Unlawful Outward Remittances: NCLT’s Discretionary Penalty Upheld by Appellate Tribunal in FEMA Violation Case

Case Details: Union of India v. Kaluram B. - [2023] 152 taxmann.com 144 (FEMA-AT, NEW DELHI)

Judiciary and Counsel Details

• • Balesh Kumar, Member
  • Pankaj Pandey & Ms Aparna Kushwah, Advs. for the Appellant.

Facts of the Case

In the instant case, the Respondent made outward remittances of Rs. 20,62,94,201/- abroad as an advance towards imports. However, data obtained from the customs database showed that no import had taken place.

The Adjudicating Authority (NCLT) made a finding that the said outward remittances were in contravention of the provisions of section 10(6) of FEMA, 1999, read with Regulation 6(1) of Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000. Thus, imposed a penalty of Rs. 21 crore on the respondent.

The appellant filed an appeal against the Adjudication Order on the ground that the quantum of penalty imposed was highly unreasonable and ridiculously low despite charges against the respondent having been upheld on merit by the Adjudicating Authority.

The appellant had stated that Adjudicating Authority had ignored the provisions of section 13(1) of FEMA, which provides for the imposition of a penalty up to thrice the sum involved in contraventions.

It was noted that the maximum amount of penalty that can be imposed under section 13(1) of FEMA is three times the amount of contravention involved. Further, from the language of section 13(1) of the FEMA, it is clear that section 13(1) of FEMA has not prescribed either a fixed amount of penalty or a minimum amount of penalty.

It, therefore, follows that the amount of penalty which is to be imposed by the Adjudicating Authority is a matter of discretion which, of course, is necessarily required to be exercised judiciously after taking into account the facts of the case and evidence placed before him.

In the instant case, the appellant had failed to place any reason in pleadings to show that discretion had not been exercised judiciously by the Adjudicating Authority.

FEMA Held

The Appellate Tribunal held that in view of the appeal having failed to bring out reasons why the penalty imposed was low and as to how the Adjudicating Authority had not exercised his discretion judiciously, the order of the Adjudicating Authority could not be interfered with and thus, the instant appeal was to be dismissed.

List of Cases Referred to

• • State of MP v. Bharat Heavy Electricals 1998 taxmann.com 1267/[1998] 99 ELT 33 (SC) (para 8).