1973, mandates the realization of export proceeds within six months from the date of export. Failure to comply can result in penalties.
Court's interpretation and reasoning: The court examined whether the appellant, as an export proceeds agent, could be held liable for the contravention of the Act. The court noted that the appellant was not an exporter nor held a position in the company that would make him responsible for realizing export proceeds.
Key evidence and findings: The court referred to a statement recorded under Section 108 of the Customs Act, 1962, where the appellant admitted to preparing export documents for a fee but was not involved in the actual export process or recovery of proceeds.
Application of law to facts: The court applied the provisions of the Act to determine that the appellant's role was limited to document preparation and did not extend to realizing export proceeds, thus not falling under the contraventions cited.
Treatment of competing arguments: The respondents argued that the appellant was part of the company that failed to secure export dues, justifying the penalty. However, the court found no evidence of his involvement in the company's failure to recover the proceeds.
Conclusions: The court concluded that the appellant did not contravene Section 18(2) and Section 18(3) of the Act of 1973, and the penalty imposed was unjustified.

Issue 2: Justification of the Penalty Imposed

Relevant legal framework and precedents: The imposition of penalties under the Act requires evidence of contravention and involvement in the failure to realize export proceeds.
Court's interpretation and reasoning: The court reasoned that the penalty was imposed without proper consideration of the appellant's role and involvement, which was limited to document preparation.
Key evidence and findings: The court found that the appellant did not respond to the show cause notice nor appeared for hearings, indicating a lack of defense against the charges. However, this was insufficient to establish contravention.
Application of law to facts: The court applied the legal standards for imposing penalties and found that the appellant's actions did not meet the threshold for contravention under the Act.
Treatment of competing arguments: The respondents' argument for the penalty was based on the appellant's association with the company, but the court found no direct involvement in the contravention.
Conclusions: The court concluded that the penalty of Rs. 50 Lakhs was imposed without proper justification and was to be set aside.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "We don't find any material to allege contravention of Section 18(2) and Section 18(3) of the Act of 1973 by the appellant."
Core principles established: The role of an agent limited to document preparation does not constitute contravention of export realization requirements under the Act.
Final determinations on each issue: The court set aside the penalty imposed on the appellant, concluding that he did not contravene the Act and was not liable for the penalty. The appeal was allowed, and the pre-deposited amount was ordered to be released to the appellant.

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