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2010 (6) TMI 878 - HC - FEMA

Issues Involved:
1. Legality of the show cause notice issued u/s 8(1) of the FERA Act.
2. Validity of penalty imposition based on allegations not mentioned in the show cause notice.
3. Applicability of section 6(4) versus sections 8(1) and 8(2) of the FERA Act for non-issuance of encashment certificates.

Summary:

1. Legality of the show cause notice issued u/s 8(1) of the FERA Act:
The appellant, an Assistant Manager at the State Bank of India (SBI) Extension Counter at Anna International Airport, was charged under sections 8(1) and 8(2) of the Foreign Exchange Regulation Act (FERA) for possessing foreign currencies without proper accounting. The appellant argued that as an employee of an authorized dealer (SBI), he was empowered to deal in foreign exchange, making the show cause notice under sections 8(1) and 8(2) inapplicable. However, the court found that the appellant's actions were independent and not connected with the authorized dealer's activities, thus validating the notice under sections 8(1) and 8(2).

2. Validity of penalty imposition based on allegations not mentioned in the show cause notice:
The appellant contended that the penalty was imposed based on the non-procurement of encashment certificates, which was not mentioned in the show cause notice. The court noted that the respondent's reference to the absence of encashment certificates was to discredit the appellant's explanation for tallying accounts, not the basis for the penalty. The penalty was imposed for contravening sections 8(1) and 8(2), and the court found no merit in the appellant's argument that the penalty was based on a different reasoning.

3. Applicability of section 6(4) versus sections 8(1) and 8(2) of the FERA Act for non-issuance of encashment certificates:
The appellant argued that any violation related to non-issuance of encashment certificates should fall under section 6(4) of the FERA Act, not sections 8(1) and 8(2). The court held that the respondent's reference to the non-issuance of encashment certificates was to disbelieve the appellant's explanation for the possession of foreign and Indian currencies. The penalty was not imposed for failing to issue encashment certificates but for unauthorized dealing in foreign exchange, thus sections 8(1) and 8(2) were applicable.

Conclusion:
The court dismissed the appeal, upholding the penalties imposed by the respondent for violations of sections 8(1) and 8(2) of the FERA Act. The appellant's arguments regarding the legality of the show cause notice and the basis for the penalty were rejected.

 

 

 

 

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