2023 (10) TMI 292 - HC - FEMA

High Court upholds 60% penalty waiver for export non-realization under FERA & FEMA

Raymond Versus The Appellate Tribunal for Foreign Exchange, The Special Director of Enforcement Enforcement Directorate

The High Court upheld the Tribunal's decision to waive 60% of the penalty amount imposed on the appellant for failure to realize export proceeds under ... Stay of demand / waiver of pre-deposit - Levy of penalty - Contravention of Section 18(2) of FERA - failure to realize export proceeds to the tune of US $ 2,03,925/- - Penalties Levied - Tribunal has waived 60% of the total penalty calling upon the appellant to deposit only 40% thereof, for which a period of 30 days was granted - plea for full waiver of mandatory, statutory pre-deposit and non-compliance with an interim order of the Tribunal - HELD THAT:- Tribunal has, in waiving 60% of the penalty, and directing deposit of only 40%, taken note of all contentions of the Appellant, including the hardship projected. In fine, a balance has been struck and the Appellant directed to remit only 40% of the penalty, bearing in mind the interest of the State as well. Taking a cue from the order in the case of Monotosh Saha [2008 (8) TMI 9 - SUPREME COURT]we made a similar offer to the appellant to remit at least a portion of the amount in order that we may consider directing the Tribunal to hear the appeal. Learned counsel, upon instructions, is categoric that no amount of the penalty can be remitted, as the appellant has absolutely no available resources. In Nimesh Suchde Prop.Siddharth Polymers, the Delhi High Court [2009 (7) TMI 1328 - DELHI HIGH COURT] on the facts of that case, and taking note of judgment in Monothosh Saha felt, prima facie, that the appellant had satisfied the condition of undue hardship. The question that arose related to the valuation of a consignment for the purpose of levy of import duty.The appellant had sought waiver of pre deposit and that request had been dismissed directing deposit within 30 days, premised upon the finding that the goods imported, were higher in value than disclosed. A Single Judge of the Delhi High Court confirmed the order of the Tribunal as against which, an appeal had been filed. The Division Bench considered the plea of waiver in light of Sections 8(3) and 8(4) of the FERA, that imposed restrictions on dealing with foreign exchange. The Adjudicating Officer while invoking Sections 8(3) and 8(4) of the FERA was expected to examine the matter independently and arrive at a conclusion in the matter. In that case, the Officer had merely relied on the order passed by the Customs Authority which, in turn, had been based on the premise that the import was without a valid import license. The Bench noted that no independent finding had been rendered by the Authority in regard to the finding of undervaluation rendered by the Customs Officer which was a pre-requisite while invoking Sections 8(3) and 8(4) of the FERA. Mere reference to an order passed by the Customs Authority would not suffice. It was on the above facts that the Bench concluded that the dismissal of request of dispensation of pre deposit had not been decided in proper light by the Tribunal. The facts of this case are not analogous to the case of Siddharth Polymers and hence do not advance the case of the Appellant. We do not find any extenuating circumstances warranting interference in the discretionary order passed by the Tribunal. In fact, the Tribunal has itself waived 60% of the penalty based on the plea of financial stringency put forth by the petitioner. We find very little justification to interfere in the discretion exercised by the Tribunal as it not shown to be perverse in any way. The order of the Tribunal is confirmed and this Civil Miscellaneous Appeal is dismissed. Since the appeal is stated to be listed on 05.10.2023, the appellant is permitted to remit the amount by then, to condition of which the Tribunal will proceed with the appeal. Issues:The judgment involves challenges to orders passed under the Foreign Exchange Regulation Act, 1973 and the Foreign Exchange Management Act, 1999, regarding failure to realize export proceeds, contraventions, penalties, and appeals based on undue hardship for pre-deposit requirements.Issue 1 - Challenge to Orders under FERA and FEMA:The appellant challenged orders under FERA and FEMA for failure to realize export proceeds, with penalties levied for contraventions. The appellant was engaged in exporting various products and faced show cause notices for not realizing export proceeds, leading to penalties being imposed by the authority.Issue 2 - Appeal Based on Undue Hardship for Pre-Deposit:The appellant filed an appeal before the Tribunal challenging the penalties imposed, citing undue hardship in making the required pre-deposit as mandated by Section 19 of FEMA. The appellant pleaded financial difficulties due to ongoing legal proceedings and lack of assets to meet the penalty deposit requirements.Issue 3 - Tribunal's Decision on Pre-Deposit Waiver:The Tribunal considered the appellant's plea for waiver of pre-deposit and decided to waive 60% of the total penalty amount, directing the appellant to deposit only 40% within a specified timeframe. The Tribunal balanced the appellant's hardship with the State's interest, allowing the appeal to proceed upon compliance with the deposit condition.Separate Judgment:In a separate judgment, the Division Bench considered a similar plea for waiver of pre-deposit in light of FERA provisions. The Bench emphasized the need for independent examination by the Adjudicating Officer and highlighted the importance of proper evaluation before dismissing requests for pre-deposit dispensation.Conclusion:The High Court confirmed the Tribunal's decision to waive a portion of the penalty based on the appellant's financial constraints, finding no justification to interfere with the discretion exercised. The appellant was given a deadline to remit the required amount for the appeal to proceed, with no additional costs imposed. The Civil Miscellaneous Appeal was dismissed, upholding the Tribunal's order.