2008 (1) TMI 892 - HC - FEMA

High Court Upholds Tribunal's Penalty Decision

Indo International Ltd. Versus Asstt. Dir., Dir. of Enforcement, Chennai

The High Court upheld the Appellate Tribunal's decision denying waiver of the penalty amount for hearing appeals on merits. The Court found that the ... - Issues Involved:1. Waiver of penalty amount for hearing appeals on merits.2. Applicability of Section 10(5) and Section 10(6) of FEMA.3. Alleged contravention of Section 42(1) of FEMA.4. Prima facie case and undue hardship.Summary:1. Waiver of Penalty Amount for Hearing Appeals on Merits:The appellants sought waiver of the penalty amount for the purpose of hearing their appeals on merits. The Appellate Tribunal had rejected their applications for waiver, citing the sound financial condition of the appellant companies and the lack of a prima facie case. The High Court upheld this decision, noting that the Revenue had made out a prima facie case and that the companies were in a position to pay the penalty amount.2. Applicability of Section 10(5) and Section 10(6) of FEMA:The appellants argued that Section 10(5) of FEMA, which pertains to authorized persons verifying certain details, was not applicable to them as they purchased foreign exchange from authorized persons. They also contended that Section 10(6) was not attracted as they had returned the foreign exchange within the specified period of 30 days. However, the respondents argued that the appellants had used the foreign exchange for purposes other than those declared, thereby contravening Section 10(6).3. Alleged Contravention of Section 42(1) of FEMA:The appellants claimed that they had not contravened any provisions of FEMA or any rule, direction, or order made therein, and therefore, Section 42(1) was not applicable. The respondents, however, highlighted that the appellants had admitted to using the foreign exchange for business purposes instead of foreign visits, which constituted a contravention.4. Prima Facie Case and Undue Hardship:The High Court noted that the Revenue had made out a prima facie case, and the appellants had not demonstrated undue hardship that would warrant a waiver of the penalty amount. The Court referred to the Supreme Court's observations in S. Vasudeva v. State of Karnataka & Ors. and M/s. Benara Valves Ltd. & Ors. v. Commissioner of Central Excise & Anr., which defined 'undue hardship' as excessive hardship not warranted by circumstances.Conclusion:The High Court dismissed the writ appeals, upholding the Appellate Tribunal's order requiring the appellants to deposit the penalty amount within 45 days. The Court allowed the appellants an additional 30 days to deposit the amount, if not already deposited, and dismissed the connected miscellaneous petitions without any order as to costs.