Penalty under FEMA

By | August 14, 2015

Penalty under FEMA

Penalty that can be imposed under FEMA

The penalty can be upto thrice the sum involved in such contravention where the amount is quantifiable. If the amount is not quantifiable, penalty upto Rs. two lakhs can be imposed. If contravention is of continuing nature, further penalty upto Rs. 5,000 per day during which the contravention continues can be imposed. – section 13(1).

The Adjudicating Authority adjudicating the contravention can also order confiscation of any currency, security or any other money or property in respect of which the contravention has taken place. He can also direct that foreign exchange holdings of any person committing the contravention shall be brought back to India or retained outside as per directions. – section 13(2).

The term ‘property’ in respect of which contravention has taken place shall include deposits in bank or Indian currency where the contravening property has been converted into bank deposits/Indian currency. It also includes any other property which has resulted out of conversion of the contravening property. – section 13(2). -.- In other words, if the contravening property is converted into bank deposits, Indian currency or another property, such deposit/Indian currency/other property can also be confiscated.

In addition to imposition of penalty, the foreign currency can be confiscated. Penalty as well as confiscation of currency both are permissible – S Baskar v. Enforcement Directorate (2011) 271 ELT 65 (Karn HC DB).

Confiscation of foreign currency – If foreign currency is acquired illegally, confiscation is justified, but redemption of foreign currency on payment of fine in lieu of confiscation should be permitted –Felix Dores v. CC 2000(118) ELT 639 = 91 ECR 514 (CEGAT) * Kishin Shewaram v. CC 2002(140) ELT 225 (CEGAT) – followed in Philip Fernandes v. CC 2002(146) ELT 180 (CEGAT), where it was held that in absence of special circumstances, absolute confiscation is not justified and redemption fine should be imposed.

Contravention by Companies/firm

A person who was responsible for conduct of business of the Company/firm shall be deemed to beguilty of contravention committed by the Company. Burden is on him to prove that offence was committed without his knowledge. Any other officer, director or partner will also be deemed guilty of contravention, if it is proved that contravention has taken place with his consent or connivance or is attributable to his negligence. – section 42.

In Girdhari Lal Gupta v. D N Mehta – AIR 1971 SC 2162, it has been held that in case of partnership firm, only partner in overall control of day-to-day business of the firm can be held to be ‘person in-charge’ of and responsible for business of the firm. Further, the burden of proof that the partner was in overall control of business lies on the prosecution. – followed by FERAB in Forward Fashion’s case decided on 2-7-86 – quoted and followed in Batra v. Director of Enforcement – (1995) 80 Taxman 95 (FERAB).

Proceedings can continue even after death or insolvency

Right, obligations, proceedings or appeal shall not abate by reason of death or insolvency of the person liable. Proceedings of penalty can be continued by or against legal representative/official assignee/official receiver. They can file an appeal also. The legal representative is liable only to the extent of the inheritance or estate of the deceased. [section 43].

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