TMI Blog2014 (2) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... f 2006 CRL.A. No. 630 of 2006 CRL.A. No. 701 of 2006 CRL.A. No. 702 of 2006 CRL.A. No. 703 of 2006 CRL.A. No. 704 of 2006 CRL.A. No. 705 of 2006 CRL.A. No. 706 of 2006 - - - Dated:- 11-2-2014 - Justice S. Muralidhar,JJ. For the Appellant : None For the Respondent : Mr. Ashok Kumar Panda, Senior Advocate with Mr. Naveen Kumar Matta, Advocate. ORDER 1. These appeals are directed against the impugned orders passed by the Foreign Exchange Appellate Tribunal ( AT ) dismissing the appellants respective appeals against the adjudication orders ( AOs ) passed by the Special Director ( SD ), Enforcement Directorate ( ED ) holding the Appellants guilty of contravening Section 8 (1) of the Foreign Exchange Regulation Act, 1973 ( FERA ) and imposing penalty under Section 50 FERA. 2. The Appellants in these appeals are Indian subsidiaries of their respective parent corporations incorporated outside India. Barring the above distinction, the issue that arises in these appeals is similar to the issue that was decided by the Court in its judgment dated 3rd February 2014 in Criminal Appeal No. 40 of 2008 (Mitsubishi Corporation v. Director of Enforcement) and in the judgment passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealers may allow such foreign nationals, who are their regular constituents, to make recurring remittances for family maintenance, etc.,upto 75% of their net salary (i.e. after deduction of contribution to provident, etc., funds and taxes payable) after verifying that they hold valid employment visas. On request, authorized dealers may also allow remittances in excess of 75% of net salary provided the foreign nationals is in receipt of perquisites in India such as free housing, conveyance and medical facilities and his family (wife and/or children) is resident outside India. (ii) Salaries to the employees deputed by foreign companies to their India offices/branches/subsidiaries/ joint ventures may be paid abroad to the extent of 75% of the net salary (tax to be paid for the full amount in India) and balance amount of salary may be paid in India. 7. In the first place it must be noticed that the foreign nationals in these cases are not employees of the Indian subsidiaries but have only been seconded to them. The foreign holding company continued to pay the salaries of the expatriate employees abroad in foreign exchange. The Indian subsidiary only paid in Indian rupees a porti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorities. 9. Mr. Panda was candid that no facts have been found by the ED to counter the above assertions. It is, therefore, plain that even according to the ED in none of these cases was there any allegation that an expatriate employee of the Indian subsidiary was seeking to remit abroad in foreign exchange monies paid to him in India in Indian rupees. In the circumstances, the Court fails to appreciate how Para 11D.3 FECM would apply at all. The case of violation of the requirement of that clause of the FECM by the Appellants is misconceived. 10. Also, in light of the ED being unable to counter the factual position explained in the above replies to the SCNs, it is evident that there was a basic misconception on the part of the ED that the expatriate employees of the foreign holding companies upon being seconded to the corresponding Indian subsidiary ceased to the employees of the respective foreign company and further that the payments made by the foreign holding company to its employees abroad were on behalf of the Indian subsidiary. There was absolutely no basis for the ED to make such an assumption. 11. This Court does not wish to repeat what has already been held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquiring any foreign exchange as a result of Mitsubishi Japan remitting funds to the Appellant for disbursal of the salaries of the employees seconded to it does not arise. Further, the question of the Appellant repaying Mitsubishi, Japan the sum paid as salaries also does not arise. 12. In the present appeals, the ED has not been able to counter the factual position that no salaries were been paid outside India by the Indian subsidiary to expatriate employees working in India. There was, therefore, no remittance of foreign exchange involved. The question of taking the approval of the RBI for making payment in Indian rupees to the expatriate employees in India did not arise. Also all taxes applicable under the Indian Income Tax Act, 1961 have been paid by the Indian subsidiary and requisite returns have been filed with tax authorities. The mere fact that income tax has been paid by the Indian subsidiary does not ipso facto attract Section 8 (1) FERA. In any event, that is not even the allegation in the SCNs issued to the Appellants. It is not open to the ED to justify the AOs on a ground other than that stated in the SCN. In fact, the AT itself rejected the plea raised on b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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