Fomento Resources Pvt. Ltd. Vs Special Director Directorate of Enforcement (Appellate Tribunal Under SAFEMA Delhi)
FEMA Penalty in Iron Ore Export Case Partly Upheld-Alleged Under-Invoicing via Overseas Commission – Tribunal Reduces Penalty & Drops Charges for LTC Consignments
The SAFEMA Appellate Tribunal partly allowed appeals filed by M/s Fomento Resources Pvt. Ltd. & its Directors against FEMA penalties imposed for alleged under-invoicing of iron ore exports through discounts linked to overseas “protective agent” commissions. The Enforcement Directorate alleged violation of s.7 & s.8 of FEMA on the ground that commissions paid abroad formed part of the export value which was not declared or repatriated.
The Tribunal held that engagement of protective agents & negotiated price reductions indicated that part of the export value may have been suppressed, especially in spot contracts. Reliance was placed on the Director’s statement admitting dis counts from initial offers & voluntary payment before the Customs Settlement Commission, which weakened the exporter’s defence. However, for consignments under long-term contracts where pricing was formula-based, the Tribunal found limited scope for manipulation & dropped related charges.
It was further held that penalty u/s 13 of FEMA is civil in nature & does not require proof of mens rea. While invocation of s.8 along with s.7 was held incorrect, liability under s.7 remained. Directors were held responsible u/s 42 as persons in charge of business. Considering proportionality & prior customs settlement, the Tribunal substantially reduced penalties to ₹30 lakh on the company & ₹3 lakh each on the directors.
FULL TEXT OF THE ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
This Order disposes of the Appeals Nos. FPA-FE-52/GOA/ 2020 filed by M/s Fomento Resources Pvt. Ltd. (erstwhile M/s Prime Minerals Pvt. Ltd.), FPA-FEsafe-53/GOA/2020 filed by Shri Ambar Timblo, Director and FPA-FE-54/GOA/2020 filed by Shri Apoorva Misra, Director, against the Order No. Adj/04/B/SDE/ SK/WR/2020 dated 20.03.2020 (Impugned Order), passed by the Special Director, Directorate of Enforcement, Mumbai. The Ld. Adjudicating Authority (AA) imposed the penalty of Rs. 3,00,00,000/- on the Appellant Company M/s Fomento Resources Pvt. Ltd., vide the Impugned Order for the contravention of Section 7 of the Foreign Exchange Management Act, 1999 (FEMA) read with Regulation 3, 9 & 13 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 and Section 8 of the FEMA read with Regulation 3 of Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulation 2000, arising due to non-realization of the export proceeds to the extent of commission of the amount Rs. 29,19,04,657/- (USD 59,47,320) paid to the overseas agents. Penalty of Rs. 30,00,000/- was imposed on the Appellant Shri Ambar Timblo, Director and Rs. 30,00,000/- was imposed on the Appellant Shri Apoorva Misra, Director for the aforementioned contraventions in terms of Section 42 of FEMA.
