2017 (10) TMI 352 - HC - FEMA

High Court affirms Tribunal's penalty order under Foreign Exchange Management Act

M/s Wood Tech Consultants Private Limited Versus Joint Director of Enforcement Office of The Joint Director of Enforcement, Government of India

The Karnataka High Court upheld the decision of the Appellate Tribunal for Foreign Exchange, New Delhi, which ordered the appellants to deposit 10% of the ... Partially dispensing with deposit of the penalty amount - order passed exercising the power under second proviso to Section 19(1) of the Foreign Exchange Management Act, 1999 - Held that:- It is relevant to state that an appeal would lie to the High Court under Section 35 of the Act on any question of law arising out of the order passed by the Appellate Tribunal. On the facts of the case, it can’t be said that the discretion exercised by the Appellate Tribunal in directing to deposit only 10% of the penalty and furnishing security (otherwise than bank guarantee) for 40% of the penalty is unreasonable or arbitrary to warrant interference. In our opinion, no question of law arises for consideration in this appeal. The appeal is devoid of merit and it is accordingly dismissed. Issues:Appeal against order dispensing with deposit of penalty amount under second proviso to Section 19(1) of the Foreign Exchange Management Act, 1999.Analysis:The judgment by the Karnataka High Court involved an appeal against an order passed by the Appellate Tribunal for Foreign Exchange, New Delhi, partially dispensing with the deposit of the penalty amount under the second proviso to Section 19(1) of the Foreign Exchange Management Act, 1999. The Tribunal ordered the appellants to deposit 10% of the total penalty amount within 30 days and furnish reliable security for 40% of the penalty. The Tribunal considered the arguable case of the appellants and decided on partial waiver based on precedents and the interest of revenue. The Tribunal noted that demanding a bank guarantee could lead to deprivation of the statutory right to appeal. The Tribunal, therefore, stopped insisting on bank guarantees due to the financial conditions of the appellants.The appellant relied on various decisions to support the appeal, including Vaseem Iqbal Kapadia v. Union of India, ND Investments v. Union of India, Pennar Industries Ltd. vs. State of A.P., Benara Valves Ltd. v. Commissioner of Central Excise, Monotosh Saha v. Special Director, Enforcement Directorate, and Nimesh Suchde Prop. Siddharth Polymers vs. Union of India. However, the High Court examined the matter in light of these decisions and found that the discretion exercised by the Appellate Tribunal in directing the deposit of 10% of the penalty and furnishing security for 40% was not unreasonable or arbitrary. The High Court concluded that no question of law arose for consideration in the appeal, and hence, the appeal was dismissed. The High Court also dismissed the application filed for interim stay in view of the dismissal of the appeal.