TaxTMI 
TaxTMI 
2026 (8) TMI 106
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....VIII(48)-322/CC/KOLK/CUS/10/2156 dated 09.05.2011, that M/s West Bengal Essential Commodities Supply Corporation Limited (M/s WBECSCL) effected shipments of Iron Ore, Iron & Steel and Cotton raw/waste abroad during the period 2004-2005, for which the export documents were negotiated through Bank of Maharashtra, Canara Bank, Central Bank of India, Union Bank of India, Syndicate Bank & Oriental Bank of Commerce, and failed to realize the export proceeds. 3. Enquiries were made by issuing directive dated 14.09.2011 to all the above-named Authorized Dealers (banks) to get the details of the said export bills, and information as to whether any extension of time was granted, certified copies of the FIRCs/BRCs, and whether any proceeds of exports were realized. Enquiries were also made by using directive dated 14.09.2011 under FEMA, to the exporter M/s WBECSCL. 4. Some of the negotiating bankers, namely, Canara Bank, Union Bank, Bank of Maharashtra, Central Bank, Oriental Bank, vide letters dated 08.02.20212, 03.02.2012, 13.12.2011, 07.10.2011 and 13.12.2011, respectively, stated that all of the export bills reflected in the XOS are still outstanding and no extension of time was gra....
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...., is misplaced. The expression "documents submitted or to be submitted to your bank" clearly restricts the Appellant's role to banking documentation only. Sections 7 & 8 of FEMA, 1999 and regulations 8, 9 and 13 of FEMA Regulations, 2000 apply to the exporter, or person responsible for realization. The Appellant had no control over export operations, no authority to enforce recovery. It is pointed out that the impugned order does not identify any specific obligation or failure on part of the Appellant. 10. It is further argued that no liability arises under section 42 as the said provision requires consent, or connivance, or neglect. None of these was present. 11. It is also argued that due diligence expected of the appellant was duly exercised by the him. The Appellant recorded multiple cautionary notes in official files suggesting many dos and don'ts including: required 100% Bank Guarantee against procurement or advance ship freight. Required Performance Guarantee, only on the basis of confirmed LC before packing credit, due diligence of business associates, quality inspection, market study before entering in to contract, contractual safeguards regarding T & C. The ....
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....posed be quashed. Arguments for the Respondent 18. The respondent has contested the arguments made on behalf of the appellant. 19. It is reiterated by the respondent that M/s WBECSCL failed to realize balance export proceeds equivalent to Rs 48.40/- crores in the year 2004-2005, for which, the company as well as its Managing Director, Financial Advisor and the appellant were held responsible for not taking the reasonable steps which could realize the said export proceeds. 20. It was further submitted that the appellant has never applied for extension of time limit to the Reserve Bank of India for realization of balance export proceeds. The Reserve Bank of India is regulatory authority for all foreign exchange transactions and as per FEMA Provisions and Rules therein an exporter is obligated to take all reasonable steps to realize and repatriate to India the foreign exchange declared on export documents. Though they made some correspondence with their higher officers, but the correct procedure for realization of export proceeds would have been either to make an application for extension of time limit or requesting the Reserve Bank of India to get the balance export proce....
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....ion in the year 2002 as Commercial Manager and subsequently his designation was changed to Manager (Export) till May 2005 and thereafter, shifted to Manager (Recovery) from 2005-2007 and he was released from the company in the year 2007. 23. As Financial Officer and Chief Accounts Officer of the company, the appellant was also responsible for the conduct of export business of the company. Though he was reporting to the Managing Director and getting approvals for his steps related to export realization, this fact alone cannot absolve him from his liability under the section 42 of FEMA, 1999. The said provision is as follows: "42. Contravention by companies- (1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall ....
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....d the rival submissions of the parties. It is well-settled that under FEMA, where the contravention is committed by the company, vicarious liability would fasten itself on any person who was in-charge and was responsible to the company for the conduct of the business of the company. This could include cases of default which took place with the consent or connivance of the said person, or was if it was attributable to the negligence or neglect on the part of that person. It is also well-settled that the person "in charge" must mean the person who is in control of the day-to-day business of the company. In this regard, a distinction has been drawn by courts between the directors in charge of day-to-day affairs of the company's business and other directors who are not. In the absence of any material to prove that the person was 'in charge' and was responsible to the company for the conduct of its business, the action under Section 42(1) would be void ab initio. 29. The detailed arguments raised on behalf of the appellant have been discussed in paragraphs 08 to 17 above and are not repeated here in the interest of brevity. The key issue that arises for consideration is whether or no....