Evasion of forex dues can now land you in jail

Business

oi-Sneha

By Sneha B K

Published: Wednesday, April 24, 2013, 16:30 [IST]

The Enforcement Directorate (ED), for the first time in 14 years, has recently arrested a Surat-based diamond trader for "wilfully" evading forex duty penalties to the tune of Rs 3.99 lakh under section 14 of the Foreign Exchange Management Act (FEMA), a civil law where arrest and prison procedures are never heard of.

"This is the first time since 1999 that the agency has arrested and sent to jail someone in a case of foreign exchange violations. More such orders against wilful and chronic defaulters are in the offing across the country," a senior official dealing with FEMA cases said.

The FEMA, enacted in 1999, is implemented by the ED in the country and as compared to the stringent anti-money laundering law (the Prevention of Money Laundering Act) the forex contravention cases are treated as civil in nature.

The ED action on the trader, in Gujarat's Surat, came in a case where the diamond trader illegally transferred USD 60,000 abroad in alleged violation of FEMA laws.

The competent authority of the FEMA sent the businessman to three months in jail after the ED made a case saying that a number of FEMA penalty notices were not honoured by the trader despite having financial resources to do so.

The agency has now decided to take help of this rarely used section 14 of the Act in order to ensure compliance in these cases and reduce the pendency of these violations piling up over the years.

The section 14 of FEMA stipulates that "if any person fails to make full payment of the penalty imposed on him under section 13 within a period of 90 days from the date on which the notice for payment of such penalty is served on him, he shall be liable to civil imprisonment."

The top brass of the agency has also directed the agency's offices in the country to select such chronic default cases of forex duty violations and take strict action.

"However, a defaulter under these provisions is only sent to a civil prison for a maximum of six months. The civil prisoner does not have many restrictions and strict regime in the jail as compared to a criminal prisoner. The defaulter can settle the amount and walk free before the expiry of the jail term," an official explained.

PTI