Allowed

FPA-FE-5-MUM/2016 of M/s. Ingram Micro India (P) Ltd. v/s The Special Director Directorate of Enforcement, Mumbai

ATFP4 May 2018FPA-FE-5-MUM/2016

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed an appeal against an order imposing a penalty of Rs. 14 lakhs for FEMA contravention. The court set aside the impugned order, holding that the appellant was not liable for failing to produce original Bills of Entry from 2000 due to their destruction, ruling that photocopies with customs endorsement were sufficient and no penalty was warranted for the technical breach

What did the court decide?

The impugned order passed by the Adjudicating Authority is set aside and the appeal is allowed.

FPA-FE-5-MUM/2016 of M/s. Ingram Micro India (P) Ltd. v/s… — Company and Corporate | ATFP (2018)

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APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT AT NEW DELHI

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Date of Decision:-04.05.2018

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MP-FE-42/MUM/2017(Misc.) &

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FPA-FE-5-MUM/2016

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M/s. Ingram Micro India (P) Ltd.

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… Appellant

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Versus

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The Special Director Directorate of Enforcement, Mumbai

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… Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant : Shri C.D. Mulherkar, Advocate

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For the respondent	: Shri Pankaj Yadav,
	Legal Consultant

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CORAM

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JUSTICE MANMOHAN SINGH : CHAIRMAN

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JUDGEMENT

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MP-FE-42/MUM/2017(Misc.) &FPA-FE-5-MUM/2016

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The above-mentioned appeal has been filed against the Order no. ADJ/01/B/JD/SK/2016/FEMA/204 dated 2^nd March, 2016 passed by the Adjudicating Authority who imposed the penalty against upon the appellant for a sum of Rs. 14,00,000/- (Rupees Fourteen lakhs only) for contravention of USD 306739 (Equivalent to Rs.1,38,12,725/-). The relevant period of contravention for the admitted case of the respondent is for the year 2000. The proceedings for adjudication under Section 13 of the FEMA, 1999 were initiated on 28^th March, 2013 i.e. more than 12 years.

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It appears from the record that based upon certain information provided by the Reserve Bank of India, a Notice dated 21.11.2002 was issued by the FPA-FE-5/MUM/2016 Page 1 of 9

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Page 1 of 9

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Enforcement Directorate (ED) seeking the Exchange Control Copies of certain Bills of Entry. The appellant is not aware of what transpired thereafter.

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On 05.07.2012, a notice was issued to Godrej & Boyce Mfg. Co. Ltd. (and not to the appellant) for furnishing documentary evidence towards import of goods for certain remittances, including five (5) remittances pertaining to the appellant, listed below:-

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S. No.	Bank	Curr- ency	Indian Value(Rs.)	Foreig Value ($)	Date of remittance	Ref. No.
1.	HDFC Bank	US$	319054.37	6849.90	15Jan 2001	6010150730
2.	HDFC Bank	US$	1708177.30	36554.19	07 Dec 2000	6003420723
3.	HDFC Bank	US$	7520714.00	171713.66	26June2000	6001481543
4.	HDFC Bank	US$	13475989.00	299533.00	07 Aug 2000	6001751435
5.	HDFC Bank	US$	336736.38	7206.00	07 Dec 2000	6003420722

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By its letter of 16.07.2012, Godrej & Boyce Mfg. Co. Ltd. informed the ED that the operations of the appellant were independent and the appellant should be contacted in the matter. The details regarding the appellant sought by the ED were provided by Godrej & Boyce Mfg. Co. Ltd. by its letter dated 27.09.2012.

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A letter dated 11.10.2012 was then issued by the ED to the appellant asking it to provide the Bills of Entry for the remittances listed in paragraph 3 above.

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By its letter dated 07.11.2012, the appellant, after obtaining confirmation from the authorized dealer was able to provide documents pertaining to remittances at serial Nos. 1&2 of the table in paragraph 3 above.

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FPA-FE-5/MUM/2016

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Page 2 of 9

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As regards the remaining three remittances, the appellant informed the ED that as the matter pertained to more than 13 years earlier, the appellant was not in a position to produce the documents.

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On 28.03.2013, the Assistant Director filed a complaint under section 16(3) of the FEMA regarding the remittances at S. No. 3, 4 and 5 of the table in paragraph 3 above i.e. regarding the following documents:-

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S. No.	Bank	Curr- ency	Indian Value(Rs.)	Foreig Value ($)	Date of remittance	Ref. No.
1.	HDFC Bank	US$	7520714.00	171713.66	26June2000	6001481543
2.	HDFC Bank	US$	13475989.00	299533.00	07 Aug 2000	6001751435
3.	HDFC Bank	US$	336736.38	7206.00	07 Dec 2000	6003420722

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The Adjudicating Authority issued a Show Cause Notice No. T-4/8B/JD/(SB/2013 to the appellant requiring them to show cause in writing within 30 days as to why adjudication proceedings as contemplated under section 13 of Foreign Exchange Management Act, 1999 should not be held against the appellant on the basis of the aforesaid complaint.

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During the adjudication proceedings, the appellant sent a letter dated 09.04.2014 to the concerned authorized dealer, HDFC Bank, requesting them to provide the appellant with copies of remittances listed in paragraph 13 above.

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By its letter dated 29.05.2014, HDFC Bank informed the appellant that “ As a practice the bank maintains data within a span of 8-10 years post which data is purged and documents trashed. The above transactions could not be

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FPA-FE-5/MUM/2016

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Page 3 of 9

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traced in our systems, either on account of data truncation or the bill reference being incorrect .”

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After sustained efforts and going through all the old documents, the appellant was able to trace the copies Copy of Bill of Entry for US$ 171,713.66 (S.No.1 in the table in paragraph 8 above). These documents were submitted before the Adjudicating Authority vide letter dated 10.02.2016 (submitted on 11.02.2016), including copies of Bill of Entry No.646930 dated 13.06.2000 and TR6 Challan No. 98035315 dated 21.06.2000). As regards the remittance of US$ 7,206 (S.No.3 in the table in paragraph 8 above), the appellant was unable to trace any documents and requested the Adjudicating Authority to condone the non-submission of documents in this regard.

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The Adjudicating Authority accepted the copy of the Bill of Entry regarding the remittance of US$ 171,713.66 as the appellant was able to produce the original „out of charge document‟ issued by Indian Customs but refused to accept the coy of the Bill of Entry with respect to US$ 299,533 on the ground that the original was required to be produced.

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By its letter dated 22.02.2016, the appellant requested the Deputy Commissioner of Customs for the issue of certified duplicate copy of the Bill of Entry with respect to remittance ofUS$ 299,533. The Deputy Commissioner of Customs verbally informed the appellant that tracing a Bill of Entry for a period prior to 2006 would take a long time and that there was no certainty whether it would be traced.

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It is admitted position that on 02.03.2016, the appellant appeared before the Adjudicating Authority and requested for further time and attempted to submit a letter dated 29.02.2016 in this regard along with a copy of the request made to Customs department for certified duplicate copy of the Bill of Entry regarding remittance of US$ 299,533.

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FPA-FE-5/MUM/2016

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Page 4 of 9

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The case of the appellant is that on 3^rd March, 2016 when the appellant counsel admitted to submit the letter, as directed, he was informed that the impugned order had already been passed. The said letter was not taken on record. After receiving the order, the present appeal has been filed.

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It is not denied by the respondent that the proceedings were initiated after more than 13 years, therefore, the appellant could not produce the original Bill of Entry of one remittance. It is submitted by the counsel for the respondent that, no limitation act would apply in the absence of any provision of the Act, even otherwise, there is some correspondence of 2002 onwards between the parties.

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It is settled law that non-provision of the original Bills of Entry does not constitute a violation of FEMA (Sunil Engineering Corporation v Union of India (117) 2005 DLT 525 and Themis Agencies v Union of India AIR 2007 Bom 144. This is more so, when at the time of the import ( in 2000), FEMA itself did not impose any obligation on the importer to produce the original exchange control copy of the Bill of Entry nor did it impose any penalty for non-furnishing of the original exchange control copy of the Bill of Entry.

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Section 10(6) of the FEMA is attracted only when the person who has acquired or purchased foreign exchange does not use it for the purpose for which he declared it was being acquired/purchased or uses it for any other purpose for which purchase/acquisition of foreign exchange is not permissible. Therefore, it was to be shown by the complainant, by way of evidence and intention of a party, that the appellant had used the foreign exchange for a purpose other than that declared or used it for any impressible purpose, which the complainant failed to do with mala fide intention in order to conceal the transaction. Non furnishing of original Bill of Entry is not an offence under section 10(6) of the FEMA as held various High Courts, in case after the lapse of long period of time where the respondent slept having full knowledge, the some benefit of doubt would go in favour of the party concerned particularly FPA-FE-5/MUM/2016 Page 5 of 9

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the party was carrying out genuine transaction and had been disclosing the same.

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The burden of demonstrating that the appellant had used the foreign exchange for a purpose other than that declared (or used it for any impressible purpose) lay on the ED and that the appellant may not be in position to produce on the record, particularly after a delay of more than 13 years after the remittance took place, more so when the none of the persons who were incharge of and responsible for the affairs of the appellant (at the time when the alleged contravention occurred in 2000) are available nor is the complete or original record pertaining to the 13 year old transaction available with the appellant.

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Even otherwise, it is well settled law that non-filling of the original of the Bill of Entry is only a procedural irregularity and does not amount to a contravention of section 10(6) of FEMA, more so when the fact of import is not disputed, as evidenced from the endorsement of the customs authorities in the photocopy of the Bill of Entry submitted by the appellant.

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There is no law that required the appellant to maintain original documents for a period of 12 years after the remittance took place. Even financial statues such as the Income Tax Act only require maintenance of records for a period of 7 years.

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Even an authorized dealer of foreign exchange is only required to maintain its records for a period of one year from the date of their verification. Consequently, the authorized dealer in the present case, i.e. HDFC Bank, was also unable to provide any documents when requested by the appellant.

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There is no legal impediment whatsoever in the Adjudicating Authority accepting the photocopy of the Bill of Entry in case the original is lost and/or not available/traceable. In this regard, Section 65 (c) of the Indian Evidence Act, 1872 (“Evidence Act”) provide that:

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FPA-FE-5/MUM/2016

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“Secondary evidence may be given of the existence, condition or contents of a document in the following cases:

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(a) ……

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(b) ……

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(c) When the original has been destroyed or lost, on when the party offering evidence of its contents cannot, for any other reason not arising

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Section 63 of the Evidence Act further provides that secondary evidence includes copies made from the original by mechanical processes which in themselves insure the accuracy of the copy and copies compared with such copies (i.e. photocopies).

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Therefore, the Adjudicating Authority erred in rejecting the photocopy of the Bill of Entry tendered by the appellant regarding the remittance of US$ 299,533 (which was signed/endorsed by the customs), more so when the appellant demonstrated to the Adjudicating Authority that the original has been destroyed or lost without any default or negligence on the part of the appellant and the same cannot be found within a reasonable time despite due diligence/ efforts on the part of the appellant. The benefit of doubt would go in favour of the appellant in view of facts of this case.

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Yet in the case of Themis Agencies v Union of India reported in AIR2007 Bom 144, “ Section 8(4) of FERA does not require that the person acquiring the foreign exchange must furnish the Exchange Control copy of the bill of entry to establish that the goods purchased by utilizing the foreign exchange has been brought into India. Therefore, it is open to the person acquiring foreign exchange to establish that the goods have been brought into India by any other means. In the present case, the goods purchased by the appellant by remitting foreign exchange have actually arrived in India and the same were cleared for warehousing. It is admitted that out of the three consignments, one consignment has been cleared by the appellant on payment of requisite customs duly and

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FPA-FE-5/MUM/2016

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other charges. The remaining two consignments have been auctioned by the Customs/CWC as the appellant failed to clear the goods within the bond period and the authorities have recovered the customs duty and other charges payable on the two consignments. In these circumstances, it cannot be said that the appellant has failed to prove that the goods purchased by remitting the foreign exchange have been brought into India.

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The photocopy of the Bill of Entry provided by the appellant carries the signature and endorsement of the relevant customs officer, clearly evidencing that the relevant import has taken place.

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It is well settled by the Hon‟ble Supreme Court in the case of Hindustan

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Steel Ltd v State of Orissa (1972) 83 ITR 26 that a penalty will not be imposed for a mere technical breach or even because it is lawful to do so unless the party on whom the penalty is imposed, acts in deliberate defiance or the law or is guilty of contumacious or dishonest conduct or acts in conscious disregard of the law, none of which are present in the present case. On the contrary there is no violation of section 10(6) or any other provisions of FEMA or regulations thereunder and the current management of the appellant (which has taken over the affairs of the appellant 12 years after the alleged contravention in 2000), has all along acted in a bona fide manner and is not guilty of any contravention or any dishonest conduct.

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By Order dated 02.02.2018, the interim application of the appellant was allowed and thereafter the present appeal was heard. For the above such facts and reasons, the order passed by the Adjudicating Authority is not sustainable in law.

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