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APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT AT NEW
DELHI
Date of Decision:- 21.12.2018
MP-115/DLI/2018(Exem)
MP-104/DLI/2018(Misc)
FPA-FE-10/DLI/2018
M/s. L.G. Electronics India Pvt. Ltd. & Anr. … Appellant
Versus
The Joint Director
Directorate of Enforcement, Delhi … Respondent
Advocates/Authorized Representatives who appeared
For the appellant : Shri R.K. Handoo, Advocate
Shri Gaurav Verma, Advocate
Shri Mohit Das, Advocate
For the respondent : Shri Pankaj Yadav
Legal Consultant
CORAM
JUSTICE MANMOHAN SINGH : CHAIRMAN
JUDGEMENT
FPA-FE-10/DLI/2018
1. The above-mentioned appeal has been filed u/s 19 of the Foreign
Exchange Management Act, 1999 („FEMA‟) against Adjudication Order No.
ADJ/02/FEMA/DZ/2017/JD(SM) dated 29/12/2017 for contravention of
Section 10(5), 10(6) & Section 42(1) & (2) of FEMA,1999 r/w Regulation 6(1) of
Foreign Exchange Management(Realization, Repatriation & Surrender of
Foreign Exchange) Regulation,2000. A Show Cause Notice bearing No. T-
4/02/FEMA/DLZO/BE/2016 dated 09/09/2016 was issued to the Appellants.
2. The Adjudicating Authority has imposed a penalty of Rs. 30.00 lakhs on
the Company and Rs. 10 lakhs on the Managing Director vide the impugned
order.
FPA-FE-10-DLI-2018 Page 1 of 9
3. The brief facts are that after investigations, a Show Cause Notice was
issued against the Appellant Company and its Managing Director for alleged
violation of Section 10 (5) and 10 (6) of FEMA, 1999, r/w Regulation 6 (1) of the
Foreign Exchange Management (Realisation, Repatriation, and Surrender of
Foreign Exchange) Regulations, 2000 alleging that the Appellant Company has
failed to submit (Bill of entry) documentary evidence for import of goods in
respect of the advance remittance of US $433661.76 through HSBC Bank. In
terms of Section 42 of FEMA, 1999, the Managing Director of the Company was
arraigned as a noticee.
4. The RBI gave information to Enforcement Directorate, by communication
dated 08/08/2002 that certain Bill of Entries have not been submitted in
respect of remittances made through Citi Bank and State Bank of India for
period prior to 08.02.2002, however, it was contented by the Company that it
had produced documents for such remittances, as would be evident from Para
2.3 and 2.4 and 2.5 of the Show Cause Notice.
5. It was submitted that in respect to the remittance of US $ 433661.76
clarification was sought from the M/s. L.G. Electronics Pvt. Ltd. and they have
replied that they have made a request to the RBI through HSBC Bank vide
letter dated 12/01/2016 for exemption from submitting import documents. To
check veracity of company‟s claim made to RBI, a letter dated 04/04/2016 was
written to RBI. In reply, RBI, vide its letter forwarded a letter copy of No
Objection dated 15/04/2016 issued to HSBC Bank.
6. With regard to the Show Cause Notice in respect of the remittance of
US$433661.76, after exchanging correspondence, the RBI has granted no
objection to the bankers, HSBC Bank by communication dated 15/04/2016
intimating that the RBI has no objection and advised the Authorised Dealer not
to insist for Bill of Entry against the advance remittance of US$433661.76
made by the Appellant Company.
FPA-FE-10-DLI-2018 Page 2 of 9
7. The said factual position is not denied by the respondent and despite
the ex-post facto exemption/permission granted by Reserve Bank of India, as
aforesaid, the complaint was preferred under FEMA, 1999 before the
Adjudicating Authority for alleged non-submission of Bill of Entry in respect of
the said advance remittance of US$433661.76.
8. It is submitted by the respondent that the appellants relied upon the
selected portion of the RBI letter dated 15/04/2016 and the Appellants cannot
be allowed to read selectively as the RBI uses the word “without prejudice” and
that thus has not clearly raised no objection to the action to be taken by the
enforcement authorities under FEMA. It is stated that RBI has no objection
with the investigation conducted by the ED otherwise RBI in its letter ought to
have objected the ED‟s investigation and also even direct the ED to close the
SCN.
“After receiving the RBI letter dated 15/04/2016, ED
wrote a letter to Sh. Vikas Jaiswal(Asst. General Manager,
RBI) vide F. No. T-3/FEMA/BE-1861/DZ/2002 dated 27/04/2016
for clarifying the content of letter dated 15/04/2016. In
response to ED’s letter, RBI vide letter dated 13/05/2016
clarified that the RBI does not debar the Directorate of
Enforcement from carrying on with the investigation already
initiated against them.”
9. It is submitted by the respondent that as alleged by the appellants (took
all reasonable steps to repatriate it), the foreign exchange is merely an eye
wash as it is clear from the adjudication order itself that the Appellants had
paid the advance amount in October 2008 to their regular supplier of computer
monitor screen. The shipment was expected in November 2008, however, due
to financial crisis, the vendor could not fulfil its commitment and also did not
refund the advance amount. Also the vendor was declared bankrupt and as
such the advance amount could not be recovered from the vendor. It is also
found that the Appellants failed to respond to the query regarding filing of any
claim before the competent court during the course of bankruptcy proceedings,
FPA-FE-10-DLI-2018 Page 3 of 9
thereby leading to formation of a belief that no such claim was filed by the
Appellants.”
10. Lastly, it is stated on behalf of respondent that since the Appellants
failed to respond to the query regarding filing of any claim before the competent
court during the course of bankruptcy proceedings, thereby leading to
formation of a belief that no such claim was filed by the Appellants. It is
alleged that the Civil Judgment dated 29/03/2012 of the competent court in
China ordering bankruptcy of the Chinese vendor shows that the vendor had
suffered huge losses in a row from 2006 to 2008 and stopped production
entirely in October 2008 i.e. the same month when the advance amount was
paid by the Appellants to the vendor. It has been further mentioned in the said
judgment that the vendor resumed part of the production from February to
April 2009. Having failed to apply any due diligence and then having failed to
recover its advance or procure supplies against the advance when the
production resumed for three months, it cannot be said that the Appellants
acted in a bona-fide manner.
11. The adjudicating authority rejected the contention raised by the company
regarding receipt of material worth US $ 58,746.24 in respect of remittance
US $ 433661.76 in Jan.2009 for the reason that the supporting documents
provided by the company i.e. Invoice no. LPDSG091IL dated 14/01/2009 who
stated that the said supplies are with the reference to a separate contract
LPD081204 dated 28/11/2008 and are for a different product i.e.
6318L15015H and at a different price i.e. US $ 29.14 per piece.
12. There is no denial that the Appellant Company was making regular
imports from 2006 onwards from the said foreign company and the impugned
amount is just 1.4% of the total imports made from the said exporter and
0.05% of the total imports for the year 2008.
FPA-FE-10-DLI-2018 Page 4 of 9
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