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of <h1>Tribunal Overturns Adjudication, Orders Release of Bank Guarantees; Finds No Violation of Foreign Exchange Regulation Act.</h1> The Tribunal allowed the appeals, overturning the adjudication order and instructing the respondents to release the bank guarantees provided by the ... - Issues Involved:1. Alleged contravention of section 8(3) read with section 8(4) of the Foreign Exchange Regulation Act, 1973.2. Validity and specificity of the show-cause notice.3. Justification for the higher price of imported Cinnarizine.4. Misutilization of foreign exchange.5. Relevance of the advance license and RBI notification.Issue-wise Detailed Analysis:1. Alleged Contravention of Section 8(3) Read with Section 8(4) of the Foreign Exchange Regulation Act, 1973:The adjudication order imposed penalties on the appellants for contravening the provisions of section 8(3) read with section 8(4) of the Foreign Exchange Regulation Act, 1973. The appellants were accused of over-invoicing the import price of Cinnarizine, thereby misutilizing foreign exchange. The Tribunal noted that the appellants had entered into contracts with Janssen of Belgium for the supply of Cinnarizine at higher rates compared to other importers. However, the Tribunal found no evidence of a secret understanding or misutilization of foreign exchange, as the higher price was justified by the unique commercial advantages and conditions of their transactions with Janssen.2. Validity and Specificity of the Show-Cause Notice:The appellants contended that the show-cause notice was vague and lacked specific facts to substantiate the allegations. The Tribunal agreed, noting that the notice failed to provide clear details about the alleged contravention, particularly regarding the supposed failure to surrender foreign exchange. The notice did not specify the date when the appellants allegedly became aware that the foreign exchange could not be used for its intended purpose, nor did it clarify the basis for the charge of misutilization.3. Justification for the Higher Price of Imported Cinnarizine:The appellants argued that the higher price of Cinnarizine was justified by several factors, including the exclusive rights to export under Janssen's brand name 'Stugeron,' which was already registered in the USSR. The Tribunal acknowledged that these factors contributed to the higher price and distinguished the appellants' transactions from those of other importers. The Tribunal concluded that the higher price was a result of a legitimate commercial bargain and not indicative of over-invoicing or misutilization of foreign exchange.4. Misutilization of Foreign Exchange:The Tribunal examined whether the foreign exchange was utilized for the intended purpose. It was established that the foreign exchange was acquired for payment to Janssen for the specified quantities of Cinnarizine at the agreed price. The Tribunal found that the foreign exchange was released by the bank after due consideration and was remitted directly to the foreign buyer, with no evidence of misutilization or retention of funds abroad. The Tribunal concluded that the appellants had utilized the foreign exchange for the intended purpose.5. Relevance of the Advance License and RBI Notification:The Tribunal noted that the advance license granted to the appellants specified the quantity and value of drugs to be imported and exported. The license was approved by a committee comprising representatives from various government departments. The Tribunal found that the import and export of Cinnarizine were allowed based on the advance license, and the foreign exchange was released in accordance with the terms of the license. The Tribunal also considered the RBI notification, which provided a general exemption for fees related to the use of brand names for raw materials used in Parkinsonism diseases, relevant to the appellants' case.Conclusion:The Tribunal allowed the appeals, set aside the adjudication order, and directed the respondents to release the bank guarantees furnished by the appellants. The Tribunal found that the appellants had not contravened the provisions of section 8(3) read with section 8(4) of the Foreign Exchange Regulation Act, 1973, and that the higher price of Cinnarizine was justified by the unique commercial conditions of their transactions with Janssen.
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