TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1034
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....ith direction to pay Rs. 10,00,000/- in the form of FDR with the Respondent Directorate within one month of the Order. It is recorded on the Order Sheet dated 07.10.2024 that the Appellant has complied with the Order by depositing Union Bank of India Draft No. 175131 dated 08.05.2024. 2. Ld. Counsel for the Appellant stated that the conclusion made in the Impugned Order was erroneous since the Appellant had received the commission payable by the foreign supplier by way of setting off the same against the value of goods purchased by the Appellant from such foreign supplier. Ld. Counsel contended that the Respondent has also duly admitted the said fact. Ld. Counsel submitted that Section 8 of FEMA and Regulation 3 of FEMA (Realisation, Repatriation and Surrender of Foreign Exchange) Regulation, 2000 mandate that a person resident in India "shall take all reasonable steps to realise and repatriate to India such foreign exchange" which is due to such person. It is therefore submitted that the act of the Appellant in setting-off the commission receivable by the Appellant against the import payables for the goods imported by the Appellant, would have to necessarily lead to a conclusio....
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....ted 17.11.2011 issued by RBI vide No. RBI/2011-12/264 stated that it had been decided to delegate power to Authorized Dealer Category-I Banks to deal with the cases of "set-off" of export receivables against import payables subject to certain terms and conditions. Ld. Counsel therefore argued that in view of the Circular the contravention under FEMA is merely technical procedural lapse and not substantive. Ld. Counsel argued that the Appellant satisfied all the conditions prescribed in the Circular. The only inadvertent omission is that the Appellant had not made a formal application with their Authorised Dealer Bank for allowing the setting-off. He placed reliance on the decision of the Hon'ble Supreme Court in the case of Mangalore Chemicals & Fertilizers Ltd. vs. Deputy Commissioner reported in 1991 (55) ELT 437 (S.C.) and in the case of Hindustan Steel Ltd. vs. State of Orissa reported in 1978 (2) ELT 159 (S.C.). Ld. Counsel also pleaded that the penalty commensurate to the failure of the Appellant, if in case the Appeal is decided against the Appellant, should be imposed. Ld. Counsel pleaded to allow the Appeal. 5. Ld. Counsel for the Respondent Directorate alleged that the....
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....oad, was netted off by him against the value of goods imported by him and that no permission of the Reserve Bank of India for such netting off had been obtained by the said Shri M. Lakshmi Chand Jain. Since the foreign exchange outflow from the country for each specified purpose vis-a-vis the amount of foreign exchange received into India for each specified purposes are required to be properly indexed by the Reserve Bank, as a part of larger monetary policy dealing with balance of payment, current account deficit etc., the argument that such an arrangement does not cast a burden on the foreign exchange reserves of the county does not hold water. I also find that such a practice that had been adopted by the Noticee is against the very preamble of FEMA, which is an Act to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. If everyone on their own do netting off of the foreign exchange receivable against payable, it would definitely adversely affect the orderly development and maintenance of foreign exchange market in Ind....
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.... the transactions of sale and purchase may be reported separately in 'R' Returns. e) The relative GR forms will be released by the AD bank only after the entire export proceeds are adjusted/received. f) The" set-off of export receivables against import payments should be in respect of the same overseas buyer and supplier and that consent for "set-off" has been obtained from him. g) The export/import transactions with ACU countries should be kept outside the arrangement. h) All the relevant documents are submitted to the concerned AD bank who should comply with all the regulatory requirements relating to the transactions. 2. AD Category I banks may bring the contents of this circular to the notice of their constituents and customers concerned. 3. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law. The perusal of the Circular clearly brings out that the Authority to deal with the cases of "set-off" of export receivables against import pa....