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TMI Blog2008 (12) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... No. T-4/57-B/AD/VKA/B/2001 dated 28.6.2001. For contravention of Section 9(1)(d) and Section 8(1) r/w Section 68 Foreign Exchange Regulation Act, 1973,. on the reasons that the appellants made expenses or made payment of US dollars 31700/- and Rs. 7,35,689/- on behalf of wholly-owned subsidiary named M/s. Leela Industries Ltd in USA and further transferred US dollars 40,000/- to the aforesaid wholly-owned subsidiary. This Tribunal while disposing off application for dispensation of pre-deposit of penalty allowed by order dated 5.1.2004 the appellant in Appeal No. 556/2003 to make pre-deposit of 20% penalty but appellant in Appeal No. 557/2003 is directed to deposit whole amount of penalty. Both the appellants have complied with the pre-deposit order dated 5.1.2004. Presently, these appeals arc taken up for final disposal on merits. 3. We have heard Shri Neil Heildreat h. Advocate, on behalf of the appellants and Shri A.C. Singh, DLA, on behalf of Enforcement Directorate. Ld. Counsel on behalf of the appellants has filed written submissions which arc taken on record. 4. I t is argued on behalf of the appellants that a Show Cause Notice No. T-4/56-B/AD/VKA/2001 dated 28.6.2001 is is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore that date, the appellants were maintaining a Liaison Office in USA for whose maintenance in New York remittance of foreign currency of US dollars 40,000/- in different instalments is made. This amount of US dollars 40,000/- is remitted to the Liaison Office and not to the wholly-owned subsidiary M/s. Leela Industries Ltd., USA, because the dates of these remittances arc between February till May, 1994 and not after incorporation of wholly-owned subsidiary M/s. Leela Industries Ltd., USA, on 19.7.1994. 6. Lastly, the argument is made that RBI's Circular No. AD (MA) Circular No. 13 dated 12.3.1992 allows this remittance per Clause 24 25 whereafter appellants cannot be held guilty for contravention of Section 8(1) FER Act, 1973. It is also contended that the appellants cannot be visited with a penalty merely on technical breach as held in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC). Per contra, Shri A.C. Singh, DLA, supported the impugned order. 7. This is an admitted position that wholly-owned subsidiary M/s. L eela Industries Ltd., USA, is incorporated on 19.7.1994 after obtaining approval letter dated 14.7.1994 (as at page 17-20 of the records) from RBI. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either express or implied, of any party to creation of agency is immaterial In the words of the Hon'ble Supreme Court following is stated:- For creating a contract of agency, in view of Section 185 of the Indian Contract Act, even passing of the consideration is not necessary. The consideration, so far as the employer was concerned as evidenced by the Scheme, was to project their better images before the employees. It is well settled that the purpose of determining the legal nature of the relationship between the alleged principal and agent, the use of or omission of the word 'agent' is not conclusive. If the employee had reason to believe that his employer was acting on behalf of the Corporation, a contract of agency may be inferred. In DESU v. Basanti Devi [1999] 8 SCC 229 at 240, this Court stated the law, thus, formation of the contract of insurance is between 1.IC and the employee of DESU. Scheme has been introduced by LIC purely on business considerations and not for any particular benefit of insurance conferred on the employee working in an organization. Though in the proforma letter written by DESU to LIC. it is mentioned that DESU would be an agent of the emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of US dollars 40,000/- are described, it is quite clear that the appellants made an application for establishing of wholly-owned subsidiary on 1.6.1994 to the Ministry of Commerce, Government of India, which has been referred in the RBI's approval letter dated 14.6.1994. From this factual position, it becomes quite clear that the appellants started preparations for establishing a wholly-owned subsidiary in USA much before June, 1994. The amounts are admittedly transferred on the dates as follows: Dates Amounts 8.2.1994 US dollars 16000/- 4.5.1994 US dollars 16000/- 31.5.1994 US dollars 8000/- 11. The above dates of transfer of US dollars arc not detached by length of period from the date of establishment of the wholly-owned subsidiary but are intimately connected. It appears from the close by dates that the transfer of US dollars 40,000/-, including establishment of wholly-owned subsidiary, is a part of the same transaction. It is nobody's case that this transferred amount is spent by Liaison Office before incorporation of wholly-owned subsidiary. If that is so, the amount which was lying there in USA with the Liaison Office, later, is taken over by wholly-owned subsidi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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