1995 (8) TMI 351 - AT - FEMA

Appellate Tribunal Overturns Penalty; Emphasizes Fairness, Context in Enforcement Under Foreign Exchange Regulation Act.

Ramlal Kapoor & Sons Versus Director of Enforcement

The Appellate Tribunal allowed the appeal, overturning the penalty imposed on the appellant for contravening section 9(1)(e) of the Foreign Exchange ... - Issues:Violation of section 9(1)(e) of the Foreign Exchange Regulation Act, 1973; Delay in initiating adjudication proceedings; Justification for penalty imposition; Contravention of section 9(1)(a) and exoneration; Applicability of penalty based on circumstances.Analysis:The judgment by the Foreign Exchange Regulation Appellate Board pertains to an appeal against a penalty imposed on the appellant for contravening section 9(1)(e) of the Foreign Exchange Regulation Act, 1973. The appellant had placed a sum in its books of account to the credit of an individual settled in the UK, leading to the allegation. The appellant had already deposited the penalty amount, prompting the disposal of the appeal on its merits.The appellant's counsel contended various grounds against the order, emphasizing the delay in initiating adjudication proceedings after the submission of the reply to the Show Cause Notice (SCN). Citing judicial decisions, the counsel argued that the proceedings initiated after a significant lapse of time were flawed. Reference was made to the Supreme Court's stance on the necessity of exercising powers within a reasonable period, highlighting the importance of reasonableness in such matters.Moreover, the appellant's counsel argued that the exoneration of the appellant on a related charge of contravention of section 9(1)(a) raised doubts about the justification for holding the appellant guilty under section 9(1)(e). The circumstances surrounding the deposition of the amount in question, initially by a resident individual and later transferred to the appellant's account, were crucial in determining the nature of the contravention. The Adjudicating Officer's decision not to impose a penalty for the alleged contravention under section 9(1)(a) further supported the argument against penalizing the appellant for the less serious contravention under section 9(1)(e.Ultimately, the Appellate Tribunal allowed the appeal, setting aside the penalty imposed on the appellant for contravention of section 9(1)(e). The order directed the return of the deposited amount to the appellant within 30 days. The judgment underscored the importance of evaluating the entirety of circumstances and the nature of contraventions before imposing penalties under the Act, ensuring fairness and reasonableness in enforcement actions.