2024 (9) TMI 509 - AT - FEMA

Company's FERA violation penalties slashed from Rs.2 crores to Rs.2.5 lakhs after proving majority imports legitimate

The Appellate Tribunal under SAFEMA reduced penalties imposed on a company for FERA violations involving foreign exchange remittances and non-submission ... Contravention with respect to Foreign Exchange Remittance and non-submission of import document along with Exchange Control Copy of Bill of Entry - penalty of Rs.2 crores was imposed on M/s Owens Brockway (I) Ltd. under Section 50 of FERA, 1973 and personal penalty of Rs.40 lakhs each on three in-charge of and responsible to the said company for the conduct of day-to-day business of the company - HELD THAT:- Appellant company is able to prove the import of consignment with respect to three remittances and the only contravention is with respect to two remittances of NLG 31764.12 and NLG 45149.15, totaling to NLG 76913.27. Therefore, the total contravention is not equivalent to NLG 43,503,43.27, but only NLG 769,13.27 i.e. only 1.76% to the alleged contravention, as inadvertently/wrongly mentioned in the impugned order. Therefore, in the facts and circumstances of the case and in the interest of justice, the penalty amount needs to be reduced, instead of remanding it back to the Adjudicating Authority, as the matter is about 25 years old and the chances of tracing out the record by both the sides seems to be difficult. In sequel to our discussion in the preceding para, the amount of penalty imposed on erstwhile M/s Owens Brockway India Pvt., now, Hindustan National Glass & Industries Ltd. is hereby reduced to Rs. 2.5 lakhs. The impugned order passed by the Adjudicating Authority is modified accordingly. Issues Involved:1. Non-submission of Exchange Control Copy of Bill of Entry.2. Validity of the Show Cause Notice (SCN) and its service.3. Merger and change of company name.4. Procedural irregularities and natural justice.5. Calculation and validity of the penalty imposed.Issue-wise Detailed Analysis:1. Non-submission of Exchange Control Copy of Bill of Entry:The case revolves around M/s Owens Brockway (I) Ltd. failing to submit the Exchange Control Copy of Bill of Entry for the remittance of foreign exchange amounting to NLG 43,50,343.27 through ABN Amro Bank, New Delhi. It was alleged that the company did not provide proof of import for the foreign exchange remitted, thereby contravening Section 8(3) and 8(4) of the Foreign Exchange Regulation Act, 1973, read with Chapter 7A, 20(i) of the Exchange Control Manual, 1995. The tribunal noted that the appellant company was able to prove the import of consignment with respect to three remittances, but failed to provide proof for two remittances totaling NLG 76,913.27.2. Validity of the Show Cause Notice (SCN) and its service:The SCN issued to M/s Owens Brockway (I) Ltd. was returned with the remark 'No Such Person.' The tribunal observed that the SCN was not properly served as it was sent to the previous address of M/s Owens Brockway (I) Ltd. The tribunal highlighted that the issuing authority failed to serve the SCN by other modes such as affixation or publication, leading to an ex-parte order being passed. The tribunal noted that the ex-parte proceedings were conducted in haste due to the sun-set period.3. Merger and change of company name:The tribunal acknowledged that M/s ACE Glass Container Ltd. purchased the shares of M/s Owens Brockway (I) Ltd., and the company's name was changed to M/s ACE Glass Container Ltd. Subsequently, M/s ACE Glass Container Ltd. merged with M/s Hindustan National Glass & Industries Ltd. The appellant company contended that they were unaware of the previous company's remittance issues, as nothing was reported in the due diligence report at the time of the share purchase.4. Procedural irregularities and natural justice:The tribunal emphasized that the impugned order was passed in violation of the principles of natural justice. The SCN was returned undelivered, and the appellant company was not given an opportunity to present their case. The tribunal also pointed out that the notice for personal hearing was returned with the remark 'No such Person,' indicating that the proceedings were not properly communicated to the appellant.5. Calculation and validity of the penalty imposed:The tribunal noted that there was an apparent mistake in the remittance entry, which was incorrectly recorded as NLG 42,07,750.00 instead of FRF 4,20,750.00. The tribunal found that the total contravention was only NLG 76,913.27, which is 1.76% of the alleged contravention. Considering the facts and circumstances, the tribunal decided to reduce the penalty amount instead of remanding the case back to the Adjudicating Authority, citing the age of the case and the difficulty in tracing records.Conclusion:The tribunal reduced the penalty imposed on M/s Owens Brockway (I) Ltd., now Hindustan National Glass & Industries Ltd., to Rs. 2.5 lakhs. The impugned order passed by the Adjudicating Authority was modified accordingly. The appeal was partly allowed, and the judgment was pronounced on the 9th Day of July, 2024.