FEMA penalty upheld for disguised outward remittances as import advances across 39 tranches under Section 13(1)

The Appellate Tribunal for FEMA upheld penalty imposed on appellant for outward remittances in 39 tranches abroad disguised as advance for imports. The tribunal ruled that under Section 13(1) FEMA, penalty imposition up to three times the contravention amount is discretionary, requiring judicious exercise by the Adjudicating Authority. The Authority imposed penalty slightly over fifty percent for each contravention, totaling over hundred percent, which the tribunal found objective and judicious. Appeal failed as appellant could not demonstrate improper exercise of discretion by the Adjudicating Authority.

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Issues:
Appeal for enhancement of penalty imposed under FEMA 1999 for contravention of provisions involving outward remittances without corresponding imports.

Analysis:
The judgment pertains to an appeal filed by the Union of India against an Adjudication Order imposing a penalty of Rs. 21,00,00,000 on the respondent for contravention of provisions of FEMA 1999. The appeal sought enhancement of the penalty, arguing that the amount imposed was unreasonably low despite the upheld charges. The respondent failed to appear for multiple hearings, leading to an ex-parte decision based on available records. The Adjudicating Authority found the respondent guilty for outward remittances without corresponding imports, contravening FEMA provisions. The penalty was imposed under Section 10(6) and Section 3(b) of FEMA, 1999. The appeal contended that the penalty was unreasonably low and cited Section 13(1) of FEMA, which allows penalties up to thrice the contravention amount.

The judgment analyzed Section 13(1) of FEMA, emphasizing that the penalty amount is at the discretion of the Adjudicating Authority, to be exercised judiciously based on case facts and evidence. It noted that the Authority had imposed a penalty slightly over the total amount involved in the contraventions, complying with the statutory provisions. The judgment referenced a Supreme Court case to highlight that statutes like FEMA provide a maximum penalty limit, allowing discretion for the Authority to determine the penalty amount. It concluded that the Adjudicating Authority had acted judiciously, and the appeal failed to demonstrate any reasons for interference with the penalty decision.

In light of the discussions and observations, the judgment dismissed the appeal, stating that the Adjudicating Authority's order could not be interfered with due to the lack of reasons presented in the appeal to challenge the penalty imposition. The judgment upheld the penalty decision based on the Authority's compliance with statutory provisions and the exercise of discretion in determining the penalty amount.

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