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2024 (10) TMI 392 - AT - FEMAViolation of Section 6(3)(b) of FEMA and Regulation 5(1) of Regulation of 2000 - delay of 24 days occurred in reporting FDI remittance - Penalty imposed on the appellant company and on the Director individually - HELD THAT - It is not in dispute that the appellant company failed to make a report of the receipt of the amount of USD 3,09,00,000 within a period of 30 days thereby committed violation of the provisions of FEMA and Regulations. As we refer to the facts of the case pertaining to the amendment in the Act and the excuse taken by the appellant for the delay. It was submitted that online reporting was made effective since 08.02.2016 by RBI and otherwise reporting of FDI on the forms (ARF) was to be made manually. The appellant said to have faced teething problem in making report online. The respondents have demonstrated that online system for reporting was introduced on 12.02.2015 itself though with liberty to make reporting manually. In view of the above, we are unable to accept the excuse taken by the appellant in reference to teething problems. Teething problem, if substantiated, may remain initially but not in deplorable form under operation for a year before making it compulsory. Thus, the lame excuse taken by the appellant cannot be accepted to justify the delay. It is more so when there is no material placed on record to prove any teething problem in reporting. The appellant had not placed on record that even other Company also faced the difficulties which the appellant faced to substantiate their plea/excuse. The appellants no doubt have made reference of the letter sent to the RBI to seek excuse for delay in reporting and issuance of UIN. The RBI is not the authority to take up the matter of delay rather if reporting is made even with delay, UIN can be issued. It is not that for delayed reporting, UIN cannot be issued by the RBI. Thus, the letters sent to the RBI cannot fill the gap and prove the case in favour of the appellant which otherwise has not substantiated with material. In view of the above, we are unable to accept the case of the appellant on facts to find justification in delay in making report of the FDI. It is more so when appellant Company committed default in reporting in previous years also and for that an application for compounding was filed and for it learned counsel for the respondent has submitted documents to show an application by the appellant for compounding for the delay caused in reporting of FDI. It was not that for the first time but on several occasions, appellant caused delay in making report of FDI. The facts are relevant to analyse the bonafide of the appellant company and even in reference to justification for imposition of the penalty of the nature imposed herein. Whether delay in reporting should be considered only as a technical default so that no penalty be imposed? - If the plea raised by the appellant is accepted and no penalty on delay in making report is imposed, then there would be no sanctity to mandate for reporting of FDI within a period of 30 days and to make compliance of the provisions. Nobody would make a report within time or comply the mandate of law if the penalty for the delay in making report cannot be imposed on the pretext of technical delay. In fact, technical delay needs to be defined properly and in a given case technical delay may not require imposition of penalty but when it is not offending any statutory provision. If any provisions of law have not been complied, then violation may result in penal consequences, if provided. In view of the above, we are not in a position to subscribe the argument of the appellant to give immunity from imposition of penalty taking it to be a technical delay and to cause interference in the impugned order. Reference to the provisions of Section 6(3)(b) and Regulation of 2000 superseded by the Regulation of 2017 followed by the Regulation of 2019 - repeal or express omission and substitution of any provision unless a different intention appears, the repeal/omission shall not affect the continuance of such enactment by the enactment so repealed and in operation at the time of such repeal. The detailed discussion on the issue has been made to show that words repeal and omission are interchangeable and even there is express omission of the provision it would remain in operation in a given case detailed out by the Apex Court in the case of Fibre Boards Pvt. Ltd. 2015 (8) TMI 482 - SUPREME COURT It is necessary to clarify that so far as the regulations are concerned, it has not been framed by the Central Government and thereby the Regulations framed by the RBI remain in operation pursuant to Section 47(3) of the Act of 1999 as amended and when it was in continuity, the appellant cannot take excuse regarding repeal/omission of the provision in the light of operation of Section 6 and 6A of the General Clauses Act read with Section 24. The issue is squarely covered by the judgment in the case of Fibre Boards Pvt. Ltd. 2015 (8) TMI 482 - SUPREME COURT . In the light of the discussion made above, we do not find even any legal ground to assail the order of the Adjudicating Authority. Quantum of penalty imposed on the appellant - We find reasons to interfere in the amount of penalty. It is true that the FDI for a sum of more than Rs. 204 crores was received by the appellant and it was required to be reported within a period of 30 days. The delay is of 24 days but for it the penalty of Rs. 20 crores on the Company and Rs. 5 crores on the Director is excessive in our opinion. Reasonableness in imposition of penalty needs to be shown and accordingly we cause interference in the quantum of penalty and substitute it by imposition of penalty of Rs. 2 cores on the Company while on Director it would be of Rs. 5 lakhs. With the substitution of the penalty, we cause interference in the impugned order to that extent while maintaining it on the legal and factual issues dealt with by the Adjudicating Authority and elaborately discussed by us on all the issues raised before the Tribunal.
Issues Involved:
1. Validity of penalty imposed under a repealed provision of FEMA. 2. Justification for delay in reporting FDI due to technical difficulties. 3. Determination of whether the delay constitutes a technical default. 4. Appropriateness of the quantum of penalty imposed. Issue-Wise Detailed Analysis: 1. Validity of Penalty Imposed Under a Repealed Provision of FEMA: The primary legal issue was whether the penalty imposed on the appellant under Section 6(3)(b) of FEMA, which was repealed effective 15.10.2019, was valid. The appellant argued that since the provision was omitted, any action based on it was unsustainable. The Tribunal referred to the General Clauses Act, particularly Sections 6, 6A, and 24, to determine that the repeal or omission of a provision does not affect actions taken under it unless a different intention is expressed. The Tribunal relied on the Supreme Court's judgment in the case of Fibre Boards Pvt. Ltd., which clarified that repeals and omissions are interchangeable and covered by the General Clauses Act, thereby validating the penalty despite the repeal. 2. Justification for Delay in Reporting FDI Due to Technical Difficulties: The appellant contended that the delay in reporting the FDI was due to teething issues with the new online reporting system introduced by the RBI. However, the Tribunal found that the online system had been operational since 12.02.2015, with compulsory reporting from 08.02.2016, and the appellant failed to provide substantial evidence of technical difficulties. The Tribunal concluded that the appellant's claim of technical difficulties was unsubstantiated and could not justify the delay. 3. Determination of Whether the Delay Constitutes a Technical Default: The appellant argued that the delay was a technical default and should not attract a penalty. The Tribunal, however, emphasized the importance of adhering to statutory timelines for reporting FDI to maintain the integrity of legal provisions. It was noted that if delays were excused as technical defaults without penalties, it would undermine compliance with the law. The Tribunal concluded that the delay was not merely technical but a violation of statutory provisions, warranting penal consequences. 4. Appropriateness of the Quantum of Penalty Imposed: The Tribunal reviewed the penalty amounts of Rs. 20 crores on the company and Rs. 5 crores on the director, considering them excessive. It was noted that while penalties need not be based on actual loss, they should be reasonable. Given the circumstances, including the appellant's history of delayed reporting and the amount involved, the Tribunal reduced the penalties to Rs. 2 crores for the company and Rs. 5 lakhs for the director. This adjustment was made to ensure the penalty was proportionate to the offense while maintaining the legal and factual findings of the Adjudicating Authority. The appeal was disposed of with modifications to the penalty amounts, affirming the Tribunal's stance on legal and factual issues.
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