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2014 (2) TMI 763 - HC - FEMALevy of penalty for contravention of Section 8(3)(4) Foreign Exchange Regulation Act, 1973 (FERA) - respondent-Company had acquired foreign exchange for importing P.P. Dyed Chips. - goods imported by the Company were pigment preparations. - price of pigment preparation could be higher than the price of PP Dyed Chips. - Held that - it would be difficult to dispute that pigment preparations are a product altogether different from PP Dyed Chips. Pigment preparations, it appears to me are the colouring substance whereas PP Dyed Chips are polypropylene chips which have been subjected to dyeing using a colouring substance for the purpose. Had PP Dyed Chips and pigment preparation being one and the same product there could be no reason for the respondents to place order for PP Dyed Chips instead of pigment preparations. The foreign exchange utilised by the respondents for importing PP Dyed Chips was to the extent of ₹ 87,58,617/-. Considering the value of the goods imported by them, neither penalty imposed upon the Company nor the penalty imposed on its Managing Director, Mr. G.P. Poddar and the Executive Director Mr. A.K. MIttal can be said to be excessive. If at all, the penalty imposed upon them was on the lower side. Therefore, there is no scope for reducing the penalty. - Decided against the appellant.
Issues Involved:
1. Whether the appellants misused foreign exchange for purposes other than importing PP Dyed Chips. 2. Whether the appellants misdeclared the imported goods as PP Dyed Chips instead of pigment preparation. 3. The binding nature of the Customs Authority's order, confirmed by CEGAT and the Supreme Court, on the appellants and the Tribunal. 4. Whether the appellants were rightly held guilty by the Adjudicating Officer and if the impugned order is liable to be confirmed. Detailed Analysis: Issue 1: Misuse of Foreign Exchange The respondents were accused of acquiring foreign exchange for importing PP Dyed Chips but instead imported pigment preparations. This contravened Sections 8(3) and 8(4) of the Foreign Exchange Regulation Act, 1973. The Special Director of Enforcement noted that the respondents did not use the foreign exchange for the declared purpose. Statements from Mr. B.B. Verma and Mr. G.P. Poddar confirmed that the goods imported were pigment preparations, not PP Dyed Chips. The Tribunal found that the respondents admitted to importing pigment preparations, thus establishing misuse of foreign exchange. Issue 2: Misdeclaration of Imported Goods The Special Director of Enforcement found that the respondents declared the imported goods as PP Dyed Chips while they were actually pigment preparations. This was supported by statements from Mr. B.B. Verma and Mr. G.P. Poddar. The Customs Authorities also found the consignment to contain pigment preparations instead of PP Dyed Chips. The Tribunal noted that the respondents admitted to this misdeclaration, reinforcing the charge of misdeclaration of goods. Issue 3: Binding Nature of Customs Authority's Order The Customs Authority's order, holding the appellants guilty of misdeclaration, was confirmed by CEGAT and the Supreme Court. This order found that the respondents deliberately suppressed information about the nature and composition of the imported goods. The Tribunal considered this binding on the appellants, affirming the findings of the Customs Authority and the Supreme Court. Issue 4: Guilt and Confirmation of the Impugned Order The Tribunal upheld the Special Director of Enforcement's findings, holding the respondents guilty of contravening the Act. The penalty imposed was Rs. 8 lakh on the Company, Rs. 2 lakh each on Mr. G.P. Poddar and Mr. A.K. Mittal, and Rs. 50,000 on Mr. B.B. Verma. The Tribunal found that the penalties were justified given the value of the foreign exchange misused (Rs. 87,58,617/-). The High Court affirmed this decision, stating the penalties were not excessive and, if anything, were on the lower side. Conclusion: The appeals were allowed, and the impugned orders passed by the Tribunal were set aside. The High Court upheld the findings of the Special Director of Enforcement and confirmed the penalties imposed on the Company and its officials. The legal reasoning and evidence presented established that the respondents misused foreign exchange and misdeclared the imported goods, justifying the penalties imposed.
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