TaxTMI 
TaxTMI 
2026 (1) TMI 858
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..... Karthikeyan, and of Rs. 3,00,000/- on Shri P. P. Nagarajan for the contravention of the provisions of Regulation 3(2) of Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 to the extent of Rs. 15,25,74,992/-, vide the Impugned Order. 2. Ld. Counsel for the Appellants submitted that there was no violation of provisions of Regulation 3 (2) of Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000, since the payments were received in freely convertible foreign currency of the final destination which was declared in the shipping bills. Moreover, the Appellants were not aware that the payments had been received from third parties since the State Bank of India (SBI) had issued FIRC/BRC. The Appellants were also unaware of the procedural requirement of FEMA Notification No. 14 dated 03.05.2000 (Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000), which stipulates that forex remittance should flow from the buyer. Ld. Counsel further submitted that the Reserve Bank of India (RBI) had issued the Circular No. AP(DIR) Series, Circular No. 70 dated 08.11.2013, subsequent to the impugned exports having been made. F....
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....egulations 2000, in force during the relevant period. Ld. Counsel emphasized that the RBI had allowed third party payment in respect of export transactions through circular dated 08.11.2013 which however was subject to certain conditions. Ld. Counsel contended that since the third party payments for the export were allowed on 08.11.2013, the export transactions for which third party payments were received, made before 08.11.2013 were in violation of the aforementioned FEMA Regulations. Ld. Counsel contended that on reading of RBI Circular No. 70 dated 08.11.2013, the prohibition on payment of export proceeds from third party which ensued through the aforementioned Regulations and remained in force before 08.11.2013 becomes obvious. Ld. Counsel read the following sentence from the said Circular: "Normally payment for exports has to be received from the overseas buyer named in the Export Declaration Form (EDF) of Exports and the payment shall be received in a currency appropriate to the place of final destination as mentioned in the EDF irrespective of the country of the buyers." Ld. Counsel further argued that the payments from the third party were allowed for the export....
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.... is pertinent to reproduce the provisions in dispute: Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000 Notification No. FEMA 14/2000-RB dated 3 May 2000 RESERVE BANK OF INDIA (EXCHANGE CONTROL DEPARTMENT) CENTRAL OFFICE MUMBAI 400 001 In exercise of the powers conferred by Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India makes the following regulations in respect of the manner of receipt and payment in foreign exchange, namely: 1. Short title and commencement :- i) These Regulations may be called the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2000. ii) They shall come into effect on 1st day of June, 2000. ***** 3. Manner of Receipt in Foreign Exchange :- (1) Every receipt in foreign exchange by an authorised dealer, whether by way of remittance from a foreign country (other than Nepal and Bhutan) or by way of reimbursement from his branch or correspondent outside India against payment for export from India, or against any other payment, shall be as mentioned below: Group Manner of receipt....
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....ited to various provisions of FEMA Notification No. 14 dated May 3, 2000 dealing with the manner of receipt & payment for trade transactions. Normally payment for exports has to be received from the overseas buyer named in the Export Declaration Form (EDF) by the exporter and the payment shall be received in a currency appropriate to the place of final destination as mentioned in the EDF irrespective of the country of residence of the buyer. Similarly, the payments for the import should be made to the original overseas seller of the goods and the AD should ensure that the importer furnishes evidence of import, such as, Exchange Control copy of the Bill of Entry to satisfy itself that goods equivalent to the value of remittance have been imported. 2. With a view to further liberalizing the procedure relating to payments for exports/imports and taking into account evolving international trade practices, it has been decided as under: i. EXPORT TRANSACTIONS AD banks may allow payments for export of goods /software to be received from a third party (a party other than the buyer) subject to conditions as under: a) Firm irrevocable order backed by a tri....
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....at the manner of receipt or payments from the third party for the export made was not in existence before 08.11.2013. It is also to be appreciated that even on allowing of receipts for exports from a third party, the Authorised Dealer Banks had to permit such receipts only under certain conditions. It is with the experience of a few months that further liberalization was made on 04.02.2014, whereby the cautious approach prescribed for the banks was not completely discarded as the banks were still required to be satisfied with the bona fides of the transaction, as well as keep the norms stipulated by the FATF in view. We therefore conclude that the contravention of Regulation 3 (2) of the aforementioned Regulations 2000 had occurred for the export consignments made before 08.11.2013 for which payments for the export proceeds had been received from third party. 10. In so far as the two individual Appellants are concerned, we concur with the findings made in paragraph 5.13 of the Impugned Order. The two individual Appellants have admitted signing the commercial invoices relating to the impugned export consignments. While it may be true that Late Shri Jagdish Prasad Khemka may have ....