Union of India Vs AGS Infotech Ltd. (Appellate Tribunal Under SAFEMA Delhi)
SAFEMA Tribunal Refuses To Enhance FEMA Penalty – Quantum Of Penalty Is Discretionary & Not Mandatory Up To Maximum Limit
The Appellate Tribunal under SAFEMA dismissed the appeal filed by the Enforcement Directorate (ED) seeking enhancement of penalty imposed on M/s AGS Infotech Ltd. and its directors for contravention of provisions of the Foreign Exchange Management Act (FEMA).
The case arose after investigation revealed that AGS Infotech Ltd. remitted about USD 4.141 million (≈ ₹18.76 crore) to a UAE company (Bluetronics FZE LLC) purportedly for import of software. However, no software was actually imported, and the funds were subsequently routed to another company, Nexxoft Infotel Ltd., indicating misuse of foreign exchange obtained from bank loans.
The Enforcement Directorate alleged violation of:
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Section 10(6) FEMA read with Foreign Exchange Regulations for misuse of foreign exchange obtained from an authorised dealer, and
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Section 4 FEMA for acquisition and transfer of foreign exchange abroad.
The Adjudicating Authority had already imposed penalties aggregating about ₹5.14 crore on the company and its directors. Dissatisfied with the quantum, the ED filed an appeal seeking enhancement of penalty.
Rejecting the ED’s appeal, the Tribunal held:
