TMI Blog2002 (7) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... and/or set off the amount due to him against the amount payable by him to a non-resident without the general or special permission of the Reserve Bank of India ? 4. Whether a penalty can be imposed on a person for a mere technical or venial breach of the provisions of Act for where the breach flows from a bona fide belief that the offender is not liable to act in a manner prescribed by the Statute ? 5. Whether the Adjudicating Authority can alter the charge originally levelled against a person without giving an opportunity to the person to meet the same as provided under the Adjudication Proceedings and Appeal Rules, 1959 made under the Act resulting in the breach of the principles of natural justice ? 6. Whether the Respondents have violated all the settled principles of law in adjudicating the matter and in disposing the appeal ? 2. Briefly stated, the Appellants were carrying on business of Engineering Contractors, particularly business of constructions of long distance cross country pipe line for crude oil, gas products etc. and for fabrication and erection of various main and inter connecting utility piping system for various industries like petroleum, refinery fer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notice No. 29 the charge against the Appellant was that they had indulged in selling of foreign exchange amounting to KD 670 to various members of the staff in Kuwait which contravened the provisions of section 4(1) of the Act of 1947 and rendered themselves liable to be prosecuted under section 23(1) of the said Act. In response to the said show-cause notice, the Appellants filed explanation pointing out that amounts were paid to various officials of Dudsal in Kuwait to execute contract taken by the Appellants and the amounts so paid to them were later on recovered either by deduction from their salaries or otherwise. According to the Appellants, therefore, it is not a case of selling of foreign exchange - which was the charge framed in the subject show-cause notice. The Special Director in his order has held that though it cannot be said that the foreign exchange has been sold by the Appellants but the record clearly indicated that the amounts were "lent" by the Appellants to its employees and later the amounts were settled in India which transaction also contravened the provisions of section 4(1) of the Act. This view was challenged before the Appellate authority and the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be held, he shall issue, a notice fixing a date for the appearance of that person either personally or through his lawyer or other authorized representative. (4) On the date fixed, the Adjudicating Officer shall explain to the person proceeded against or his lawyer or authorized representative, the offence, alleged to have been committed by such person indicating the provisions of the Act or of the rules, directions or orders made thereunder in respect of which contravention is alleged to have taken place. (5) The Adjudicating Officer shall then give an opportunity to such person to produce such documents or evidence as he may consider relevant to the inquiry and, if necessary, the hearing may be adjourned to a future date; and in taking such evidence the Adjudicating Officer shall not be bound to observe the provisions of the Indian Evidence Act, 1872 (1 of 1872). (6) If any person, fails neglects or refuses to appear as required by sub-rule (3) before the Adjudicating Officer, the Adjudicating Officer may proceed with the inquiry in the absence of such person after recording the reasons for doing so. (7) If, upon consideration of the evidence produced before the Adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision in that behalf the Adjudicating Authority cannot or even for that matter the Appellate Authority cannot alter the charge. The fact that no prejudice was likely to be caused to the noticee if the charge was to be altered cannot validate such an action which is without authority of law. The Appellants therefore, contend that if particular procedure is prescribed by law then the proceedings will have to be conducted in that manner alone and the authority cannot arrogate to itself power which is not so provided under the Act or the rules framed thereunder so as to alter the charge midstream of the enquiry. To buttress this contention it is further urged that the present proceedings are undoubtedly quasi criminal proceedings and even for this reason it was not open to the authority to alter the charge midstream. In support of this contention reliance has been placed on the decision of the Apex Court in C.C.E. v. I.T.C. Ltd. 1994(71) ELT 324 (SC) - Collector of Central Excise where the Apex Court has observed that if any action is taken without giving any opportunity to the other side to meet the grounds then that person cannot be made liable of that ground. The next decision r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving notice in that behalf to the Appellants. Obviously, the latter would result in plain infraction of principles of natural justice which cannot be countenanced and especially when the proceedings are of quasi criminal in nature. On this reasoning the subject show-cause notice will have to be discharged. 4. It is then contended that in the present case section 4(1) has no application because, the Appellants had obtained permission from the Reserve Bank of India to undertake contracts and which permission included spending on employees of their necessities abroad to facilitate the execution of the contract. The arguments proceeds on the premise that although the Appellants have paid amount KD 670 to its employees that payment has been made to its staff and employees in relation to the execution of contract for which the Appellants have already obtained permission from the Reserve Bank of India and that the payments have been made in regular course of business. It was therefore, not necessary to obtain special or general permission as such before making such payments to the employees. It is also contended that if the purport of section 4(1) was to be given narrow construction a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out." (p. 29) 5. The next decision relied in Akhar Badruddin Jiwani v. Collector of Customs 1990 (47) ELT 161 (SC). This decision follows the principle enunciated by the Apex Court in Hindustan Steel Ltd. ( supra ) and other decisions on the point. In para 59 of this decision the Apex Court has made reference to the said principle which has already been extracted above and opined that even if it is assumed for arguments sake that the stone slabs imported for home consumption are marble still in view of the finding arrived at by the Appellate Tribunal that the said product was imported on a bona fide belief that it was not marble, the imposition of such a heavy fine is not at all warranted and justifiable. 6. It is therefore contended that applying the above principle to the fact situation of the present case the penalty levied by the authorities below for the nature of default committed by the Appellants cannot be sustained. It is further contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law. On the other hand, what is seen from the record is that the Appellants have paid only sum of KD 670 to its employees abroad for their pressing requirements. That amount cannot be said to be of such nature that the authorities would presume that it was paid with a view to defeat the provisions of law or to get undue benefit or it was dishonest attempt on the part of the Appellants. Assuming that the breach has been established, the same being of technical or venial breach of the provisions of Act and since it was under a bona fide belief that the Appellants were not liable to get permission of the Reserve Bank of India for the said transaction, there would be no question of imposing the penalty. Accordingly, the appeal would succeed in so far as Show Cause Notice No. 29 is concerned. Re : Show-Cause Notice No. 32 9. Relating to the next show-cause notice No. 32, the charge in this notice was of "receiving" Rs. 2596-80 from Manipal Engg. College and "placing" the same to the credit of M/s. Karl Kolb Scientific Technical Supplies, Frankfurt, West Germany, a company reside outside India, without the general or special exemption of the Reserve Bank of India. The show- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son who was resident of New York, outside India; but when the alleged transaction took place the provisions of section 5(1)( aa ) were not in operation and charge of "receiving" could not be framed. What is contended is that, the allegations, even if accepted as it is, would only mean that the Appellants had "received" the amount. In which case it cannot be breach of sub-clause ( a ) of section 5(1) of the Act, as there is no evidence of making payment to or for the credit of any person resident outside India, for the Appellants have relied on cash books which do not even remotely suggest that position. It is argued that merely because some correspondence was exchanged between the parties that would not be sufficient to establish the requirement of payment to or for the credit of any person resident outside India or of having placed any sum to the credit of any person resident outside India, as is required for section 5(1)( d ). As observed earlier, it will not be necessary to go into this wider questions in view of the conclusion already reached and as recorded by the appellate authority that the appellate authority that the breach was only a technical or venial one. On that reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case ( supra ) has taken the view that in such a situation there would be no case for imposing penalty. Understood thus, even the conclusion reached by the authorities below on this show-cause notices would fail and the appeal would therefore succeed. No doubt the Counsel for the Respondents contends that merely because the amount involved in the show-cause notice is paltry sum of Rs. 1,000 that cannot be the basis for absolving the Appellants. As observed earlier, assuming that the Appellants are found to be amiss in not obtaining prior permission of the Reserve Bank of India, the fact remains that nature of transaction being one effected in the usual course of business and the amount involved being very small and the breach being technical or venial breach, as observed by the Apex Court, it would not be a case for imposing penalty. Accordingly, this appeal would succeed even in respect of show-cause notice Nos. 35 and 36. Re : Show Cause Notice No. 37 11. That takes me to show-cause notice No. 37. The charge in this show-cause notice was that the Appellants have received a payment of Rs. 4500 from M/s. Flexicons Ltd. Bombay and credited the same to the account of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have proceeded to take action for breach under section 5(1)( aa ) of the Act, it was obliged to follow the procedure prescribed under the Rules, 1952. That has not been done in the present case. The fact that no prejudice has been caused to the Appellants is of no consequence. The question is whether the authority had jurisdiction or power to alter the charge in absence of any express provision in that behalf such as section 216 of the Criminal Procedure Code. Understood thus, both the authorities below have committed material irregularity in proceeding with the matter with reference to the subject show-cause notice. In this view of the matter, the appeal would succeed also with regard to the show cause notice No. 37. Re : Show Cause Notice Nos. 38 and 39 12. That takes me to the show-cause notice Nos. 38 and 39. Show-cause notice No. 38 concerned, it is alleged that the Appellants have "made payment" of Rs. 28,582-83 on behalf of M/s. Telefunken, 79 Ulm (Danau) Elishetenstrasse, West Germany, resident outside India, without the general or special exemption from the Reserve Bank of India thereby controverting the provisions of section 5(1)( c ) of the Act; whereas in show-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een that the Adjudicating Authority itself had acquitted the appellants - company in respect of charge as per show-cause notice No. 33 on the ground that it was a case of adjustment and there is no right in any party to receive the money when there is corresponding liability to pay. It is contended that the Authority below have taken inconsistent position in its order. For the adjudicating authority while examining the claim in the context of show-cause No. 33 has observed that : "There, unless proved to the contrary it will be presumed that the adjustments and deductions made by Mennesmann are in pursuance of this agreement. The learned advocate has stressed this point further by referring to the note at page 130 which is the annexure to the Show-cause notice. That note itself records that Mannesmann should be asked to send debit note for the two amounts viz. Rs. 4,113-03 and Rs. 6,076-24 in the last lines of the note. It is submitted that if the adjustment was something which was not in the Ordinary Course of business the debit notes would not have been asked for. This appears to be correct. Unless they were in terms of the business agreements the debit notes which have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f conduct, contumacious or dishonest, or acted in conscious disregard of its obligations. Thus, applying the principle enunciated by the Apex Court in Hindustan Steel Ltd. s case ( supra ), to my mind, there would be no cause for imposing penalty in respect of such technical or venial breaches. Besides, the adjustments in question are mainly in respect of bank charges paid by the parties. 15. Be that as it may, what is relevant to note is that the appellate authority proceeded to examine the matter on the premise that agency agreement between the parties was not filed before the authority or power and the letter of credit was not in accord with the agreement as is seen from the correspondence between the parties, whereby the Appellants were requested to carry out the necessary amendment which was not done. The appellate authority has also adverted to the fact that no permission from the Reserve Bank of India was produced. In the circumstances the appellate authority has imposed penalty of Rs. 16,000. 16. The Counsel for the Appellants however, contends that the appellate authority has only made reference to some of the correspondence selectively, whereas whole set of docu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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