TaxTMI 
TaxTMI 
2014 (2) TMI 883
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....'AT') dismissing the appellants' respective appeals against the adjudication orders ('AOs') passed by the Special Director ('SD'), Enforcement Directorate ('ED') holding the Appellants guilty of contravening Section 8 (1) of the Foreign Exchange Regulation Act, 1973 ('FERA') and imposing penalty under Section 50 FERA. 2. The Appellants in these appeals are Indian subsidiaries of their respective parent corporations incorporated outside India. Barring the above distinction, the issue that arises in these appeals is similar to the issue that was decided by the Court in its judgment dated 3rd February 2014 in Criminal Appeal No. 40 of 2008 (Mitsubishi Corporation v. Director of Enforcement) and in the judgment passed today in a batch of crimi....
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....tions by the ED in each SCN is that payments made abroad by the foreign corporation to the expatriate employees in foreign exchange was in effect payments made on behalf of the Indian subsidiary and since that payment was essentially the liability of the Indian subsidiary it could not have been made without the prior permission of the RBI. No other allegation is made to bring home the charge of violation of Sections 8 (1) and 9 (1) (c) FERA by the Appellants. In other words the SCNs make no reference to violation of any clause of the FECM. Nevertheless, the Court has examined Clause 11D.3 of the FECM which reads as under: "11D.3 (i) Foreign nationals who are not permanently resident in India but are in regular employment with Indian firms/....
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....s issued to them. Illustratively, the stand of Sony India Limited in reply to the SCN issued to it was under: "From the enclosed details, it can be seen that these employees were getting the following emoluments in and outside of India: Paid in Japan a. Base Salary (continuation pay as it may be called) paid to maintain the continued employment of these employees with Sony Corporation; b. Japanese Salary paid as per their entitlement; c. Year end Bonus paid only to Mr Yoshio Kubo, as per company policy; d. Hardship Allowance paid to compensate these employees to relocate to India; e. Education Allowance paid only to Mr Nobuyuki Norimatsu as his children were pursuing education outside India; f. Leave Travel Assistance paid to meet th....
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....e been found by the ED to counter the above assertions. It is, therefore, plain that even according to the ED in none of these cases was there any allegation that an expatriate employee of the Indian subsidiary was seeking to remit abroad in foreign exchange monies paid to him in India in Indian rupees. In the circumstances, the Court fails to appreciate how Para 11D.3 FECM would apply at all. The case of violation of the requirement of that clause of the FECM by the Appellants is misconceived. 10. Also, in light of the ED being unable to counter the factual position explained in the above replies to the SCNs, it is evident that there was a basic misconception on the part of the ED that the expatriate employees of the foreign holding compa....
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....or outside India. The question that then arises is whether on the facts of the present case, the Appellant can be said to have "purchased or otherwise acquired or borrowed" any foreign exchange in India. 19. The AT has proceeded on the basis that the employees of the parent corporation, seconded to the Appellant, are its "borrowed employees". The fact of the matter is that the expatriated employees of the HO, are posted in India with the LO, continue to be employees of the parent corporation. The salaries payable to them by the parent corporation were partly paid in India, and for that limited purpose, the funds were remitted by Mitsubishi, Japan which were then disbursed by the Appellant to such seconded employees. By no means, could it b....
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.... (1) FERA. In any event, that is not even the allegation in the SCNs issued to the Appellants. It is not open to the ED to justify the AOs on a ground other than that stated in the SCN. In fact, the AT itself rejected the plea raised on behalf of the ED that it should address questions that did not form the subject matter of the SCNs which led to passing of the AOs. 13. With the AOs in each of these cases holding that the case of the ED regarding violation by the Appellants of Section 9 (1) (c) FERA was not made out, the case regarding violation of Section 8 (1) FERA was untenable since the SCNs in all these cases set out the same allegations to justify the case under both provisions. The question of the Appellants "acquiring" or "otherwis....