APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE (FROM NEW DELHI)

Appeal

787 of 2004, 788 of 2004, 789 of 2004, 790 of 2004

THIRUMALAI CHEMICALS LTD - Complainant(s)

Versus

ADDL C C , ENFORCEMENT - Opp.Party(s)

BEFORE: Vinay Kumar Mathur, H K Mudgil

Rahul Ray, Natasha Sarkar

16 Dec 2015

ORDER

Vinay Kumar Mathur, J.

[1] Appeal No. 787/2004 has been filed against Adjudication Order No. ADJ-73/B/AAO/PKS/2004/1435, dated 27-1-2004, passed by Adjudicating Authority Sh. P.K. Sinha, Addl. Commissioner of Customs who has held the appellant guilty of contraventions of Section 8(3) and 8(4) of FERA, 1973 r/w. Section 49(3) and 49(4) of FEMA, 1999 who has imposed a penalty of Rs. 1,41,90,175/- on appellant M/s. Thirumalai Chemicals Ltd. Appeal No. 788/2004 has been filed challenging separate Adjudication Order No. ADJ-74/B/AAO/PKS/2004/1436, dated 27-1-2004, passed by Sh. P.K. Sinha, Addl. Commissioner of Customs and the Adjudicating Officer holding the appellant guilty of contraventions of Section 8(3) and 8(4) of FERA, 1973 r/w. Section 49(3) and 49(4) of FEMA, 1999 who has imposed a penalty of Rs. 1,40,71,263/- on appellant M/s. Thirumalai Chemicals Ltd.

[2] Appeal No. 789/2004 has been filed challenging separate Adjudication Order No. ADJ-75/B/AAO/PKS/2004/1437, dated 27-1-2004, passed by Sh. P.K. Sinha, Addl. Commissioner of Customs and the Adjudicating Officer holding the appellant guilty for contraventions of Section 8(3) and 8(4) of FERA, 1973 r/w. Section 49(3) and 49(4) of FEMA, 1999 who has imposed a penalty of Rs. 1,41,90,175/- on appellant M/s. Thirumalai Chemicals Ltd.

[3] Appeal No. 790/2004 has been filed challenging Adjudication Order No. ADJ-76/B/AAO/PKS/2004/1438, dated 27-1-2004, passed by Sh. P.K. Sinha, Addl. Commissioner of Customs and the Adjudicating Officer holding the appellant guilty of contraventions of Section 8(3) and 8(4) of FERA, 1973 r/w. Section 49(3) and 49(4) of FEMA, 1999 and consequently imposed a penalty of Rs. 5,69,11,840/- on appellant M/s. Thirumalai Chemicals Ltd.

[4] Since all the appeals have been filed by the same company against different adjudicating orders of the even dates involving identical facts and also alleging same contraventions and the grounds for challenge in all the four appeals are common, therefore, for the sake of convenience all the four appeals are being disposed of by a common order.

[5] Brief facts necessary for the disposal of the appeals are that in appeal No. 787/2004 it is alleged that RBI had forwarded the list of importers who had acquired foreign exchange from authorized dealers for the purpose of import of Benzyne but had failed to submit the evidence of import to their bankers. It is alleged that the appellants had acquired foreign exchange equivalent to Rs. 1,41,90,175/- and had failed to submit the evidence of import as required in Appeal 7A. 20 (Chapter-7) of Exchange Control Manual (ECM). The Enforcement Directorate, in view of the above issued a show cause notice on 14-5-2002 to the appellant company for the alleged contraventions of Section 8(3) and 8(4) of FERA, 1973 r/w. 7A. 20 (Chapter-7) of ECM r/w. Section 49 of FEMA, 1999. It is contended that in response to the SCN the appellant company failed to furnish the required bills of entries/information/documents. A personal hearing memo was also alleged to have been issued and thereafter reminders were also sent but the company did not respond to even three personal notices. In view of the above the Adjudicating Authority proceeded to decide the matter and held that neither the reply to SCN had been filed nor any evidence had been produced in defence before him, therefore; he held that the company had contravened the provisions of Section 8(3) and Section 8(4) of FERA, 1973 r/w. sub-section (3) and (4) of Section 49 of FEMA, 1999 and imposed a penalty of Rs. 1,41,90,175/- against the company.

[6] In Appeal No. 788/2004 also the facts are similar to that of Appeal No. 787/2004 and it has been alleged that the RBI had reported that the appellant company had acquired foreign exchange equivalent to Rs. 1,40,71,263/- and had failed to submit the evidence of import as required under Section 8(3) and 8(4) of FERA, 1973 r/w. 7A. 20 (Chapter-7) of ECM r/w. Section 49 of FEMA, 1999. A SCN was issued but no response was filed. Therefore, opportunity for personal hearing was given and two reminders were also sent, but nobody turned up. The Adjudication Authority proceeded to decide the matter and in view of the fact that the appellant had not furnished any documentary evidence in defence to prove that goods had duly arrived and despite opportunities for personal hearing and reminders failed to produce any evidence in rebuttal/reply of the requirements of the provisions alleged to have been contravened, therefore, on account of failure to produce any evidence the appellant was held guilty for contraventions of Section 8(3) and 8(4) of FERA, 1973 r/w. sub-section (3) and (4) of Section 49 of FEMA, 1999 and the Adjudicating Authority imposed a penalty of Rs. 1,40,71,263/- on the appellant company.

[7] In Appeal No. 789/2004 it is alleged that the company had acquired foreign exchange equivalent to Rs. 1,41,90,175/- but had failed to submit any evidence of import as required in Section 8(3) and 8(4) of FERA, 1973 r/w. 7A. 20 (Chapter-7) of ECM r/w. Section 49 of FEMA, 1999 and a penalty of Rs. 1,41,90,175/- has been imposed on the appellant company.

[8] Similarly, in Appeal No. 790/2004, it has been alleged that the company had acquired foreign exchange equivalent to Rs. 5,69,11,840/- and had failed to submit any evidence of import as required and the Adjudicating Authority has held the company guilty of contravention of Section 8(3) and 8(4) of FERA, 1973 r/w. 7A. 20 (Chapter-7) of ECM r/w. Section 49 of FEMA, 1999 and has imposed a penalty of Rs. Rs. 5,69,11,840/against the company.

[9] Aggrieved from all the four Impugned Orders which are exactly true copies of one another except change in the figure of amount involved for the alleged transactions and amount of penalties, the appeals have been filed contending that the company had opened LC from ICICI and Standard Chartered Banks and after importing goods had submitted the exchange control copies of bills of entries to the respective authorized dealers well in time. The company had received letters acknowledging the submission of exchange control copies of bills of entries from the banks. However, since the appellant company had shifted its office from Mittal Tower, Nariman Point to Thirumalai House, Plot No. 101/102, Sion-Matunga Estate, Scheme No. 6, Road No. 29, Sion (E), Mumbai and since M/s. Thirumalai Chemicals Ltd. is a large public limited Mumbai based company, therefore, whereabouts of the company could have been easily ascertained by the respondents or their authorized dealers. Further submission is that the appellant had informed authorized dealers about the change of address. It has been pleaded that the RBI had sent a list to ED of defaulters to whom foreign exchange had been released for exports but who had failed to furnish the proof of imports to the Banks (Authorized dealers). It has been contended that SCN was never received at the office of the appellants and also no communication from RBI/Banks seeking any information was ever received. Similarly, the appellants never received any notice for personal hearing or the alleged reminders thereof. It is contended that on 27-1-2004 the Adjudicating Authority passed the impugned order holding that the appellants had failed to produce any evidence before him regarding the actual imports against the remittances in question. Therefore, through the impugned Adjudication Orders the adjudicating authority imposed penalties holding the appellants guilty for the alleged contraventions. It has also been contended that the appellants learnt about the Impugned Order on 21-2-2004 telephonically from the Office of the Enforcement Directorate and received copies of the orders on 22-2-2004. The appellants also learnt that the summons were issued to the bank prior to the passing of the impugned order. However, bank authorities neglected the summons and did not inform the appellants nor filed any reply before the Adjudicating Authority. It has also been contended that the Adjudicating Authority has failed to give any particulars and reasons in the Impugned Order as to how it was concluded that the appellants had failed to submit the evidence of import in respect of the foreign exchange released to the company by the authorized agents. The Adjudicating Authority committed error in not affording reasonable opportunities to the appellants to represent and defend themselves, the orders were passed without due application of mind and the efforts made by the appellants were not taken into due consideration, which was incumbent upon the Adjudicating Authority. The authorized dealers it appears had wrongly informed the RBI about non submission of bills of entry, though the same had been received, which, might have resulted into inclusion of the name of the appellants in the list of defaulters. The Adjudicating Authority committed error in arriving at its conclusion without any documentary evidence or cogent evidence available in support at all. Therefore, it has been prayed that the Adjudication Orders dated 27-1-2004 be set aside and quashed.

[10] Shri Rahul Ray, advocate representing all the appellants has submitted that the appellants have been unduly harassed and prosecuted in the instant matters for no fault of theirs. The fact of the matter is that the appellants had timely filed the bills of entries as a proof of imports in respect of all the remittances sent by them in all the appeals to the authorized dealers. Thus no contravention of any of the provisions of FERA or FEMA is made out. Submission is that the office of the company had been shifted from Mittal Tower, Nariman Point to Thirumalai House, Plot No. 101/102, Sion-Matunga Estate, Scheme No. 6, Road No. 29, Sion (E), Mumbai in September, 1999. It appears that the alleged communications including the SCN and alleged notices for personal hearing and reminders thereof might have been sent at the Nariman Point address from which office the company had already shifted. Thus, no service of either SCN or personal hearing notices could be effected upon the appellants company, therefore, the appellants had no knowledge of the Adjudication proceedings. It has been submitted that had the summons or notices been served upon the appellants they would have definitely placed the true facts regarding timely submission of bills of entries as proof of the imports to the authorized dealers, before the Adjudicating Authority and the proceedings would have been dropped against them. However, since the service could not be effected and the Adjudicating Authority did not bother to ensure whether due service had been effected or not, therefore, he proceeded with the matter holding that no evidence in support of the fact that the goods had been actually imported against the foreign currencies released had been filed and the Adjudicating Authority imposed exorbitant penalties against the appellants. Submission is that there is no logic in the Impugned Order for arriving at the conclusion as to why the penalties equal to the amount of transactions involved were imposed. The amount of penalties imposed clearly reflect that there was no application of mind by the Adjudicating Authority. Further submission is that all the Adjudicating Orders impugned in the instant appeals are ex parte and are cryptic which are neither speaking nor any reasons for arriving at the conclusions have been given. The Impugned Orders in view of the fact that proof of timely submission of all the bills of entries in respect of all the transactions had been duly filed in respect of all the appeals and copies of all communications by the appellants to the authorized dealers (banks), by RBI to the authorized dealers and also to the officers of Enforcement Directorate to review the order have been filed, therefore, the appeals are not sustainable and are liable to be quashed. Since the Impugned Orders are devoid of any merits and have been passed illegally and are not sustainable, therefore, all the appeals deserve to be allowed. Reliance has been placed on the judgments of Hindustan Steel Ltd. v. State of Orissa, 1978 2 ELT (J159) (S.C.), Xerox Modi Corpn. Ltd. v. The Special Director , and Director of Enforcement v. M.C.T.M. Corporation Pvt. Ltd., 1996 2 SCC 471.

[11] Ms. Natasha Sarkar, legal consultant has defended the impugned order and has contended that show cause notices were dispatched to the appellants but they failed to appear or file any response to them. She has argued that the rules do not talk about the requirement of ensuring service upon the noticees. The plea that the company's office had shifted to other place and the communication sent could not be delivered to the appellants is wrong as no report to that effect was received in the office of Enforcement Directorate. Further submission is that the Adjudicating Authority sent notices of personal hearing to all the appellants and also sent reminders thereof. The appellants chose not to contest and place their case before the Adjudicating Authority. Further submission is that the Enforcement Directorate acted on the communication of the RBI which was based on the information submitted by the authorized dealers (banks) to the RBI wherein it was informed that the appellants had not filed evidence in the form of bills of entry of import against the foreign exchange acquired by them and remitted by them to various countries. Ld. legal consultant has further submitted that the Adjudicating Authority passed the impugned orders on the basis of available evidence and had no reason to doubt the veracity of the contentions of the Enforcement Directorate. The impugned orders are reasoned and self speaking though they may be copies of one another barring the figures of amount involved and the penalties imposed, however contraventions on the grounds alleged were clearly made out against the appellants. She has contended that though no fault can be found in the impugned orders, however, since the evidence in support of contentions by the appellants to the effect that timely proof of imports in the form of bills of entries were filed by them with the authorized dealers and was not filed by them and also it was not brought to the notice of the Adjudicating Authority that it was mistake/negligence on the part of the authorized dealers that they wrongly informed the RBI that the appellants had not furnished the proof of utilization in respect of the foreign exchange released to them. It has been contended that the evidence of alleged submissions of timely submitting bills of entries & communication with RBI & authorized dealers were not before the Adjudicating Authority, therefore, the evidence by the appellants filed in the appeals cannot be now considered by this Tribunal. In view of the above it will be proper that if the evidence filed on behalf of the appellants is to be considered it would be appropriate that the matter may be remanded as last resort to the Adjudicating Authority for consideration of the evidence filed by the appellants.

[12] We have considered the submissions of Ld. counsel for the appellants as well as Ld. legal consultant and are of the view that though the Civil Procedure Code, 1908 is directly not applicable in the proceedings before the Tribunal and the Tribunal can lay down its own procedure but simultaneously it is to be ensured that the principles of natural justice are not violated in any way. In the instant appeals it has been alleged that SCNs were issued to the appellants, however, no proof of the service upon the appellants has been filed. There is no proof of service of notices for personal hearing and their alleged reminders to the appellants as well. We are not in agreement with the submissions of Ld. Legal consultant that service upon the notice is not contemplated anywhere in the rules or regulations, in our view unless the communication is served upon the addressee he cannot be expected to appear and defend or contest his case. Thus in our opinion the principles of natural justice have not been adhered by the Adjudicating Authority in proceeding ex parte particularly when the offices of the company were shifted from Nariman Point to Matunga, Mumbai in 1999 prior to the alleged dispatch of notices to the appellants. Thus, service of SCNs or notices etc. for personal hearing could not have been deemed sufficient upon the appellants.

[13] The impugned orders are ex parte orders. The Adjudicating Authority has without due application of mind relied upon the contentions of the Enforcement Directorate and has imposed penalties equal to the amount which was reportedly released to the appellants without evaluating the facts and discussing even relied upon evidence of the enforcement. The penalties imposed appear to have been imposed arbitrarily and no reason to fix the quantum on the logic or formula has been disclosed.

[14] It has been contended on behalf of the appellants that in Appeal No. 787/2004 the appellants have filed copies of communications by RBI dated 21-12-2004 addressed to Deputy Director, Enforcement Directorate, Mumbai informing that there has been no lapse/FERA violations on the part of the company and the transactions were wrongly reported in BFE due to oversight of the bankers of the company. A request to review the decision regarding levy of penalty was also made by the RBI and directions to apprise the Appellate Tribunal suitably for withdrawal of the relevant orders passed against the company was also made has been filed. In addition to it the appellant has filed copy of letter dated 18-1-1997 sent to the ICICI bank on 18-1-1997 whereby the exchange control copy of two bills of entries towards the import of benzyne have been enclosed. The communication was duly received by the bank on 20-1-1997. Yet another copy of communication dated 18-1-1997 in respect of exchange control copy of two more bills and enclosing copy of the same to the ICICI bank has also been filed, which was duly received by the bank. Through Annexure 'B' the appellant has filed copies which were submitted to the bank and as annexure 'C' the appellant has filed communication by the ICICI bank dated 15-5-2004 to the RBI through which it has been informed that the bank had made two payments against the LC for which the company had submitted the proof of import on 20-1-1997 with a small shortfall and sought permission from the RBI to accept the bill of entry despite the shortfall.

[15] Similarly, in Appeal No. 788/2004 the appellant has filed copies of receipts of two bills of entry by the ICICI bank on 20-1-1997 and copy of bills of entries have been filed as Annexure 'A'. Yet another copy of receipt of two more bills of entry which were submitted on 18-1-1997 to the ICICI bank by the company have been filed and also confirmation of receipt of the copies of bills of entries in respect of the transactions by the ICICI bank to the RBI has been filed as Annexure 'C'

[16] In Appeal No. 789/2004 also the appellant has filed two communications both dated 18-1-1997 as Annexure 'B' duly acknowledged by ICICI bank of the receipt of the 4 bills of entry in connection with the import of benzyne. Copies of bills have also been filed and also communication by ICICI bank to RBI dated 15-5-2004 and also the communication by RBI of May, 2004 as Annexure 'E' confirming the receipt of the bills of entry by the bank.

[17] Similarly, in Appeal No. 790/2004 also proof of filing the bills of entry towards the import of orthoxylene in respect of 6 bills of entry were filed with the Standard Chartered Bank and were duly received, by the Bank on 9-12-1996 and copies of bill of entries ex-bond clearance home consumption have also been filed and the communication by the Standard Chartered Bank to the RBI and documentary evidence dated 12-5-2004 and the communication by RBI of May, 2004 confirming that the ICICI bank had confirmed that they had received EC copies of bills of entry in respect of the transactions have also been filed.

[18] From the above it is clear that the appellants had timely submitted the exchange control copies of bills of entries in respect of the transactions involved in all the 4 appeals however, the RBI was apparently not informed by the Banks that the appellants had filed the exchange control copies of bills of entries within the time. It appears that the banks, subsequently realized their mistake/negligence and RBI also realized that the proceedings ought not to have been taken against the appellants. Therefore, it advised Deputy Director, Enforcement Directorate to revise the decision and inform the Appellate Tribunal accordingly. It appears to be a case of gross negligence and extremely casual approach on the part of the authorized dealers to have supplied wrong information to RBI which has resulted in undue harassment and compelling them to incur heavy expenditure in litigation for almost long years involving courts for no fault on their part.

[19] Initially the appeals were dismissed by this Tribunal as they were filed beyond time and the Tribunal in view of the prevailing law dismissed the applications for condonation of delay and resultantly the appeals, where after the appellants challenged the order before the Hon'ble High Court which affirmed the judgment of the Tribunal. The appellant thereafter approached the Hon'ble Supreme Court which in Appeal Nos. 3191-3194/2011 [, : 2011 (268) E.L.T. 296 (S.C.)] held that the Appellate Tribunal can entertain the appeals after the prescribed period of limitation for filing appeal if it is satisfied that there was sufficient cause for not filing the appeals within the said period. In view of the same the orders passed by the Tribunal as well as by Hon'ble High Court were set aside and the matter was remanded to the Tribunal for fresh consideration.

[20] After the receipt of the record the delay was condoned by this Tribunal and applications for stay and waiver from pre-deposit of penalties were heard and disposed of. Against the order of dispensation also the appellants approached the Hon'ble High Court which set aside the order of this Tribunal and directed the Tribunal to hear the appeals on merits without insisting of pre-deposit.

[21] We see no reason to remand the matter back to Adjudicating Authority at this stage when parties have been litigating for a period of more than 11 years. The genuineness of the papers filed by the appellants as proof of due compliance of the requirement of filing of the exchange control copies of the bills of entry with the authorized dealer within time has not been disputed by the respondents. The appeals are continuation of the trial proceedings. We are convinced on the basis of evidence filed by the appellants in the instant appeals that they had timely submitted the exchange control copies of Bills of Entries to the respective authorized dealers (banks). We are also convinced with argument that it was negligence/mistake on the part of the authorized dealers in not reporting the due compliances to the RBI and instead furnished wrong information. The basic fault appears to us on the part of the banks but since they are neither parties in these appeals nor they have been afforded any opportunity to place their version before the Tribunal, therefore, we are not making any observations against them.

[22] As regards the role of respondents, Enforcement Directorate, we find that despite the communication by the Reserve Bank of India to the Deputy Director dated 21-12-2004 whereby it was informed that no lapse/FERA violations on the part of the company had been found and the transactions were wrongly reported in BFE due to oversight of the bankers and a request in view of the above was made to review the decision regarding the levy of penalty with further directions to apprise the Appellate Tribunal suitably for withdrawal of the relevant orders passed against the company, copy of which has been filed in the record of Appeal No. 787/2004. The Enforcement Directorate perused the matter and did not inform the Tribunal that no lapse/FERA violation on the part of the company has been found by the RBI and RBI has asked the Enforcement Directorate to withdraw the relevant order passed against the company. The appellants were dragged up to the Hon'ble Supreme Court in litigation, unnecessarily by the respondents. We would like to emphasize that Enforcement Directorate has not been created for the sole purpose of prosecuting the matters of alleged violations under FERA/FEMA but they are duty bound to assist the Tribunal and the Courts by placing the correct facts before them on the principle of fair play so that the parties get fair justice and the faith of the parties is not eroded from the judicial system. The Enforcement Directorate is an organ in the system of dispensation of justice and the way the matters in which no case was made out as per the communication of the RBI was persuaded, without discloser of the contents of the communication received by the Enforcement Directorate, the appellants had to suffer not only in terms of expenditure that might have been incurred in the litigation but also wastage of lot of valuable time of the appellants, Tribunal and Courts. The expenses incurred in litigation by the appellants may run perhaps in lakhs of rupees. However, we think it appropriate that for the failure to place the communication before the Tribunal and convey the contents in time the respondents be imposed a token costs in all the appeals for their conduct.

[23] In view of the above discussions the appeals deserve to be allowed with costs. While parting with the judgment we would like to record our appreciation for the sincere efforts made by Mr. Rahul Ray, counsel for the appellants and Ms. Natasha Sarkar, legal consultant.

ORDER

All the appeals are allowed with costs of Rs. 5,000/- each and the Adjudication Orders impugned herein:-

1. Adjudication Order No. ADJ-73/B/AAO/PKS/2004/1435, dated 27-1-2004

2. Adjudication Order No. ADJ-74/B/AAO/PKS/2004/1436, dated 27-1-2004

3. Adjudication Order No. ADJ-75/B/AAO/PKS/2004/1437, dated 27-1-2004

4. Adjudication Order No. ADJ-76/B/AAO/PKS/2004/1438, dated 27-1-2004

are set aside. The respondents are directed to pay a token cost of Rs. 5,000/- per appeal totalling Rs. 20,000/- to the appellants within a period of two months from the date of communication of this judgment. Copies of this judgment be placed on the record of Appeal Nos. 788 to 790/2004.

The Registrar is directed to send copies of this judgment to the appellants and respondents.

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