2016 (2) TMI 1107 - AT - FEMA

Tribunal upholds FEMA contravention, reduces penalty for Norscot Trading, stresses export proceeds repatriation

The Tribunal affirmed the contravention under Section 8 of FEMA, 1999 by M/s. Norscot Trading (P) Ltd. and Ole Peter Tollefson for failing to repatriate ... Liability under Section 8 of FEMA, 1999 for non-repatriation of export proceeds - company liability for acts of its authorised representative - evidentiary significance of invoice and admissions recorded under Section 37 of FEMA - finality of findings not appealed by the respondent - penalty proportionality and judicial moderationLiability under Section 8 of FEMA, 1999 for non-repatriation of export proceeds - evidentiary significance of invoice and admissions recorded under Section 37 of FEMA - company liability for acts of its authorised representative - Adjudicating Authority's finding that the disputed invoice for Euro 111250 constituted an export transaction attracting liability to repatriate proceeds and that both the company and its director are liable for contravention of Section 8 FEMA. - HELD THAT: - The Tribunal accepted that the execution and contents of the disputed invoice were not denied by the appellant and that the invoice was on the printed letterhead of the company. The admission in the statement recorded under Section 37 that the invoice was prepared by the appellant's director, coupled with the invoice particulars (including inclusion of freight and description of exported building materials), gave probative force to the finding that either an export occurred or a fraudulent invoice was created for improper purposes. As the director was the authorised representative in charge of the company's affairs, the company is answerable for acts of its authorised agent. In absence of any proof from the appellant that a loan in Spain was sought on the basis of the invoice, and given the admitted execution of the invoice, the Tribunal found no valid basis to hold the transaction outside the scope of Section 8 and affirmed liability. [Paras 5, 12, 14, 15]The finding of contravention under Section 8 FEMA in respect of the Euro 111250 invoice is affirmed against the company and against the director.Finality of findings not appealed by the respondent - scope of appellate scrutiny where respondent does not challenge adjudication - Whether the Tribunal could re-examine the Adjudicating Authority's dropping of charges relating to transactions of US $ 883,748.50. - HELD THAT: - The Tribunal noted that the Adjudicating Authority had relied on the director's sworn statement and the agency agreement in dropping charges as to the US $ 883,748.50 transactions. The Enforcement Directorate did not prefer an appeal against that portion of the Adjudicating Authority's order. Consequently, the Tribunal held it was not within its purview to re-open or re-decide the dropped charges, although the Tribunal observed prima facie doubts about the reasoning of the Adjudicating Authority. [Paras 6, 11, 13]The Tribunal declined to re-examine or disturb the Adjudicating Authority's finding in respect of the US $ 883,748.50 transactions because those findings were not appealed by the respondent.Penalty proportionality and judicial moderation - Whether the monetary penalty imposed by the Adjudicating Authority should be modified. - HELD THAT: - While upholding the finding of contravention, the Tribunal considered the peculiarity of facts and concluded that the penalty on the company was excessive. Exercising its power to moderate, the Tribunal reduced the penalty imposed on the appellant company from the adjudicated amount to a lesser sum, while maintaining the penalty against the director. The Tribunal directed refund of the surplus amount deposited by the appellants after the appeal period. [Paras 14, 15]Penalty on the appellant company reduced; penalty on the appellant director maintained; surplus to be refunded after expiry of the appeal period.Final Conclusion: The appeals are dismissed insofar as the finding of contravention of Section 8 FEMA in relation to the Euro 111250 invoice is concerned and the Adjudicating Authority's order is affirmed on liability; however, the penalty on the appellant company is reduced, the penalty on the director is maintained, and the Tribunal will refund the surplus penalty amount deposited by the appellants after the appeal period. Issues Involved:1. Alleged failure to repatriate payments received from overseas parties.2. Alleged use of company resources for personal transactions.3. Contravention of Section 8 of FEMA, 1999.4. Penalty imposition and its appropriateness.Detailed Analysis:1. Alleged Failure to Repatriate Payments Received from Overseas Parties:The Enforcement Directorate alleged that M/s. Norscot Trading (P) Ltd., Mumbai, failed to repatriate payments amounting to US $ 883748.50 and Euro 111250 received from M/s. Dolfin Drilling Ltd., Scotland. The documents seized from Ole Peter Tollefson's residence indicated that these amounts were credited to his personal foreign bank accounts instead of the company's accounts. The Adjudicating Authority dropped the charges related to US $ 883748.50 based on Tollefson's statement and the agency agreement with Dolfin Drilling Ltd. However, the Tribunal noted that the Enforcement Directorate did not appeal against this finding, thus it was not within the Tribunal's purview to scrutinize it further.2. Alleged Use of Company Resources for Personal Transactions:The seized documents included invoices and monthwise figures of commissions, indicating that the payments were directed to Tollefson's personal accounts. The Adjudicating Authority found that Tollefson used the company's stationery for personal transactions, including an invoice for Euro 111250 for building materials exported to Spain. Despite Tollefson's claim that the invoice was for securing a bank loan in Spain, the Tribunal found no proof of such a loan application. The Tribunal inferred that the invoice related to an actual export transaction, thus requiring repatriation of the amount to India.3. Contravention of Section 8 of FEMA, 1999:The Adjudicating Authority held that M/s. Norscot Trading (P) Ltd. and Ole Peter Tollefson contravened Section 8 of FEMA, 1999, by failing to repatriate the export proceeds. The Tribunal supported this finding, noting that the invoice's contents, including freight charges, indicated an export transaction. The Tribunal emphasized that the company was liable for repatriating the amount involved, as the invoice was on the company's letterhead and signed by Tollefson.4. Penalty Imposition and Its Appropriateness:The Adjudicating Authority imposed a penalty of Rs. 6 lakhs on M/s. Norscot Trading (P) Ltd. and Rs. 1.20 lakhs on Ole Peter Tollefson. The Tribunal found the penalty on the company to be on the higher side and reduced it to Rs. 4 lakhs while maintaining the penalty on Tollefson. The Tribunal directed that the surplus amount of Rs. 2 lakhs, already deposited by the appellants, be refunded to the appellant company after the expiry of the appeal period.Conclusion:The Tribunal affirmed the Adjudicating Authority's findings of contravention under Section 8 of FEMA, 1999, and upheld the liability of M/s. Norscot Trading (P) Ltd. and Ole Peter Tollefson. The penalty on the company was reduced, and the order was modified accordingly. The Tribunal's decision emphasized the company's responsibility to repatriate export proceeds and the consequences of using company resources for personal transactions.