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TMI Blog1996 (7) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... d with section 68(1) Rs. 50,000 Section 8(1), read with section 68(1) Rs. 50,000 3. Nitco Hosiery Mills [Appellant in Appeal No. 253/90] Section 18(2) Rs. 1,00,000 Section 9(1)(c) Rs. 50,000 Section 8(1) Rs. 50,000 Shri P. Balasubramanian [Appellant in Appeal No. 254/90] Section 18(2), read with section 68(1) Rs. 1,00,000 Section 9(1)(c), read with section 68(1) Rs. 50,000 Section 8(1), read with section 68(1) Rs. 50,000 2. After hearing both the parties at some length, we came to the conclusion that these cases will have to be remanded for fresh adjudication. In view thereof, we decided to dispense with the requirement of pre-deposit in all the appeals and heard further arguments on merits. 3. Happy Bee, City Knitting Company and Nitco Hosiery Mills are partner- ship firms and are sister concerns of each other. It appears that these firms made a number of exports during 1983-84 to Brevio of Italy and their sister concerns at Switzerland. The value of the total exports made by these three appellants is stated in the show-cause notices (SCNs I, IV and VII). It appears that prior to the exports, the foreign buyer sent several remittances through banking channels to the three appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealisation which was clear from the fact that they had taken the extreme and highest protection of ensuring that their exports were covered by advance remittance, thus, ensuring receipt of the export proceeds in the prescribed manner within the prescribed time. 5. In regard to the charge of contravention of section 9(1)(c), the appellants stated that the import in question was done under the Import Licence issued by the Controller of Import and Export. It is examined in the Memorandum of Appeal that a copy each of the import permit goes to customs and RBI and the import cannot be made unless these authorities clear the same. It is not disputed that no amount in Indian currency or foreign exchange had been paid to the suppliers who were the foreign buyers of export items. It was stated that the cost of import would be adjusted against the advance payments after obtaining the permission of the Reserve Bank. 6. In regard to the charge of contravention of section 8(1) they replied that the SCN did not point out exactly as to how the amount mentioned therein was computed and from whom the amount was borrowed and that on this count alone the charge should be quashed. They submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mself by observing in para 16 of the impugned order that in case of borrowing what is necessary to prove is delivery by one party and the receipt by another party of money on agreement, express or implied, to repay money with or without interest . However, while coming to the conclusion that the appellant required prior permission from the RBI he has not discussed any evidence to show that there was an agreement to repay the foreign exchange received by way of advance. Without a finding to this effect, the receipt of advances could not be treated as borrowing and unless borrowing is established, the question of prior permission of the Reserve Bank does not arise. The consideration of the fact that the RBI s permission was not obtained was, therefore, misleading. 9. Further on, in the same para (i.e., para 16), the learned Adjudicating Officer has observed that all the transactions, i.e., advance remittances, subsequent non-realisation and non-payment of imports have taken place without the approval of the Reserve Bank of India . In view thereof, it is clear that the learned Adjudicating Officer has taken the view that advance remittances required prior permission of the RBI. The qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellants were in the nature of interest free loan as opined by the RBI in their letter of 20-5-1986 or whether they were advance against exports but were received in contravention of the procedure laid down in para 11C.10 of the RBI Manual. The findings of the learned Adjudicating Officer on these points are vague. In para 15, he came to the conclusion that the procedure laid down in sub-para (iii) of para 11C.10 has not been followed inasmuch as the formalities required by the said paragraph of issue of certificate on security paper and endorsement on GRI Forms by authorised dealers were not complied with. However, in para 11, he rejected the alleged contention that the said remittances had to be repaid by making exports for the reason that the same was not substantiated by the permission of the RBI. The reasoning seems to be that since the formalities required by para 11C.10 of the RBI Manual were not complied with, the appellants contention of receipt of the remittances by way of advance is not tenable and, therefore, remittances were by way of advance money which had to be repaid in the form of exports of goods of equivalent value and since there is no permission of the RBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made subsequently. 12. The learned Adjudicating Officer has concluded that the formalities laid down in para 11C.10(iii) were not complied with. This conclusion is not disputed. However, the question would be as to whether the appellants could be blamed for the said non-compliance and whether the non-compliance would amount to the contravention on the part of the appellants as alleged. The powers delegated to the authorised dealers in the matter of advances for exports is regulated by para 11C.10 of the Manual. It is the duty of the authorised dealers to deal with such advances in the manner laid down in that para. The authorised dealers ought to have issued the requisite certificate on security paper and called upon the appellants to produce the certificate for endorsement of the GRI particulars at the time of each exports. Apparently, the authorised dealers did not observe the prescribed procedure. Instead, they sought the permission of the RBI under their letter of 3-2-1987 to permit them to account for the GRI Forms against the advance remittances. In this letter, they have given details of GRI Forms and the advance remittances credited by them from time to time. The procedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, the RBI ought not to have requested the Enforcement Directorate to investigate and initiate proceedings under the Act without seeking full particulars from the concerned authorised dealers regarding the advance remittances received by them and whether they have adjusted the amounts of advance against the GRI Forms and if not, how they propose to deal with the advance remittances. These are the aspects which were required to be sorted out between the RBI and the authorised dealers before referring the matter to the Enforcement Directorate so that the Enforcement Directorate could take a definite view on the question of contravention. 15. As regards the finding of contravention of section 9(1)(b), the appellants have submitted that the imports were made against the licence granted by the Chief Controller of Export Import, a copy of each of which had been endorsed to the Customs and RBI. The impugned order does not indicate whether the investigating agency had examined the terms of import licence and particularly the decision of the Government as to how the invoices value of imports would be remitted to the foreign party. The grant of import licence obviously amounts to the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Adjudicating Officer has observed in para 16 that the appellants even at this stage have not been able to give detailed account of total remittance received, total exports made for adjusting the said remittances along with the debiting of the foreign exchange for the import of machinery . In para 14 also, he has observed that there is no documentary evidence to show the time schedule with regard to the number of advance remittances received vis-a-vis the adjustment made and the balance left therein . In the Memorandum of Appeal, the appellants have stated that a copy of bunch of documents containing the details of adjustment were produced by the Managing Partner Shri P. Balasubramanian at the time of recording of his statement on 5-5-1988 by the Enforcement Officer, and that once again it was placed before the Special Director at the time of personal hearing. The appellant s statement is substantiated by page 4 of Shri Balasubramanian s statement recorded on 5-5-1988 under section 40 of the Act, wherefrom it is seen that he had submitted all the documents referred to by the learned Adjudicating Officer at the time his statement was recorded. The observations made by the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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