2005 (11) TMI 540 - AT - FEMA

Appellate Authority Reduces Penalties for Foreign Exchange Violations, Recognizes Merits in Arguments, Waives Pre-deposit.

The Appellate Authority reduced the penalties imposed on the appellant firm and its partners for contravening sections 10(5) and 10(6) of the Foreign ... - Issues:Challenge to order imposing penalties under Foreign Exchange Management Act, 1999 for contravention of specific sections and regulations.Analysis:The judgment involves multiple issues related to penalties imposed under the Foreign Exchange Management Act, 1999. The appellants challenged a common order passed by the Special Director (Appeals) finding them guilty of contravening provisions of section 10(5) and 10(6) of the Act. The penalties imposed on the appellant firm and its partners were reduced by the Appellate Authority. The appellants argued that goods were imported in time, and alternative documents were submitted. The condition of pre-deposit of penalty was waived, and the matters were taken up for disposal on merits.The original proceedings were initiated based on a show cause notice calling upon the appellants to explain the contravention of specific provisions of the Act and regulations. The appellants submitted various documents to prove importation of goods, including bill of entry, payment receipts, and certificates from Chartered Accountants. The Adjudicating Authority imposed penalties, which were later reduced by the Appellate Authority. The Appellate Authority noted that importation was duly made, even though the bill of entry was not submitted on time.The appellants contended that they imported the goods and provided alternative proof of importation. On the other hand, the respondent argued that the filing of the bill of entry within the prescribed period was a legal requirement, and non-compliance cannot absolve the appellants of liability. The judgment analyzed the provisions of section 10(5) and 10(6) of FEMA, 1999, along with relevant RBI circulars outlining obligations regarding foreign exchange acquisition and usage.The judgment referred to specific paragraphs of RBI circulars related to the use of foreign exchange for import purposes and the submission of necessary documents to authorized dealers. It emphasized that non-submission of the bill of entry was considered a procedural irregularity based on legal precedents. Citing decisions of the Hon'ble Supreme Court and the High Court of Delhi, the judgment concluded that technical or venial breaches may not warrant penalties.In the final analysis, the contentions of the respondent were deemed unsustainable, and the findings against the appellant firm were set aside. Consequently, the appeal filed by the appellant firm was allowed, indicating merit in their arguments. All three appeals were allowed in favor of the appellants.