Mr. Lakshmi Chand Jain (“The Appellant”) was entitled to commission for the services by him to the foreign supplier. Such commission is received in the form of a discount. The commission payable by the foreign supplier was adjusted in terms of the discounts given. Therefore, The Appellant has not received any commission in foreign exchange or Indian Currency through banking channels. The Appellant has not obtained any permission from the RBI for adjusting the commission payable to him by discounting the value of supplies made to him. Therefore, the Respondent held that the Appellant has contravened the provisions of FEMA and therefore, imposed penalty of INR 30 Lacs.
The Appellant contended that he has satisfied all the conditions specified in the circular No. 47 dated 17.11.2011 issued by RBI vide No. RBI/2011-12/264 for setting off export proceeds against import proceeds. Therefore, the contravention under FEMA is merely technical procedural lapse and not substantive.
The Respondent contended that “setting-off” cannot be regarded as arising due to procedural lapse because the Appellant has declared the value of the imported goods at the suppressed prices to the Customs Authorities and thereby evaded the customs duty.
Hon’ble Tribunal held that The order copies of the Additional Commissioner of Customs, Headquarters, Bangalore corroborate the fact that the Customs Duty were evaded by the Appellant. Therefore, we reject the contention of the Appellant that the netting off the import payables by the export receivables was mere procedural lapse. Further, contention of the Appellant that contravention of the FEMA was unintentional cannot be accepted. Nothing contained in Section 13(1) of the Act indicates directly or indirectly requirement of mens rea. Words like “willful”, “deliberately”, “intentionally” etc. are missing.
The Tribunal reduced the penalty amount to INR 10 Lacs.
1. Breve resumen de los hechos del caso:
- The commission is paid to Mr. Lakshmi Chand Jain (“The Appellant”) for the services rendered by him to the foreign supplier in the form of discounts by the foreign suppliers, whom he represents in India, whenever he purchased from that supplier, on his account.
- The commission is paid to him only when the foreign supplier received payment from the Indian buyer.
- The commission payable by the foreign supplier was adjusted in terms of the discounts given.
- The Appellant has not received any commission in foreign exchange through banking channels.
- The commission payable was set off against the purchases made by the Appellant’s Firm from the foreign supplier. The amount of discount given by the suppliers ranged from 10% to 40%.
- No commission was paid to him by the foreign supplier either in foreign exchange or Indian rupees through bank or otherwise.
- He had not obtained any permission from the Reserve Bank of India (RBI) for adjusting the commission payable to him by discounting the value of supplies made to him.
- In response to the SCNs issued as above, the Appellant vide his reply dated 03/05/2013 pointed out that the commission payable, which was Rs.1,72,49,537/-, was adjusted and passed on as discount, when the Appellant made purchases from the foreign supplier.
- Therefore, the penalty is imposed on the Appellant vide Impugned order No. JD/04/BZ/2012-13/(FEMA)/(JD-SA)/2197 dated 06.12.2013 passed by Joint Director, Directorate of Enforcement, Government of India, Bangalore.
- As per the impugned order, a penalty is imposed of INR 30,00,000/- on the Appellant for contravention of provisions of Section 8 of FEMA Act read with Regulation 3 of FEMA (Realisation, Repatriation and Surrender of Foreign Exchange) Regulation, 2000.
- Therefore, the APpellant file appeal against the impugned order.
2. Relevant Legal extract:
Relevant provisions of the FEMA are reiterated below for ready reference:
- Section 13(1) of the FEMA:
“If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorisation is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues.”
- RBI/2011-12/264 A.P. (Serie DIR) Circular n.º 47, de fecha 17 de noviembre de 2011, sobre la «Compensación de cuentas por cobrar de exportación frente a cuentas por pagar de importación: liberalización del procedimiento»
La «compensación» de cuentas por cobrar de exportación frente a cuentas por pagar de importación: liberalización del procedimiento. El Banco de la Reserva de la India considera las solicitudes de los exportadores, a través de sus sucursales de AD, para la compensación de cuentas por cobrar de exportación frente a cuentas por pagar de importación. Como medida de mayor liberalización, se ha decidido delegar la facultad a los bancos de categoría I de AD para gestionar los casos de «compensación» de cuentas por cobrar de exportación frente a cuentas por pagar de importación, sujetos a los siguientes términos y condiciones:
…”
3. Argumentos del Peticionario:
El Peticionario sostuvo que:
- El apelante había recibido la comisión pagadera por el proveedor extranjero mediante la compensación de la misma con el valor de los bienes adquiridos por el apelante a dicho proveedor extranjero.
- La Sección 8 de la FEMA y el Reglamento 3 del Reglamento de la FEMA (Realización, Repatriación y Entrega de Divisas) de 2000 establecen que toda persona residente en la India «deberá tomar todas las medidas razonables para realizar y repatriar a la India dichas divisas» que le sean debidas.
- Por lo tanto, la compensación de la comisión por cobrar frente a las cuentas por pagar de importación llevaría a la conclusión de que el apelante efectivamente había realizado el valor de la comisión de dichos proveedores extranjeros.
- El importe a repatriar se había transferido al apelante en forma de descuento, y el apelante solo había pagado a los proveedores extranjeros el importe descontado; por consiguiente, no hubo carga alguna sobre las reservas de divisas.
- Por lo tanto, la conclusión de que el apelante había infringido las disposiciones es insostenible legalmente y, por ende, debe ser anulada.
- Además, según la Circular n.º 47 de la Serie A.P. (DIR), de fecha 17.11.2011, emitida por el RBI bajo el n.º RBI/2011-12/264, se delega la facultad a los bancos de categoría I de AD para gestionar los casos de «compensación» de cuentas por cobrar de exportación frente a cuentas por pagar de importación, sujetos a determinados términos y condiciones.
- El apelante ha cumplido con todas las condiciones especificadas en la circular. Por lo tanto, la contravención bajo la FEMA es meramente un fallo procedimental técnico y no sustantivo.
- La única omisión involuntaria es que el apelante no presentó una solicitud formal ante su banco de AD para permitir dicha compensación.
- Asimismo, se invocó la decisión del Honorable Tribunal Supremo en el caso de Mangalore Chemicals & Fertilizers Ltd. contra el Comisionado Adjunto, registrado en 1991 (55) ELT 437 (S.C.) y en el caso de Hindustan Steel Ltd. contra el Estado de Orissa, registrado en 1978 (2) ELT 159 (S.C.).
- Además, el apelante alegó que, en caso de que la apelación se resuelva en su contra, se debería imponer una sanción proporcional al incumplimiento cometido por el apelante.
4. Alegaciones del recurrido
El demandado sostuvo que:
- La denominada «compensación» no puede considerarse derivada de un fallo procedimental, ya que el apelante declaró el valor de los bienes importados a precios reducidos ante las autoridades aduaneras, evadiendo así los derechos de aduana.
- Por lo tanto, la contravención cometida no demuestra la buena fe del apelante.
5. Conclusiones y análisis del Tribunal de Apelación
El Tribunal de Apelación llegó a las siguientes conclusiones y análisis:
- 1 724 953,70 rupias es el valor de los bienes importados por los cuales el apelante no realizó pago alguno, dado que el apelante alegó que se trataba de la comisión por los servicios prestados por él.
- Las copias de las órdenes del Comisionado Adjunto de Aduanas, sede central de Bangalore, corroboran el hecho de que el apelante evadió los derechos de aduana.
- Por lo tanto, rechazamos el argumento del apelante de que la compensación de las cuentas por pagar de importación con las cuentas por cobrar de exportación fue un mero fallo procedimental.
- The Appellant has also argued to consider the contravention as procedural lapse in the light of the RBI Circular No. 47 dated 17.11.2011. As per the circular, the Authority to deal with the cases of “set-off” of export receivables against import payables was delegated by the RBI to the Authorised Dealer Banks of Category-I only.
- The importers or exporters are not permitted to do the set off on their own.
- Further, conditions specified in the circular were not met by the Appellant, in view of its mis-declarations of the value of the imported goods to the Customs Authority.
- Also, contention of the Appellant that contravention of the FEMA was unintentional and mere corollary to the contraventions of the Customs Act, 1962 cannot be accepted. Nothing contained in Section 13(1) of the Act indicates directly or indirectly requirement of mens rea. Words like “willful”, “deliberately”, “intentionally” etc. are missing.
- Also, The Hon’ble Supreme Court in the matter of The Chairman, SEBI v. Shriram Mutual Fund, [(2006) 5 SCC 361] has held that:
- Penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulations is established.
- Therefore, the intention of the parties becomes wholly irrelevant.
- A breach of civil obligation which attracts penalty would immediately attract the levy of penalty irrespective of the fact whether contravention must be made by the defaulter with guilty intention or not.
- Also, unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not.”
- However, the prayer of the Appellant to make the penalty commensurate to offences involved has merit in it.
6. Conclusión:
El Honorable Tribunal de Apelaciones sostuvo que:
- The Penalty amount is reduced to Rs. 10,00,000/- on the Appellant. The pre-deposit of the penalty amount made by the Appellant shall be adjusted against the reduced penalty.
