TaxTMI 
TaxTMI 
2007 (8) TMI 769
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....hange Rule Management System (in short "LERMS") as per details below and made payment towards the same by way of crossed cheques issued from their bank accounts : Name of Companies Travellers Cheques amounting to Currency amounting to Indo International Ltd. US$ 22,07,850 US$ 9,450 Rave Global Limited US$14,11,900 US$ 6,000 (b) Since the officials of the petitioner Companies were not able to make foreign trips as planned, the petitioner Companies surrendered the foreign exchange purchased as above through authorized money changers in a day or two and also received the exchange value of the foreign exchange by means of crossed cheques in their name and in fact, incurring a certain amount as Commission for the aforesaid transactions. (c) While so, the petitioners received summons from the first respondent asking them to appear in person in connection with proceedings under the Foreign Exchange Management Act, 1999 (in short "the Act") and to produce the copies of the applications for purchasing the foreign exchange under LERMS and also the details of their financial status. Though the summons were duly replied by the petitioners, the first respondent ....
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....with Sections 10(5) and 42(1) of the Act in view of the reasons that it was not proved that the petitioners (i) did not use the foreign exchange for the purpose mentioned in the declaration, (ii) did not surrender it to an authorized person within the specified period and (iii) used the foreign exchange for any other purpose for which purchase of foreign exchange is not permissible; (b) the confessional statement given by the petitioners cannot be accepted without corroboration and even if the alleged contravention is technical, a huge penalty cannot be imposed and rather a lenient view could have been taken by the second respondent; (c) the second respondent ought not to have imposed penalties of ₹ 30 lakhs and ₹ 20 lakhs particularly after holding that (i) there was no actual loss of foreign exchange; (ii) there was only a technical contravention of the provisions of the Act and (iii) there was no misutilisation of foreign exchange; and (d) the third respondent has failed to see that the petitioners had incurred huge loss in business which is reflected in their Balance Sheet and as such, they cannot make the pre-deposit. 7. In support of his contentions, the le....
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....r unconstitutionality with the order of the third respondent. 9. I have given due consideration to the rival contentions of the learned counsel on either side. 10. Before proceeding to decide the issue on hand, it would be useful to refer to sub-sections (5) and (6) of Section 10 of the Act which read as under : "An authorized person shall, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declaration and to give such information as will reasonably satisfy him that the transaction will not involve, and is not designed for the purpose of any contravention or evasion of the provisions of this Act or of any rule, regulation, notification, direction or order made thereunder, and where the said person refuses to comply with any such requirement or makes only unsatisfactory compliance therewith, the authorized person shall refuse in writing to undertake the transaction and shall, if he has reason to believe that any such contravention or evasion as aforesaid is contemplated by the person, report the matter to Reserve Bank. Any person, other than an authorized person, who has acquired or purchased foreign exchange f....
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....r that the pre-deposit for considering the appeal has been considered before taking up the appeals on merits. For arriving at a conclusion that there is no undue hardship for the petitioners, the third respondent has taken note of the financial condition as shown in the Balance Sheet of the petitioner companies reflecting huge loans and investments and has rejected the applications for dispensation of pre-deposit. In order to decide whether the third respondent is correct in rejecting the applications of dispensation of pre-deposit it would be useful to refer to the judgment of the Supreme Court in Benara Valves Ltd. case : (paras 11, 12, 13, 15) "Two significant expressions used in the provisions are "undue hardship to such person" and "safeguard the interests of revenue". Therefore, while dealing with the application, twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interest of Revenue have to be kept in view. As noted above there are two important expressions in Section 35(F). One is undue hardship. This is a matter within the special knowledge of the applicant for waiver an....