The Respondents made export against 51 invoices during the period of August 2000 to December 2000 to the extent of INR 12.41 Crores. However, the Respondent failed to release the export proceeds. Accordingly, the Adjudicating Authority imposed a penalty of INR 12.50 Crores on both the respondents for contravention of Section 7 & 8 of FEMA, read with Regulation 9(1) & 13 of Foreign Exchange Management (Export of Goods & Services) Regulations, 2000. Such a penalty is more than 200% of the amount contravened. The Notice could not be served on the Respondent, and accordingly, they were served by way of affixation on the last known addresses. Hence, they were proceeded against ex parte by the Adjudicating Authority.
However, the appellant ED filed the appeal for enhancement of the penalty, contending that the penalty imposed is quite meagre and nominal. No serious efforts were made by the respondent company to realize the export proceeds by filing any suit for recovery against them.
Hon’ble Appellate Tribunal held that as per Section 13(1) of the FEMA, the maximum penalty that can be imposed is up to 3 times the amount of contravention involved. Section 13(1) has not prescribed either a fixed amount of penalty or a minimum amount of penalty. Therefore, the penalty imposed by the Adjudicating Authority is a matter of discretion which is to be exercised judiciously after taking into account the facts of the case and the evidence. The FEMA Act itself gave an explicit scope to the Adjudicating Authority to exercise its discretion, albeit judiciously, for the imposition of a penalty. In the given case, the total penalty imposed is about 200% more than the contravened amount. However, instead of executing the said order for recovery, the appellant ED has filed an appeal for enhancement of penalty, by ignoring the fact that the respondents are not traceable, and thereby, any chance of recovery of the penalty amount became negligible during this intervening period. Hence, the practice of filing such appeals for enhancement of the penalty amount by the appellant ED needs to be deprecated.
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Therefore, the order of the Adjudicating Authority needs no interference. The appeal for enhancement of the penalty fails and is hereby dismissed.
1. Breve resumen de los hechos del caso:
- In the present case, Sh. Bharat Kumar and Sh. C Sharavan Kumar (“The Respondents”) made exports against 51 invoices from August 2000 to December 2000, to the extent of ₹12,41,89,927.
- However, the Respondents failed to realize such export proceeds.
- Therefore, the Adjudicating Authority imposed penalties on the respondents for contravention of Section 7 & 8 of FEMA, read with Regulation 9(1) & 13 of Foreign Exchange Management (Export of Goods & Services) Regulations 2000.
- The Penalty was imposed of Rs 1,2,50,00,000/- each of the respondents.
- The present appeal is filed by the Assistant Director, Chennai Zonal Office, against the order issued bythe Adjudicating Authority.
- The said Noticee could not be served, and accordingly, they were served by way of affixation on the last known addresses. Hence, they were proceeded against ex parte by the Adjudicating Authority.
- Being satisfied with the allegations made, the Adjudicating Authority imposed the penalty on the noticees.
- Aggrieved by the said order, the appellant ED filed the present appeal for enhancement of the penalty.
2. Contention of the Appellant
The Appellant submitted that:
- The Respondent has contravened Sections 7 & 8 of FEMA, read with Regulation 9(1) & 13 of Foreign Exchange Management (Export of Goods & Services) Regulations 2000, for failing to realize export proceeds amounting to Rs. 12,41,89,927/-.
- However, the penalty imposed on them is quite meagre and nominal to the extent of 100% of the contravened amount.
- No serious efforts were made by the respondent company to realize the said amount from foreign-based importers of Dubai & Jamaica by filing any suit for recovery against them.
- Therefore, the present appeal is filed to enhance the penalty amount as the said penalty is on the lower side, without considering the quantum of contravention.
3. Contention of the Respondent
None appeared on behalf of the appellants even during the adjudication proceedings, and ex parte order was passed against them.
4. Analysis by Hon’ble Tribunal
El Honorable Tribunal de Apelaciones realizó el siguiente análisis:
- Según la Sección 13(1) de la FEMA, es evidente que el monto máximo de la sanción que puede imponerse es de hasta 3 veces el importe de la contravención en cuestión.
- La Sección 13(1) no ha prescrito un monto fijo ni un monto mínimo de sanción. Por lo tanto, la sanción impuesta por la Autoridad Adjudicadora es una cuestión de discrecionalidad que debe ejercerse de manera juiciosa, teniendo en cuenta los hechos del caso y las pruebas.
- El apelante ha sostenido que la Autoridad Adjudicadora ha impuesto una sanción de hasta el 100% del monto contravenido, es decir, los ingresos por exportación no realizados por el importador con sede en el extranjero.
- En el caso presente, la Autoridad Adjudicadora no solo ha tomado nota de los hechos del caso, sino que también ha evaluado las pruebas que constan en el expediente para imponer una sanción de solo el 100%.
- En el asunto del Estado de MP y otros contra Bharat Heavy Electricals [(1997) 7 Supreme Court Cases 1], el Honorable Tribunal Supremo ha sostenido que:
- Un estatuto que prescribe la disposición de una sanción igual a 10 veces el impuesto de entrada, prescribe solo un límite máximo y no un monto irreductible, privando a la autoridad evaluadora de cualquier discrecionalidad al respecto.
- Las autoridades evaluadoras no están obligadas a imponer una sanción fija igual a diez veces el monto del impuesto de entrada.
- La propia Ley FEMA ha previsto una sanción de hasta 3 veces la suma involucrada en la contravención y, por lo tanto, otorgó un margen explícito a la Autoridad Adjudicadora para ejercer su discrecionalidad, aunque de manera juiciosa, para la imposición de la sanción.
- En el caso presente, la sanción total impuesta es aproximadamente un 200% superior al monto contravenido.
- Sin embargo, en lugar de ejecutar dicha orden de cobro, el apelante (ED) adoptó el curso de acción de presentar una apelación para el aumento de la sanción, ignorando el hecho de que los demandados no son localizables y, por lo tanto, cualquier posibilidad de recuperación del monto de la sanción se volvió insignificante durante este período intermedio.
- Por lo tanto, la práctica de presentar tales apelaciones para el aumento del monto de la sanción por parte del apelante (ED) debe ser desaprobada.
5. Final Order
El Honorable Tribunal de Apelaciones sostuvo que:
- No estamos inclinados a aumentar la cuantía de la sanción, ya que la Autoridad Adjudicadora ha impuesto una sanción adecuada.
- Por lo tanto, la orden de la Autoridad Adjudicadora no requiere intervención. La apelación para el aumento de la sanción no prospera y, por la presente, se desestima.
