Judgment
1. This appeal is directed against the Adjudication Order No. 626/Adj /93 / AD/KC, dated 29-12-1993 passed in adjudication proceedings held in pursuance of show-cause notice No. T-4/34/DZ/89-SCN-V1, dated 11-4-1989. The appellant has been held guilty of the charges of contravention of sections 16(1)(a), 14, 8(1) and 9(1)(a) of the Foreign Exchange Regulation Act, 1973 ('the Act'). All the charges have been found to be substantiated and a cumulative penalty of Rs. 52,000 has been imposed for the same. The appellant has complied with the directions made in this Board's order of 31-9-1995 disposing of dispensation applications in this and other related appeals of the appellant. This order disposes of Appeal No. 102 of 1994 on merits.
2. The charges as made out in the Show Cause Notice were that Process Instrumentation, the proprietary concern of Shri Mittal, the appellant herein, earned a commission of DM 28560.79 from Siegfried Theimer Gmbh, Hamberg; that during the period from 1983 to 1986. Process Instrumentation otherwise transferred foreign exchange equivalent to DM 15346.43, out of the said amount of DM 28560.79, to the said Siegfried Theimer Gmbh, in lieu of purchases from them during the period from the year 1985-86, thereby contravening the provisions of sections 8(1) and 9(1)(a) of the Act; that during the period 1985-86, Process Instrumentation owned/held foreign exchange equivalent to DM 15,346.43 being the amount included in the total amount of commission of DM 28560.79, which it failed to offer or caused to be offered for sale in accordance with section 14 read with Government notification dated 15-6-1977 and, thus, contravened the said provision; that Process Instrumentation who had a right to receive foreign exchange of DM 13214.36 (DM 28560.79-15346.43 = 13214.36) from the said Siegfried but it took or refrained from taking any action which had the effect of securing that the receipt of the said foreign exchange is delayed, thereby contravening the provisions of section 16(1)(a).
3. The learned Adjudicating Officer held Shri R.P. Mittal, the appellant, guilty of all charges and imposed a cumulative penalty of Rs. 52,000. A similar penalty of Rs. 52,000 has been imposed on Process Instrumentation apparently assuming it to be company as defined in the Explanation under section 68 of the Act.
4. I have carefully gone through the charges made in the show-cause notice and the impugned order including the findings arrived at by the learned Adjudicating Officer. In my opinion, the order, on face of it, is untenable for more than one reasons.
5. At the outset it is to be noted that the Department had framed separate charges in the SCN and the learned Adjudicating Officer has referred to each of those charges while giving his findings. In the circumstances, it is not permissible in law to impose a cumulative penalty without indicating quantum of penalty for each charge of contravention. In view thereof, the impugned order as to the penalty is not legally sustainable.
6. It is seen from the impugned order that the appellant had claimed that the entire amount of commission earned by him has already been received in India through normal banking channel and he produced four certificates of remittances issued by the banks. The amounts received in Danish currency were for a total amount of DKR 59,403.62 equivalent to DM 14850. The other two amounts were in the German currency of DM 4350 and DM 4,712.26. Thus, the total amount remitted by way of
commission is DM 29,058.26 as against DM 28,560.79 earned by way of commission. The minor excess in the two figures may be due to fluctuation in exchange rates. As regards the amount of DM 15,346.43, the allegation is apparently based on the entry in the credit note. It was explained by the appellant that this entry was made because the appellant was not liable to pay for the sample received from the foreign company for which they had earlier made a debit entry against the appellant. When the matter was discussed with the representative of the foreign firm, the entry was reversed. The appellant submitted that the total amount receivable by the appellant by way of commission had been remitted. It is not disputed that apart from the credit note, there is no other evidence of making the payment of DM 15,346.43. As the total amount of the commission of DM 28,560.78 had actually been remitted and the appellant had produced evidence to prove the remittance, the question of payment of the amount of DM 15,346.43 out of the said amount of DM 28,560.79 does not arise at all. For the same reason, there can be no question of transfer of the amount of DM 15,346.43 from the said amount of DM 28,560.79. The findings of contravention of sections 8(1) and 9(1)(a) of the Act are, therefore, not tenable and are liable to be set aside.
7. As regards the finding of contravention of section 14, read with Government notification of 15-6-1977, the charge itself cannot be framed on the facts alleged in the SCN. The entry in the credit note neutralises the amount earlier debited against the appellant. Therefore, he had no right to receive the said amount. It is not disputed that the amount of commission earned by the appellant remained with Siegfried. The credit note gave the appellant only a right to receive the amount mentioned therein if there is no dispute between the parties in respect of the entries therein. The appellant, by virtue of the credit note, did not become the 'owner or holder of foreign exchange'. In view thereof, the provisions of section 14 were not applicable to the facts as alleged and the charge made thereto is totally misconceived.
8. The proceedings under section 51 in respect of the charge of contravention under section 16(1)(a) were misconceived as there is no evidence that the RBI has given any direction under section 16(2) for the purpose of securing the receipt of the amount of foreign exchange. It has to be borne in mind that the consequences of non-compliance of section 16(1)(a) are expressly laid down in section 16(2) itself and, therefore, the general provision of section 51 will be attracted merely on non-compliance of the requirement of section 16(1)(a). This view has consistently been taken by this Board while following the judgment of the Madras High Court in M.O.M Corpn. (P.) Ltd. v. Director of Enforcement AIR 1989 Mad. 141.
9. Moreover, in absence of any specific period under section 16(1)(a) within which the foreign exchange is required to be received, it is difficult to sustain the charge of delay. The learned Adjudicating Officer failed to appreciate that the question of delay cannot be established unless the date due for receipt of the amount is established. The date of receipt of the amount can be established by looking into the agreement between the parties in terms of which their respective obligations and rights in respect of payment and receipt of the amount can be ascertained. There was no evidence of any such agreement on record of the learned Adjudicating Officer.
10. In view of the above, the findings of contravention of sections 16(1)(a), 14, 8(1) and 9(1)(a) or any of them cannot be sustained. The impugned order is, therefore, liable to be set aside.
11. The learned Adjudicating Officer has erred in law in treating Process Instrumentation, the sole proprietary concern of Shri Mittal, as a company as defined in the Explanation under section 68. Process Instrumentation is merely the business name under which its sole proprietor Shri Mittal carried on his activities and not any AOP. The penalty imposed on Process Instrumentation is, therefore, liable to be set aside.
12. In the result, the appeal is allowed and the impugned order is set aside as against Process Instrumentation and its proprietor Shri R.P. Mittal. The respondents are directed to refund to the appellant the entire amount deposited by him by way of pre-deposit within 45 days of the date of this order.