1999 (4) TMI 663 - AT - FEMA

Summary

Issues Involved:

1. Contravention of Section 18(2) and 18(3) of the Foreign Exchange Regulation Act, 1973.
2. Liability of directors under Section 68(1) of the Foreign Exchange Regulation Act, 1973.
3. Procedural fairness in the adjudication process.

Issue-wise Detailed Analysis:

1. Contravention of Section 18(2) and 18(3) of the Foreign Exchange Regulation Act, 1973:

The adjudication proceedings were initiated based on the allegation that the appellant-company had exported goods worth Rs. 5,27,58,945 to various countries but failed to realize the full export proceeds within the stipulated period of six months, thereby contravening Section 18(2) read with Section 18(3) of the Foreign Exchange Regulation Act, 1973. The department relied on the statement of outstanding GRIs as of 13-1-1995, the statements of the company's directors, and copies of 131 GR Forms. However, the learned counsel for the appellant argued that the adjudication proceedings were misconceived as the department had evidence of total realization of 93 GRIs within the time extended by the RBI and all remaining GRIs within five months prior to the issue of the SCN. The evidence of full realization was ignored, and the adjudicating officer proceeded based on the position as of 13-1-1995, disregarding the RBI's permission up to 31-3-1995 for 93 GRIs and pending consideration for the remaining GRIs.

2. Liability of directors under Section 68(1) of the Foreign Exchange Regulation Act, 1973:

The adjudication order imposed a penalty on the directors of the appellant-company, holding them liable under Section 68(1) of the Act. The counsel for the appellant contended that the penalties on the directors were unjustified as the entire outstanding amounts had been realized. The appellant had provided all required information and bank realization certificates, yet the adjudicating officer proceeded with undue haste and passed an ex parte order imposing penalties on both the company and its directors.

3. Procedural fairness in the adjudication process:

The appellant's counsel argued that the adjudication process was procedurally unfair. The SCN alleged violations in respect of 131 GRIs, requiring inspection of related documents, correspondence with foreign buyers, bankers, and the RBI. However, only 10 days were allowed for inspection and filing a reply, whereas normally 30 days are allowed. The request for extension of time was denied on flimsy grounds, and the adjudicating officer proceeded ex parte without proper notice. The adjudicating officer also falsely recorded that no reply to the SCN was forthcoming and that the appellants were seeking frequent adjournments, whereas the appellants had been cooperating and had only sought one adjournment.

Conclusion:

The tribunal found that the SCN and the proceedings were misconceived. The RBI had granted an extension of time up to 31-3-1995 for 93 GRIs, and the entire outstanding amount had been realized through proper banking channels. The adjudicating officer erred in framing the charge based on the position as of January 1995 and ignoring subsequent evidence of realization. The findings of contravention of Section 18(2) and 18(3) were set aside, and the invocation of Section 68 against the directors was also dismissed. The appeal was allowed, and the impugned order was set aside against all appellants.