TaxTMI 
TaxTMI 
2026 (4) TMI 376
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....No. ADJ/05&06-B/SDE/SWN/2014/FEMA dated 13.11.2014, whereby it is held that the noticees have contravened the provisions of Section 6(3)(d) of FEMA, 1999 read with Regulation 3 & Regulation 5(3) of FEM (Borrowing or Lending any Foreign Exchange) Regulations, 2000, on the ground that amounts totalling USD 522591 were remitted by the noticee importer (herein appellant) to their overseas suppliers during the year 2010-11 for the import of goods made during the years 2008-09, the said payments were made much after the permissible period of 6 months was over and thereby the noticee company availed credit from the overseas supplier for the contravention of aforesaid provisions. Thereby the penalties were imposed on the appellants as under:- ....
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....y other person residing out of India. The import of consignment does not amount to borrowing of money, as the import on credit cannot be equated with borrowing in any manner. He pointed out that due to recession in the diamond market, the consignments of diamonds imported by the appellants were either not sold, or after its sale in the domestic market, the buyers did not pay them in time, which lead to the non-recovery of payment and consequently the payment of remittances to the overseas suppliers were delayed. He argued that it was technically not possible for the appellant to send the remittances without actually realising the money from their buyers. Ld. Counsel for appellant pointed out that total outstanding of US$ 522591 got delayed ....
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....r respondent ED controverted the submissions made by the Ld. Counsel for appellant on each and every aspect which will be discussed and analysed in our findings in the following para. 6. After hearing the rival submissions following issues emerge:- i) Whether the import of consignments on credit is Current Account Transaction or Capital Account Transaction? ii) Whether appellants have contravened the provisions of Section 6(3)(d) of FEMA, 1999 r/w Regulation 3 & 5(3) of FEM (Borrowing or Lending in Foreign Exchange) Regulation, 2000. iii) If Issue no. ii) is answered in affirmative, then whether the quantum of penalty needs to be reduced? Now, we will decide the above issues in the following paras. 7. Iss....
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....ignment on credit is covered within the definition of capital account transaction. As per the case of Respondent ED, the Appellants have contravened the provision of Section 6(3)(d) of FEMA, 1999 read with Regulation 3 & 5 (3) of FEM (Borrowing or Lending in Foreign Exchange) Regulations, 2000. The said provisions are reproduced as under:- Capital Account Transaction, Section 6(3) Without prejudice to the generality of the provisions of Sub-section (2), the Reserve Bank may, by regulations, prohibit, restrict or regulate the following- (a) ... (b) .... (c) .... (d) Any borrowing or lending in foreign exchange in whatever form or by whatever name called. Capital Account Transaction is define....
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....t on record seeing the fact that Appellants have imported the consignment on credit basis vide BE dated 23.12.2008 and made the payments on different dates after expiry of six months, as mentioned in para no.2 above, without approval of RBI. Under these circumstances insisting the Respondent ED to prove the contract or agreement of loan is not mandatory. Accordingly, the judgement relied upon by Appellants is not applicable to the facts of the present case. Regulation 3 & 5 (3) of FEMA (Borrowing or Lending in Foreign Exchange) Regulations, 2000, are reproduced as under:- Regulation 3: "Prohibition to borrow or lend in foreign exchange- Save as provided in the Act, rules or regulations made thereunder, no person resident in Indi....