Tribunal overturns order, finds appellant compliant with FEMA.

The Tribunal allowed both appeals, setting aside the order dated 29th May, 2014. The appellant did not violate Section 4 of FEMA, 1999, as they legally inherited foreign exchange and made efforts to repatriate it to India. The confiscation order was overturned due to lack of a show cause notice, violating principles of natural justice. The Tribunal criticized the excessive penalty imposed and emphasized the appellant's compliance with the law. The appellant was granted the freedom to pursue legal proceedings regarding the foreign exchange held abroad.

---

---

Issues Involved:
1. Violation of Section 4 of the Foreign Exchange Management Act, 1999.
2. Application of Section 6(4) and Section 9 of the Foreign Exchange Management Act, 1999.
3. Confiscation of foreign exchange under Section 13(2) of FEMA, 1999.
4. Compliance with principles of natural justice.

Issue-Wise Detailed Analysis:

1. Violation of Section 4 of the Foreign Exchange Management Act, 1999:
The appeals were filed against the order dated 29.05.2014 for violating Section 4 of FEMA, 1999. Section 4 prohibits residents in India from holding foreign exchange outside India. The appellant, a society incorporated in India, was accused of holding foreign exchange outside India in violation of this provision. The society had inherited foreign exchange through a will executed by foreign nationals and transferred the amount to an account in Sri Lanka due to pending permission from the Ministry of Home Affairs.

2. Application of Section 6(4) and Section 9 of the Foreign Exchange Management Act, 1999:
Section 6(4) allows residents in India to hold foreign exchange inherited from persons resident outside India. Section 9(e) exempts foreign exchange acquired by inheritance from the provisions of Section 4. The Tribunal noted that the appellant inherited the foreign exchange legally and took reasonable steps to repatriate the amount to India but was unable to do so due to lack of permission from the Ministry of Home Affairs. Therefore, the appellant did not violate Section 4 of FEMA, 1999.

3. Confiscation of Foreign Exchange under Section 13(2) of FEMA, 1999:
The adjudicating authority ordered the confiscation of the foreign exchange held in Sri Lanka and the UK. The Tribunal found that the confiscation order was passed without issuing a show cause notice, violating principles of natural justice. The Tribunal emphasized that confiscation orders must be based on clear and cogent evidence, not assumptions. The Tribunal referred to previous cases where confiscation was deemed unjustified under similar circumstances.

4. Compliance with Principles of Natural Justice:
The Tribunal highlighted that the adjudicating authority failed to issue a show cause notice before ordering confiscation, thereby violating the principles of natural justice. The Tribunal criticized the adjudicating authority for not considering the totality of the facts and circumstances and for passing the confiscation order without proper justification.

Conclusion:
The Tribunal allowed both appeals, setting aside the impugned order dated 29th May, 2014. The Tribunal did not express any opinion or pass directions regarding the amount lying in foreign land, leaving the appellant free to initiate proceedings as per law. The Tribunal emphasized that the appellant did not act in defiance of the law and had taken reasonable steps to repatriate the foreign exchange to India. The penalty imposed was deemed excessive and unreasonable given the facts of the case.

---