TMI Blog1996 (3) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... been issued by the Reserve Bank of India in exercise of powers under section 9(1)( d ) of the Act. Section 9(1)( d ) paraphrased, provides for an absolute embargo on any person resident in India from making any payment to any person consequent upon any order or on behalf of any person resident outside India. This embargo may be lifted by any general or special exemption by the Reserve Bank of India. Pursuant to this power the exemption notification in question was issued. The exemption notification provides : "In pursuance of clause ( d ) of sub-section (1) of section 9 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), the Reserve Bank is pleased to permit the making of any payment in rupees by order or on behalf of a person re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rew the entire amount of foreign exchange under the letter of credit and paid the difference out of the rupees from the sale of foreign exchange so earned amounting to Rs. 12,472 to FI's local agent at Bombay. About five years later, in 1985, a show-cause notice was issued by the respondent authorities to the appellant. It was alleged that by making payment of the amount of Rs. 12,472 there was a contravention of section 9(1)( d ) of the Act. The facts, as noted above, were stated in detail by the appellant in its reply to the show-cause notice. The relevant documents were also annexed to the reply. On June 30, 1986, the Special Director passed an order in which it was stated : "In the reply dated April 9, 1986, to this show-cause notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a technical nature and that the appellant had always acted bona fide without any intention to violate any provisions of law. It is also pleaded that the entire foreign exchange had come into the country and that there was no question of any loss being suffered or of any foreign exchange which should have come into the country not doing so. Reliance was placed on the decision of the Supreme Court in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26, to contend that where violation was of a technical nature and bona fides were not in question, there should be no imposition of any penalty. By its decision dated August 8, 1988, the Board without any discussion proceeded to consider the case on the basis that FI was the agent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Board or before this court. That being the case, it is submitted, the finding of guilt and the imposition of penalty could not be interfered with. It is further added that the penalty could be imposed under section 50 of the said Act and that it was a matter which was wholly within the discretion of the concerned authority. It is submitted that the question of men's rea was not at all relevant. Reliance has been placed on the decision in the case of State of Maharashtra v. Mayor Hans George, AIR 1965 SC 722, in this connection. On the factual aspect of the matter we are of the view that the assumption that FI was acting as the agent of the appellant is not at all borne out from the records. That was never the appellant's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson resident outside India, provided that the rupee payment is backed up by the equivalent amount of foreign exchange. The words "such person" must refer to the person for whose benefit the notification was issued, namely, the person resident in India. Applying the notification to the facts of this case, it is clear that the appellant was entitled to make payment in rupees at the instance of a person resident outside India out of the sale proceeds of the foreign exchange received by it. Both the Special Director and the Tribunal have also proceeded on this basis. Their only objection was that the person ordering remittal was not the person providing the foreign exchange. If it is found that the person ordering remittal was the same as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection reference may be made to the decisions in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC), Anantharam Veerasing-haiah and Co. v. CIT [1980] 123 ITR 457 ; AIR 1980 SC 1146, and in Cement Marketing Co. of India Ltd. v. Asst. CST, AIR 1960 SC 346. There was no such consideration in this' case at all. That the proceedings for imposition of penalty under the Act are of quasi-criminal nature follows from the nature of the proceedings itself. It is also settled law that where proceedings are penal in nature, they are quasi-criminal proceedings. (See the decisions in CIT v. Anwar Ali [1970] 76 ITR 696 ; AIR 1970 SC 1782, and Shanti Prasad Jain v. Director of Enforcement, AIR 1962 SC 1764). The consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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