2015 (12) TMI 1695 - AT - FEMA

Guilty of contraventions of Section 8(3) and 8(4) of FERA, 1973 r/w Section 49(3) and 49(4) of FEMA, 1999 - Penalty imposed - whether there has been no lapse/FERA violations on the part of the company and the transactions were wrongly reported in BFE due to oversight of the bankers of the company? - Enforcement Directorate creation - Held that - We see no reason to remand the matter back to Adjudicating Authority at this stage when parties have been litigating for a period of more than 11 years. The genuineness of the papers filed by the appellants as proof of due compliance of the requirement of filing of the exchange control copies of the bills of entry with the authorized dealer within time has not been disputed by the respondents. The appeals are continuation of the trial proceedings. We are convinced on the basis of evidence filed by the appellants in the instant appeals that they had timely submitted the exchange control copies of Bills of Entries to the respective authorized dealers (banks). We are also convinced with argument that it was negligence/mistake on the part of the authorized dealers in not reporting the due compliances to the RBI and instead furnished wrong information. The basic fault appears to us on the part of the banks but since they are neither parties in these appeals nor they have been afforded any opportunity to place their version before the Tribunal, therefore, we are not making any observations against them. We would like to emphasize that Enforcement Directorate has not been created for the sole purpose of prosecuting the matters of alleged violations under FERA/FEMA but they are duty bound to assist the Tribunal and the Courts by placing the correct facts before them on the principle of fair play so that the parties get fair justice and the faith of the parties is not eroded from the judicial system. The Enforcement Directorate is an organ in the system of dispensation of justice and the way the matters in which no case was made out as per the communication of the RBI was persuaded, without discloser of the contents of the communication received by the Enforcement Directorate, the appellants had to suffer not only in terms of expenditure that might have been incurred in the litigation but also wastage of lot of valuable time of the appellants, Tribunal and Courts. The expenses incurred in litigation by the appellants may run perhaps in lakhs of rupees. However, we think it appropriate that for the failure to place the communication before the Tribunal and convey the contents in time the respondents be imposed a token costs in all the appeals for their conduct. In view of the above discussions the appeals deserve to be allowed with costs.

Summary

Issues Involved:
1. Contraventions of Section 8(3) and 8(4) of FERA, 1973 r/w Section 49(3) and 49(4) of FEMA, 1999.
2. Failure to submit evidence of import to authorized dealers.
3. Procedural lapses in adjudication and service of notices.
4. Negligence by authorized dealers (banks) in reporting compliance.
5. Role of Enforcement Directorate in pursuing the matter despite RBI's communication.

Detailed Analysis:

1. Contraventions of Section 8(3) and 8(4) of FERA, 1973 r/w Section 49(3) and 49(4) of FEMA, 1999:
The appellants were charged with contraventions of Section 8(3) and 8(4) of FERA, 1973 r/w Section 49(3) and 49(4) of FEMA, 1999 for failing to submit evidence of import after acquiring foreign exchange. Penalties were imposed based on the amounts involved in each case: Rs. 1,41,90,175/- in Appeal No. 787/2004, Rs. 1,40,71,263/- in Appeal No. 788/2004, Rs. 1,41,90,175/- in Appeal No. 789/2004, and Rs. 5,69,11,840/- in Appeal No. 790/2004.

2. Failure to Submit Evidence of Import to Authorized Dealers:
The appellants contended that they had submitted the exchange control copies of bills of entries to their authorized dealers (ICICI and Standard Chartered Banks) on time. They produced documentary evidence, including communications from the banks and the RBI, confirming the submission of these documents. The banks' failure to report this to the RBI led to the appellants being wrongly listed as defaulters.

3. Procedural Lapses in Adjudication and Service of Notices:
The Tribunal found that the principles of natural justice were not adhered to. There was no proof of service of show cause notices (SCNs) and personal hearing notices to the appellants, who had shifted their office address. The adjudicating authority proceeded ex parte without ensuring proper service, leading to the appellants being unaware of the proceedings.

4. Negligence by Authorized Dealers (Banks) in Reporting Compliance:
The banks' negligence in not informing the RBI about the timely submission of bills of entry was highlighted. The RBI later acknowledged this oversight and communicated to the Enforcement Directorate that there were no FERA violations by the appellants. This communication was not considered by the adjudicating authority, resulting in undue penalties.

5. Role of Enforcement Directorate in Pursuing the Matter Despite RBI's Communication:
The Tribunal criticized the Enforcement Directorate for not informing the Tribunal about the RBI's communication, which stated there were no violations by the appellants. The Directorate's failure to disclose this information led to unnecessary litigation and harassment of the appellants.

Conclusion:
The Tribunal allowed the appeals, setting aside the adjudication orders and imposing costs of Rs. 5,000/- per appeal on the respondents. The Tribunal emphasized the importance of adhering to the principles of natural justice and the duty of the Enforcement Directorate to assist the Tribunal by presenting accurate facts. The appellants' evidence demonstrated timely compliance, and the penalties were found to be imposed arbitrarily without proper evaluation of the facts.