TMI Blog2018 (12) TMI 1765X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 conso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99 ( FEMA‟) against Adjudication Order No. ADJ/02/FEMA/DZ/2017/JD(SM) dated 29/12/2017 for contravention of Section 10(5), 10(6) Section 42(1) (2) of FEMA,1999 r/w Regulation 6(1) of Foreign Exchange Management(Realization, Repatriation Surrender of Foreign Exchange) Regulation,2000. A Show Cause Notice bearing No. T- 4/02/FEMA/DLZO/BE/2016 dated 09/09/2016 was issued to the Appellants. 2. The Adjudicating Authority has imposed a penalty of ₹ 30.00 lakhs on the Company and ₹ 10 lakhs on the Managing Director vide the impugned order. 3. The brief facts are that after investigations, a Show Cause Notice was issued against the Appellant Company and its Managing Director for alleged violation of Section 10 (5) and 10 (6) of FEMA, 1999, r/w Regulation 6 (1) of the Foreign Exchange Management (Realisation, Repatriation, and Surrender of Foreign Exchange) Regulations, 2000 alleging that the Appellant Company has failed to submit (Bill of entry) documentary evidence for import of goods in respect of the advance remittance of US $433661.76 through HSBC Bank. In terms of Section 42 of FEMA, 1999, the Managing Director of the Company was arraigned a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, RBI) vide F. No. T-3/FEMA/BE-1861/DZ/2002 dated 27/04/2016 for clarifying the content of letter dated 15/04/2016. In response to ED s letter, RBI vide letter dated 13/05/2016 clarified that the RBI does not debar the Directorate of Enforcement from carrying on with the investigation already initiated against them. 9. It is submitted by the respondent that as alleged by the appellants (took all reasonable steps to repatriate it), the foreign exchange is merely an eye wash as it is clear from the adjudication order itself that the Appellants had paid the advance amount in October 2008 to their regular supplier of computer monitor screen. The shipment was expected in November 2008, however, due to financial crisis, the vendor could not fulfil its commitment and also did not refund the advance amount. Also the vendor was declared bankrupt and as such the advance amount could not be recovered from the vendor. It is also found that the Appellants failed to respond to the query regarding filing of any claim before the competent court during the course of bankruptcy proceedings, thereby leading to formation of a belief that no such claim was filed by the Appellants. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bankruptcy proceedings are filed which was available at page 94-98 of the Appeal that awareness of the appellant was necessary by way of ratio which was given. It appears when these were brought to the notice of Reserve Bank of India, the Reserve Bank of India after its satisfaction, granted ex-post facto permission for not insisting on the production of the Bill of Entry to the Authorised Dealer, who are supposed to collect the Bill of Entry in terms of the Custom Regulations. 15. There is no force in the finding of the Adjudicating Authority to conclude that the ex post facto exemption granted by the Reserve Bank of India without prejudice to the action by Enforcement Directorate empowers it to declare contravention and impose penalty. Needless to submit that the contravention under FEMA are subject to permission of Reserve Bank of India. 16. The counsel for the appellant argued that once the said permission and exemption by Reserve Bank of India is granted, later on it cannot be prohibited and there shall not be a contravention. 17. The counsel argued that ex-post facto permission granted by Reserve Bank of India wipes out the contravention and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de a declaration before the Authorised Dealer for acquiring the foreign exchange for a particular purpose in terms of Section 10 (5), it is incumbent upon the person acquiring the foreign exchange, that the foreign exchange acquired will be used for the purpose for which the declaration has been made. 23. 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. 24. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 29. In view of the above, the allegations against the Company and the order passed against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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