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2018 (12) TMI 1765 - ATFEMAViolation of FEMA - Appellant Company has failed to submit (Bill of entry) documentary evidence for import of goods in respect of the advance remittance through HSBC Bank - penalty imposed on managing director - HELD THAT:- It is admitted by the respondent that the Company has used the foreign exchange for the declared purpose in terms of section 10 (5) by assuming that non-receipt of the goods would mean use of foreign exchange for a wrong purpose. Once the foreign exchange has been used by the Appellant Company for the declared purpose and if said purpose is not achieved it would not lead to the inference of not using the foreign exchange for the purpose for which it was acquired. Invoking of Regulation 6 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 is without any substance as the same applies to Resident Person, who has acquired or purchased foreign exchange for any purpose mentioned in the declaration to the Authorised Dealer in terms of Section 10 (5) of the Act and does not use it for the said purpose and is enjoined to surrender such foreign exchange or unused portion thereof back to the Authorised Dealer within 60 days. In the Show Cause Notice, the provisions of the law have also been engrafted . The Counsel for the respondent has referred Section 11 of FEMA contending that the exemption granted by RBI is basically seeking compliance are not otherwise which has no substance as for alleged compliance of filing of Bill of Entry, RBI had granted exemption, hence there was no scope of compliance. Even more, reading of Section 11 FERA, 1999 in the manner is correct. In fact, it is an enabling section empowering RBI to issue directions to the Bankers/Authorised Persons for the purpose of securing compliance of the provisions of FEMA. The said section goes in consonance with the judgment of the Hon‟ble Supreme Court in the case of LIC versus Escorts, [1985 (12) TMI 289 - SUPREME COURT] wherein held that Reserve Bank of India is the Custodian General of the foreign exchange of the country and what is permitted/exempted by RBI cannot be questioned, by any person and directions are given by RBI in terms of section 11 of FEMA in consonance with the said law laid down by Hon‟ble Supreme Court. The respondent admittedly not denied the fact that the vendor was declared bankrupt who has also not issued the 60 days notice to the appellant about it, otherwise the appellant would have approached to recover the amount as of law. Even if the contention of the respondent is accepted, the respondent ED is not able to get any additional/independent evidence against the appellant apart which was already available with RBI. As asserted by the respondent that inquiries were made with the Company to find out the person incharge and responsible during the relevant period and the Company vide communication dated 14/10/2014 informed that Mr. S. Jain (Head of Finance) was the person incharge during the impugned period, who had already left the Company. The said Mr. S. Jain has not been arraigned in the show cause noticee and instead the Managing Director, who is appointed on 27/08/2015 as Managing Director of the Company, a citizen of South Korea was arraigned in vicarious liability in terms of Section 42 of FEMA. The Form DIRE-12 for appointment of the Appellant No. 2 as Managing Director. The present Managing Director became Managing Director on 27/08/2015 and was not the person in-charge of and responsible to for the conduct of the business of the Company, which was duly informed to the Respondents during the course of investigation but the Respondent chosen to arraign the new Managing Director with vicarious liability. Therefore, the notice and the penalty imposed on the Managing Director is without any valid reason. Allegations against the Company and the order passed against the Company is liable to be set aside. Once Company is not liable, as aforesaid, there is no scope of imposition of penalty on the Managing Director as the precondition for imposition of penalty in vicarious liability is, if the company is found guilty.
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