2023 (9) TMI 1559 - AT - FEMA

Pakistani refugee who became Indian citizen wins appeal against additional FEMA penalty for property purchase

The Appellate Tribunal SAFEMA, New Delhi allowed the appeal of a Pakistani national who purchased immovable properties in Dehradun without RBI permission ... Penalty imposed for contravention under FEMA - appellant was a citizen of the Islamic Republic of Pakistan and purchased two immovable properties in India [Dehradun] w/o taking any permission from the Reserve Bank of India or any other government body as required u/Regulation 7 of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 - appellant submits that the appellant and his family, being Pakistani nationals, took refuge in India in 1992 as they were being persecuted and tortured in Pakistan for being Hindus. The appellant came with his family 26 years ago to settle permanently on political asylum. HELD THAT:- As per background in which the appellant arrived in India with his family, grant of long-term visa to him by the Government of India followed eventually by grant of full citizenship as a naturalized citizen. The fact that there was no absolute bar on a Pakistani citizen acquiring property in India and the only requirement was to obtain permission. The fact that the amount of original penalty of Rs. 3,00,000/- imposed upon him and his son was duly paid, and the intended purpose of the legislation in question (FEMA, 1999) which was to consolidate and amended the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India, we are of the view that the appellant has made out a case for grant of relief. No doubt ignorance of the law is not a defence and every person is presumed to know the law to which he or she is subject. Nevertheless, in view of the facts mentioned above which are not in dispute, we are of the view that the ends of justice have been met with the penalty of Rs. 3,00,000/- imposed upon the appellant and his son in the first instance which was duly paid, and levy of further penalty of Rs. 50,000/- was not justified in his case. Accordingly, the same is hereby set aside. The instant appeal stands allowed and the further penalty of Rs. 50,000/- imposed by the adjudicating authority, and upheld by the Learned Special Director of Enforcement (Appeals) through the impugned order, are set aside. Issues:Violation of regulation 7 of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000; Appeal against penalty imposition; Consideration of citizenship status in penalty imposition; Justification of penalty imposition; Ignorance of law as a defense; Grant of relief based on circumstances.Analysis:The judgment involves an appeal arising from a penalty imposed on the appellant for contravention of regulation 7 of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000. The appellant, a citizen of Pakistan, purchased property in India without obtaining necessary permissions. The Adjudicating Authority initially imposed a penalty of Rs. 3,00,000/-, which was paid by the appellant. Subsequently, a further penalty of Rs. 50,000/- was imposed, leading to an appeal challenging this additional penalty.The appellant argued that he had been granted Indian citizenship and the property transaction should be considered regularized. He contended that no foreign exchange was involved as the property was purchased using funds earned in India. The appellant emphasized his compliance with immigration laws, lack of mens rea, and cited legal precedents supporting leniency for technical breaches. The respondent, however, argued that ignorance of the law is not a defense and supported the imposition of the additional penalty.The tribunal considered the appellant's background, including political asylum in India, grant of citizenship, and the objective of FEMA, 1999. Despite acknowledging that ignorance of the law is not a defense, the tribunal found that the original penalty had been paid, and the further penalty was unwarranted. The tribunal set aside the additional penalty of Rs. 50,000/-, granting relief to the appellant based on the circumstances and objectives of the legislation.In conclusion, the tribunal allowed the appeal, setting aside the additional penalty imposed by the adjudicating authority and upheld by the Special Director of Enforcement (Appeals). The decision was based on a comprehensive analysis of the appellant's situation, the legal framework, and the objectives of the foreign exchange regulations, ultimately granting relief to the appellant in this case.