2025 (12) TMI 1472 - AT - FEMA

Penalty for undervalued export proceeds u/s13(1) FEMA-appeal to enhance penalty dismissed as quantum is discretionary.

The dominant issue was whether the appellate forum should enhance the penalty for export proceeds undervaluation on the ground that the Adjudicating ... Enhancement of the penalty up to three times the amount of contravention - Export proceeds - undervaluation - penalty imposed by the Adjudicating Authority is low and is not commensurate - HELD THAT:- On reading of Section 13(1) of FEMA, it is obvious that the maximum amount of penalty which can be imposed under the Section is three times the amount of contravention involved. From the language of the Section, it is clear that the Section has not prescribed either a fixed amount of penalty or minimum amount of penalty. It therefore, follows that the amount of the penalty which is to be imposed by the Adjudicating Authority is a matter of discretion which, of course, is necessarily required to be exercised judiciously after taking into account the facts of the case and the evidence placed before it. We find that the Ld. Adjudicating Authority has made detailed findings in the Impugned Order. Given the facts of the case and the evidence placed before the Adjudicating Authority, we do not find that the Impugned Order is indiscreet. In fact, it is well reasoned and speaking. It is seen that the Adjudicating Authority has not only taken notice of the facts of the case but also has evaluated the evidence on record. In any case, there is no such requirement under the statute as to impose maximum penalty, as long as each contravention has been examined and if found established has attracted penalty. The reading of the Adjudication Order, therefore, reflects objectivity and judiciousness on the part of the Adjudicating Authority. Appeal is dismissed. Issues: (i) Whether the penalty imposed by the Adjudicating Authority under Section 13(1) of FEMA for under-valuation of exports should be enhanced by the Tribunal; (ii) Whether charges and penalty against the General Manager (Respondent No. 3) should have been imposed under Section 42 of FEMA.Issue (i): Whether the Tribunal should enhance the penalty imposed by the Adjudicating Authority under Section 13(1) of FEMA where the Adjudicating Authority imposed a penalty substantially below the maximum permissible amount.Analysis: The statute (Section 13(1) of FEMA) prescribes a maximum penalty up to three times the amount involved but does not mandate a minimum or fixed penalty; the amount of penalty is a discretionary exercise of the Adjudicating Authority to be made judiciously after evaluating facts and evidence. The Adjudicating Authority made detailed, speaking findings on under-valuation, took into account prior customs penalty/payment and evidence, and exercised its discretion. The Tribunal examined the record and found no perversity or illegality in the exercise of that discretion warranting interference.Conclusion: The request for enhancement of penalty is rejected. The penalty imposed by the Adjudicating Authority is upheld in favour of the assessee.Issue (ii): Whether the General Manager (Respondent No. 3) is liable for penalty under Section 42 of FEMA despite the Adjudicating Authority dropping charges for lack of evidence.Analysis: The Adjudicating Authority evaluated evidence regarding the role of Respondent No. 3 and found no material to hold him liable; the Managing Director was found to have finally decided negotiation results. The Tribunal agreed with that factual evaluation and the absence of material evidence against Respondent No. 3.Conclusion: The decision to drop charges against Respondent No. 3 is upheld in favour of the assessee.Final Conclusion: On the issues decided, the Tribunal finds no justification to enhance penalties or to reverse the finding of no liability against Respondent No. 3; the appeal by the Revenue is therefore dismissed.Ratio Decidendi: Where a statute prescribes only a maximum penalty, the adjudicating authority has discretion to fix the penalty based on evidence and facts, and an appellate forum will not interfere with a reasoned, speaking exercise of that discretion in the absence of perversity or illegality.