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2020 (11) TMI 513 - AT - FEMARestrictions on dealing in foreign exchange - diversion of exported goods, non-realisation of export proceeds, non-clearance of imported bills and write off/ set off - HELD THAT - Trend Setters Group of Companies had failed to submit Bill of Entry as evidence for actual import of the goods. Trend Setters Group of Companies did not realised the substantial portion of export proceeds and it is also established that except filing a Suit before a Sub-Court in Ernakulam, Kerala and writing to the RBI for write off/ set off, no other steps have been taken. In other words, no sufficient and visible efforts have been by/ on behalf of the Trend Setters Group of Companies to realise the export proceeds. Who was/were the person/persons responsible for the diversion of export goods / non-realisation of export proceeds and remittances of payment towards import of goods - Shri Sebastian Chokkattu was the Chairman of the Trend Setters Group of Companies and was overall in-charge of the same. It has also come on record that he was also a Director of the said group of companies. The Adjudicating Authority has imposed a total penalty of ₹ 42,15,000/- on Shri Sebastian Chokkattu. There is nothing on record that he has taken any sufficient steps/action to realise the export proceeds and that on the grounds stated in the Show Cause Notices and the reasons cited in the impugned order it is clear that exports were made and diverted. The nonrealisation of export proceeds cannot be said to be beyond the control. Mere pendency of the application for set off/write off does not absolve the responsibility of the appellants. On the given facts and circumstances of the case, I do not find any infirmity or illegality in the impugned order passed by the Adjudicating Authority. Considering the amount involved in the contraventions, it is held that the amount of penalties imposed on Shri Sebastian Chokkattu, on the basis of individual Show Cause Notices wherein contraventions has been described in details, are proper and proportionate. Hence no interference in the findings arrived at by the Adjudicating Authority, in respect of Shri Sebastian Chokkattu, is called for. Shri B. Balakrishnan was appointed as the Director of M/s. Intimate Apparels Pvt. Ltd. on 11.07.1995. It is seen from Copy of Form No.32 presented before the Registrar of Company on 14.08.1995 that Shri Sebastian Chokkattu presented the said form incorporating therein that Shri V.P. Gopalakrishnan Nair has resigned from the Directorship of the company from 11.07.1995 and Shri B. Balakrishnan appointed on the same date. Shri B. Balakrishnan became the Director from 11.07.1995 to 1997 by stepping in the shoe of Shri V.P. Gopalakrishnan Nair and thus was in-charge of and responsible to the said company for the conduct of the business of the company at the time when the aforesaid exports were made. Therefore, there is no illegality in the impugned order in holding Shri B. Balakrishnan as one of the contravener as alleged and the impugned order does not call for any interference as the penalty of ₹ 4,00,000/- imposed on him is just, proper and proportionate. Shri Biju Thomas or Trend Setters Group of Companies have approached the Commercial Attache, Indian Embassy, Washington and the U.S. Ambassador to India for realisation of export proceeds. During the course of hearing the learned counsel for the appellants did not place any evidence in this regard. So, the contention raised in the appeals regarding the steps taken to realise the export proceeds cannot be believed. However, there is nothing on record placed by the respondent nor there is anything in the impugned order and the SCNs that the appellant Shri Biju Thomas was looking after the day-to-day affairs of the Trend Setters Group of Companies. In the light of the same, the provision of Section 68(2) of FERA, 1973 is not attracted.Shri Biju Thomas cannot be held liable for contraventions of Sections 8(3) 8 (4) of FERA, 1973 read with Paragraph 7A-20 of RBI Exchange Control Manual Vol- I,1993 Edition, Sections 18(2) 18(3) read with Section 68 of FERA, 1973, the Central Government Notifications dated 01.01.1974. In view of the above, the findings of the Adjudicating Authority holding Shri Biju Thomas liable for the aforesaid contraventions and imposition of penalties are erroneous and not legal, hence, quashed and set aside. Shri S. Sunil Kumar cannot be held liable for contraventions of Sections 8(3) 8 (4) of FERA, 1973 read with Paragraph 7A-20 of RBI Exchange Control Manual Vol-I,1993 Edition, Sections 18(2) 18(3) read with Section 68 of FERA, 1973, the Central Government Notifications dated 01.01.1974. In view of the above, the findings of the Adjudicating Authority holding Shri S. Sunil Kumar liable for the aforesaid contraventions and imposition of penalties are erroneous in law and not legal, hence, quashed and set aside.
Issues Involved:
1. Non-realisation of export proceeds. 2. Non-submission of Bills of Entry for imports. 3. Responsibility of directors and officers under Section 68 of FERA, 1973. 4. Validity of penalties imposed by the Adjudicating Authority. Issue-wise Detailed Analysis: 1. Non-realisation of Export Proceeds: The appellants were charged with failing to realise export proceeds in violation of Sections 18(2) and 18(3) of FERA, 1973. The Adjudicating Authority found that the appellants did not take adequate steps to recover the export proceeds amounting to US $ 7,45,333.95, US $ 3,97,366.51, and US $ 4,69,930.58. The appellants argued that the non-realisation was due to quality claims and delays in shipments, exacerbated by labour unrest and financial crises. However, the Authority concluded that the appellants had not made serious efforts to recover the amounts, dismissing the explanation that applications for set-off/write-off were pending with the RBI. 2. Non-submission of Bills of Entry for Imports: The appellants were also charged with failing to submit Bills of Entry for imports, violating Sections 8(3) and 8(4) of FERA, 1973 and relevant RBI guidelines. The Authority found that the appellants did not provide adequate evidence of actual import of goods against remittances, with discrepancies noted in the documents submitted. The appellants contended that some Bills of Entry were lost or delayed due to external factors, but the Authority held that these explanations were insufficient. 3. Responsibility of Directors and Officers under Section 68 of FERA, 1973: The Adjudicating Authority held the directors and officers responsible for the contraventions under Section 68 of FERA, 1973, which holds individuals in charge of and responsible for the conduct of the business liable for violations. The appellants argued that they were not involved in day-to-day operations and that the contraventions occurred without their knowledge. The Tribunal found that: - Shri Sebastian Chokkattu, as Chairman, was overall in charge and failed to take adequate steps to prevent the contraventions. - Shri B. Balakrishnan, who replaced the Managing Director, was responsible for the company's operations during the period of contraventions. - Shri Biju Thomas and Shri S. Sunil Kumar were not involved in day-to-day operations during the relevant period and thus could not be held liable. 4. Validity of Penalties Imposed by the Adjudicating Authority: The penalties imposed were: - ?35,00,000 on M/s. Trend Setters Instyle Pvt. Ltd. - ?15,00,000 on M/s. Mode Creazone India Pvt. Ltd. - ?25,000 on M/s. Trend Designs Ltd. - ?20,00,000 on M/s. Intimate Apparels (P) Ltd. - ?42,15,000 on Shri Sebastian Chokkattu. - ?4,00,000 on Shri B. Balakrishnan. - ?10,05,000 on Shri Biju Thomas. - ?10,05,000 on Shri S. Sunil Kumar. The Tribunal upheld the penalties against Shri Sebastian Chokkattu and Shri B. Balakrishnan, finding them proportionate to the contraventions. However, it quashed the penalties against Shri Biju Thomas and Shri S. Sunil Kumar, concluding that they were not responsible for the company's day-to-day operations during the period of contraventions. Conclusion: - Appeals by Shri Sebastian Chokkattu and Shri B. Balakrishnan were dismissed. - Appeals by Shri Biju Thomas and Shri S. Sunil Kumar were allowed. - The penalties against the companies and responsible directors were upheld, except for those against Shri Biju Thomas and Shri S. Sunil Kumar.
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