TMI Blog2013 (7) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... k and making it doubly sure that they get the loan and when the bank fails, they cannot be expected to be heard to say that the bank was at fault and plead for exoneration. The learned counsel for the appellants did not cite any authority to show that mens rea is necessary to apply sub-sections (3) and (4) of Section 8 read with Section 50 of the Act and the appellants cannot be proceeded against in a situation like this. - impugned order of the appellate tribunal cannot, in principle, be disturbed though as will be presently seen there is, in my opinion, ground to reduce the penalty. Section 50 says that it cannot exceed five times the foreign exchange involved. It is now well settled that Section 50 provides an outer limit for the penalty prescribed which is not mandatory. Even the Deputy Director and the appellate tribunal did not impose the maximum penalty. In other words, it follows that the authorities under the Act and this court have also the power to impose a lesser penalty. - Decided partly in favour of assessee. - Civil Miscellaneous Second Appeal No. 47 of 2012 - - - Dated:- 10-7-2013 - N. Ravi Shankar, J. Shri D.V. Sitarama Murthy, Senior Counsel, for the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- and therefore the appellants are liable for penalty under Section 50 of the Act. 6. Accordingly, a show cause notice was issued, and after hearing the appellants, the Deputy Director of the Enforcement Directorate, Bangalore, by his order dated 24-9-2001, held that the first appellant being the company and the second appellant being its managing director were liable to pay penalty under Section 50 of the Act for the above violations and imposed a penalty of ₹ 3,00,000/-. This was confirmed by the appellate tribunal in the appeal of the appellants. 7. It may be noted that before the Deputy Director and the appellate tribunal, both the appellants took the plea that they were throughout keen, ready and willing to import the machinery, but the Andhra Bank unjustifiably went back on its promise and did not provide the finance and therefore they could not import the machinery and in that process, they also lost the advance which they paid to the aforesaid Switzerland company. 8. Their plea was that they never had any intention to mis-utilize and make a wrongful gain from the foreign exchange provided to them and they could not utilize it for the purpose for which it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantity different from that specified by him at the time or acquisition of the foreign exchange, such persons shall, unless the contrary is proved, be presumed not to have been able to use the foreign exchange for the purpose for which he acquired it or, as the case may be to have used the foreign exchange so acquired otherwise then for the purposes for which it was acquired. 12. It may be noted that it is sub-section (3) of Section 8 which mandates that when a person other than an authorized dealer or a money changer acquires foreign exchange for any particular purpose, then he has to use it only for that purpose and if he fails to use it, he has to inform the authorities concerned. Then sub-section (4) further clarifies what is meant by not using a foreign exchange when it is obtained by a person for importing goods and it says that even if he fails to import the goods, he will be held to have violated sub-section (3). The burden is imposed upon him to explain to prove the contrary and what is the significance of the expression to prove the contrary will be dealt with a little later. 13. It is true that the order of the Deputy Director would show that he has considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be noted that Sections 8(3) and 8(4) have already been extracted supra. 19. A perusal of the language of sub-sections (3) and (4) of Section 8 would show that the said language nowhere indicates that mens rea is necessary and that the person concerned therein should deliberately fail to import the machinery by putting the foreign exchange to misuse. It is enough to bring a person within the four corners of sub-sections (3) and (4) of Section 8, if he fails to import the machinery for a reason now pleaded by appellants. In my opinion, the mere violation of sub-sections (3) and (4) of Section 8 covers a situation even where a foreign exchange is used for the purpose for which it is meant, but the goods are not brought into the country by that person for a reason like this. 20. The learned counsel for the appellants placed much reliance upon the words unless the contrary is proved occurring in sub-section (4) of Section 8 and contended that in the circumstances of this case, the appellants can be said to have explained that they utilized the foreign currency for the purpose for which it was given but they could not import the goods because of the breach of promise by Andh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay that the bank was at fault and plead for exoneration. The learned counsel for the appellants did not cite any authority to show that mens rea is necessary to apply sub-sections (3) and (4) of Section 8 read with Section 50 of the Act and the appellants cannot be proceeded against in a situation like this. 25. For the aforesaid reasons, the question of law is answered against the appellants. It therefore follows that the impugned order of the appellate tribunal cannot, in principle, be disturbed though as will be presently seen there is, in my opinion, ground to reduce the penalty. 26. Now coming to the quantum of penalty, Section 50 says that it cannot exceed five times the foreign exchange involved. It is now well settled that Section 50 provides an outer limit for the penalty prescribed which is not mandatory. Even the Deputy Director and the appellate tribunal did not impose the maximum penalty. In other words, it follows that the authorities under the Act and this court have also the power to impose a lesser penalty. 27. The Deputy Director imposed a penalty of ₹ 3,00,000/- and this was confirmed by the appellate tribunal. It should be noted that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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