FOREIGN EXCHANGE MANAGEMENT ACT, 1999

Section 6

Capital account transactions - Delay in settlement of import dues - Grant of special permission by RBI for settlement of dues - Whether imposition of penalty upon appellants for contravention of provisions of FEMA justified

Enforcement Directorate (ED) levied penalty on the appellant company and its directors for contravention of provisions of section 6 of the Act and the regulations made thereunder. The company filed stay application for waiver of pre-deposit penalty amount on the ground that the transactions did not involve any borrowings or lending in foreign exchange in any form under section 6(3)(d). Further, there was no violation of the provisions of FEMA, as RBI granted permission to settle the dues from the foreign exchange angle. Further that, no authority has jurisdiction to re-interpret and/or restrict the permissions granted by the RBI in exercise of its jurisdiction under sections 3 and 11 of FEMA. Held: The appellants prima facie proved that there was no violation of the provisions of FEMA, the rules, regulations and the master circular on imports. Without prejudice to any of the aforesaid and assuming without admitting that there was a violation, even then the RBI regularized the same by granting the permissions to settle the dues specifically from “FEMA Angle”. The appellant also demonstrated the factual conditions which led to the delay in settlement of import dues and the limitation of the permission was only in respect of any other applicable laws other than FEMA, thus, ED would not have imposed the penalty upon appellants. Further, appellants would suffer hardship if they were made to make a deposit of the penalty amount. Therefore, the prayer of the appellants was allowed.

REFERRED : UOI v. Mahindra & Mahindra Ltd., (1995) 76 ELT 481 (SC) : (1995) 76 ELT 481 (SC) : 1995 TaxPub(EX) 0307 (SC) and LIC v. Escorts (1986) 1 SCC 264

FAVOUR : In favour of appellant

A.Y. :

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