2024 (12) TMI 535 - AT - FEMA

Company wins appeal against FEMA penalty for missing import documents, gets benefit of doubt

M/s. Wipro Ltd. Versus The Special Director Directorate of Enforcement, Bangalore

M/s. Wipro Ltd. Versus The Special Director Directorate of Enforcement, Bangalore - TMI Issues Involved:1. Alleged contravention of Section 10(6) of FEMA and Regulation 6(1) of the FEM (Realisation, Repatriation, and Surrender of Foreign Exchange) Regulations, 2000.2. Delay in proceedings and its impact on the appellant's ability to produce import documents.3. The responsibility of banks in maintaining records and notifying the Reserve Bank of India (RBI) about foreign exchange utilization.Issue-wise Detailed Analysis:1. Alleged Contravention of FEMA and Regulations:The appeal was filed against the order imposing a penalty of Rs. 20,00,000/- on the appellant company for failing to submit Bills of Entry as proof of import for foreign exchange remittances made through various banks, specifically Standard Chartered Bank (formerly ANZ Grindlays Bank). The Directorate of Enforcement alleged that the appellant company did not submit the Exchange Control Copy of Bills of Entry or surrender the foreign exchange within the stipulated period, thereby contravening Section 10(6) of FEMA and Regulation 6(1) of the Foreign Exchange Management (Realisation, Repatriation & Surrender of Foreign Exchange) Regulations, 2000. The appellant argued that they had submitted proof for 30 out of 35 remittances and were able to provide additional documentation for three out of the five disputed remittances during the appeal.2. Delay in Proceedings:The appellant contended that the proceedings were initiated after an undue delay of 13-14 years, which hindered their ability to retrieve and present the necessary import documents. The appellant argued that the delay violated the principles of natural justice, as it was unreasonable to expect retention of documents for such an extended period. The appellant relied on a precedent from the Delhi High Court, which emphasized that penalties should not be imposed merely because it is lawful to do so, especially when compliance is sought after an unreasonable delay. The appellant successfully traced documents for three remittances and argued for the benefit of doubt for the remaining two, citing the lapse on the part of the erstwhile ANZ Grindlays Bank in maintaining records.3. Responsibility of Banks:The appellant argued that the lapse in record-keeping by the erstwhile ANZ Grindlays Bank and the subsequent failure to notify the RBI should not result in a penalty against them. The appellant pointed out that Standard Chartered Bank, the successor of ANZ Grindlays Bank, did not possess the relevant records due to the transition and closure of the predecessor bank. The Tribunal acknowledged that the appellant could not be penalized for the negligence of the bank, especially when the appellant had demonstrated compliance for the majority of the transactions. The Tribunal found that the appellant had made reasonable efforts to provide proof of import and granted the benefit of doubt for the two remittances where documentation was not traceable, thereby setting aside the penalty imposed by the Adjudicating Authority.Conclusion:The Tribunal allowed the appeal, recognizing the appellant's efforts to comply with the regulations and the unreasonable delay in proceedings. It set aside the penalty imposed for the five remittances through ANZ Grindlays Bank, acknowledging the lapse on the part of the bank and the appellant's inability to produce documents after such a long period. The judgment emphasized the importance of exercising discretion judicially and considering all relevant circumstances in quasi-criminal proceedings under FEMA.