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2015 (2) TMI 24 - HC - FEMAContravention of Sections 18(2) and 18(3) read with Section 68 of the Foreign Exchange Regulation Act, 1973 - Imposition of penalty - whether each of them to whom notices were issued, were during the relevant period “in charge of and responsible to the said company for the conduct of the day-to-day business of the company”. - Held that:- ED has not been able to deny that the SCN was served on FIL and its directors, including the Appellant only at the address of the company and at the time when the Appellant had ceased to be a director. It is not the case of the ED that even after coming to know, when the appeal was filed by the Appellant, that he had ceased to be a director of FIL with effect from 31st October 2001, it offered to serve him a separate SCN at his address. Consequently, it is evident that no SCN was in fact served upon the Appellant at his address as on the date of the SCN, i.e., 28th May 2002. The ED ought to have fairly stated before the AT that since no SCN had been served on the Appellant at his ordinary place of his residence, the AO qua him should in fact be set aside and the ED should be permitted to serve a separate SCN on him. However, even before this Court it was repeatedly asserted that as far as the ED was concerned, it had served the SCN on the Appellant through FIL. Therefore the Court is constrained to observe that the fundamental requirement of the Adjudication Proceedings and Appeal Rules, 1974 (“APAR”) (1974 Rules) and in particular Rule 10 (reproduced herein below) has not been satisfied in the present case. In terms of Rule 10(b), service of notice had to be on either the address of his place of residence or his last known place of residence or the place where he carries on, or last carried on, business or personally works or last worked for gain. There can be no doubt that as on 28th May 2002, i.e., the date of the SCN, it had to be served either at the place of residence of the Appellant or the last known place of his work. As on that date, his address was not the address of FIL. - Even after coming to know that as on the date of the issuance of the SCN, the Appellant was no longer a director of FIL and therefore the notice issued to him at the address of FIL could not obviously be treated to have been served upon him, the ED was not prepared to say that the AO qua him must be set aside on that ground. The AT failed to deal with the central point in the appeal filed by the Appellant. It has also failed to note his submissions in that regard. - The occasion for the Appellant to avail of the defence available to him under Section 68(1) FERA, i.e., to show that he was not in charge of the day-to-day affairs of the company or that the infraction complained of had not occurred with his knowledge or that he had exercised due diligence to avoid such contravention would arise only after he was served with the SCN along with the documents relied upon against him by the ED. In this case, the documents include the statement of Mr. Pradeep Verma. It is not the case of the ED that even on the date of the AO, it had actually served on the Appellant, the documents relied upon in the SCN. Consequently, it is not open to the ED to now contend that even without the relied upon documents being served on the Appellant, he should somehow have made out his case before the AT in support of his defence under the proviso to Section 68 (1) FERA. The impugned AO was in violation of the principles of natural justice, as well as the requirement of Section 51 FEMA read with Rule 10 of the APPR. - impugned AO dated 3rd November 2004 and the impugned order dated 2nd July 2008 of the AT are unsustainable in law and are hereby set aside. - Decided in favour of appellant.
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