Delhi High Court
Silicon Graphics Systems India ... vs Special Director Of Enforcement & ... on 29 November, 2017
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Decided on: 29th November, 2017
+ CRL.A. 160/2016 & Crl.M.A. 2662/2016 (stay)
SILICON GRAPHICS SYSTEMS INDIA PRIVATE LIMITED
..... Appellant
Represented by: Mr. Rajiv Tyagi, Mr. Divakar
Kumar, Advs.
versus
SPECIAL DIRECTOR OF ENFORCEMENT & ORS
..... Respondent
Represented by: Mr. Amit Mahajan, CGSC for
UOI with Mr. Kunal Dutt, Adv.
CORAM:
HON'BLE MS. JUSTICE MUKTA GUPTA
MUKTA GUPTA, J. (ORAL)
1. Appellant imported certain equipments from its parent company
having its office at California, USA and applied to the Reserve Bank of
India for release of foreign exchange for remittances against the imports. It
is the case of the appellant that the documents of title to the imported goods
were routed through Citi Bank and upon receipt of the goods at the Indian
Port the appellant filed the Bills of Entry with the Customs Authorities for
clearance of the goods and the bankers' copy with the City Bank to remit the
foreign exchange in respect of the imports. Upon remittance being made
Citi Bank released the documents of title to the goods which were then filed
with the Customs Authorities for release of the goods from Indian customs.
According to the appellant Citi Bank was thus responsible for filing the
exchange control copies with the Reserve Bank of India.
2. The appellant contends that after more than 5-6 years of all the
equipments and spares being imported by the appellant, respondent issued a
memorandum dated 8th June, 2001 in view of the limitation under Section
14(3) of the Foreign Exchange Management Act, 1999 (in short FEMA)
repealing the Foreign Exchange Regulation Act, 1973 (in short FERA). On
10th April, 2002 a reminder was issued to the appellant alleging non-
submission of documentary evidence of imports into India to which
appellant replied to the respondents informing the non-receipt of the
Annexures. The appellant also applied to Citi Bank for providing the
necessary certificates and the certified copies of the Bills of Entry submitted.
The appellant submitted the two certificates provided by Citi Bank along
with the affidavits of their Managing Director with regard to the remittances
made against the Bills of Entry, the certificate of its Chartered Accountant
certifying that the foreign exchange had been duly utilized for the imports
and the list of its Directors also informing that the appellant was unable to
produce the original Bills of Entry for the imports made.
3. It is the case of the appellant that on utter non-application of mind
respondent issued a memorandum dated 31st May, 2002 holding against the
appellant in respect of 12 remittances for which the Bills of Entry had
allegedly not been filed. The appellant vide its letter dated 2 nd July, 2002,
31st July, 2002 and 31st October, 2002 sought further time to furnish the
copies of 12 Bills of Entries as Citi Bank was not cooperating. The
appellant filed with the respondent the certificate given by the Citi Bank
with respect to the remittances made against the 12 Bills of Entries issued
against the supporting documents. It also filed a list of Bills of Entries that
had been submitted to the Citi Bank for a value of ₹15,10,303.21. However
the Special Director of the respondent passed the adjudication order dated
26th September, 2003 holding that the appellant has failed to file the Bills of
Entry in respect of an amount of US$ 6,82,489.95 and imposed a penalty of
₹2,04,00,000/- upon the appellant and a further penalty of ₹50 lakhs on each
of its Directors being respondents No.2 to 5 in the present appeal.
4. Aggrieved by the adjudication order dated 25 th September, 2003 the
appellant filed an appeal before the Appellate Tribunal of Foreign Exchange
under Section 191 of the FEMA along with an application under Rule 10(1)
of the Foreign Exchange Management (Adjudication Proceedings and
Appeal) Rules, 2000 for dispensation with pre-deposit of penalty. The
application for dispensation of pre-deposit was dismissed in default by the
Appellate Tribunal on 9th February, 2010 as the learned counsel for the
appellant could not reach the office of the Appellate Tribunal in time due to
adverse weather. The appellant thus filed an application for recall of the
order dated 9th February, 2010 which was allowed and the matter was posted
for hearing.
5. Vide the order dated 12th November, 2015 the Appellate Tribunal
partly allowed the application of waiver of pre-deposit of penalty amount
and directed the appellant to deposit 10% of the penalty amount i.e. an
amount of ₹40,40,000/- and furnish credible security for the balance 50%
while failing to notice the negative net worth of appellant of more than ₹
350 million.
6. Thus, the limited issue in this appeal is whether the impugned order
dated 12th November, 2015 passed by the learned Appellate Tribunal
deciding the application for dispensation and directing appellant to deposit
10% of the penalty amount and to furnish a credible security for the balance
50% warrants interference.
7. Though learned counsel for the appellant has insisted that the present
appeal be treated as a civil appeal, however the said issue need not detain
this Court further in view of the decision of the Supreme Court reported as
(2010) 4 SCC 772 Raj Kumar Shivhare Vs. Assistant Director, Directorate
of Enforcement and Anr.
8. The primary ground on which the appellant seeks modification of the
order impugned is financial hardship to the appellant and otherwise financial
credibility of the appellant based on its assets. In M/s. Hindustan Steel Ltd.
Vs. The State of Orissa (1969) 2 SCC 627 dealing with the question of
imposition of penalty Supreme Court noted:
"Penalty will not also be imposed merely because it is lawful to
do so. Whether penalty should be imposed for failure to
perform a statutory obligation is a matter of discretion of the
authority to be exercised judicially and on a consideration of all
the relevant circumstances. Even if a minimum penalty is
prescribed, the authority competent to impose the penalty will
be justified in refusing to impose penalty, when there is a
technical or venial breach of the provisions of the Act or where
the breach flows from a bona fide belief that the offender is not
liable to act in the manner prescribed by the statute."
9. It is trite law that at the stage of deciding the application for
dispensation of the pre-deposit the Tribunal is not required to embark upon a
detailed inquiry to find out the merits of the appeal as held by this Court in
Priya Shah Vs. Enforcement Directorate (2009) 93 SCL 96 (Delhi):
"The appellate authority is not required to embark upon a
detailed inquiry to find out whether the stand of the appellant is
on a strong footing or not. What is required to be considered at
that juncture is as to whether the appellant has made out a
prima facie case in his favour, the balance of convenience qua
the deposit or otherwise lies in whose favour and whether the
deposit of the duty demanded is likely to cause undue hardship
to the appellant."
10. On the one hand the appellant contends its financial credibility and on
the other hand undue economic hardship. The Tribunal has waived off
substantial pre-deposit and has directed only 10% of the penalty amount to
be deposited with a surety for the balance 50% which cannot be said to be
undue hardship on the appellant. Considering its own claim of financial
stability, on the facts of the case this Court finds no error in the impugned
order.
11. Appeal and application are accordingly dismissed.
(MUKTA GUPTA)
JUDGE
NOVEMBER 29, 2017
'ga'
