Dismissed

FPA-FE-07/MUM/2015 of M/s Sushil Sales Corporation v/s The Deputy Director Directorate of Enforcement, Mumbai

ATFP20 Mar 2018FPA-FE-07/MUM/2015

Case brief

AI extract

What is this about?

The Appellate Tribunal held that an appeal against an adjudication order passed by a Deputy Director of Enforcement in a foreign exchange contravention case must first be filed before the Special Director (Appeals) under Section 17 of FEMA, and is not maintainable directly before this Tribunal.

What did the court decide?

The appeal filed directly before the Tribunal is dismissed as not maintainable; the matter should have been initiated before the Special Director (Appeals).

FPA-FE-07/MUM/2015 of M/s Sushil Sales Corporation v/s The… — Company and Corporate | ATFP (2018)

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APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT AT NEW DELHI

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Date of Decision:- 20.03.2018

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FPA-FE-07/MUM/2015

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M/s Sushil Sales Corporation … Appellant Versus The Deputy Director Directorate of Enforcement, Mumbai … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant : None For the respondent : Shri Prashant Pandey Legal Consultant CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN

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JUDGEMENT

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FPA-FE-07/MUM/2015

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The present appeal has been filed against the order dated 29.03.2014 passed by the Deputy Director of Enforcement.

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The operative part of the order reads as under:

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“Ample opportunities in the form of Show Cause Notice No. T-4/869/B/DD(VS)/BE/2002 dated 22.05.2002 and Call Notices dtd. 14.2.14, 25.03.14 & 27.03.2014 were given to M/s Sushil Sales Corporation, Mumbai and Mangalore, Karnataka to submit the required evidence regarding utilization of the foreign exchange remitted for the purposes it was acquired but they have failed to submit any such evidence either in response to the SCN or at the

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FPA-FE-07/MUM/2015

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time of personal hearing given to them. This leads to the conclusion that the subject imports have not taken place and thereby not utilizing the said foreign exchange acquired by M/s Sushil Sales Corporation, Mumbai for the imports of goods for which it was acquired which is a contravention of the provisions of Section 8(3) & 8(4) of FERA, 1973 read with Section 49(3) & (4) of FEMA, 1999. I am therefore, satisfied that the charges against M/s Sushil Sales Corporation, Mumbai are established and proved beyond reasonable doubt. I, therefore, impose a penalty of Rs. 15,00,000/- (Rupees Fifteen Lakhs Only) on M/s Sushil Sales Corporation, Mumbai, in terms of the powers conferred upon me under Section 50 of FERA, 1973 read with Section 49(3) & (4) of FEMA, 1999.

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The penalty of Rs. 15,00,000/- (Rupees Fifteen Lakhs Only) on M/s Sushil Sales Corporation, Mumbai should be deposited in the office of the Joint Director, Directorate of Enforcement, 2^nd Floor, Mittal Chambers, Nariman Point, Mumbai-400 021 by means of Demand Draft/Pay Orders drawn in favour of the DDO A/c, Directorate of Enforcement, Mumbai, payable at Mumbai, within 45 days from the date of receipt of this Adjudication Order. While depositing the penalty, this Adjudication Order No. and date should be quoted clearly.

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No one appears on behalf of appellant when the matter was listed for hearing.

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The main submission is that the appellant has filed the appeal before this tribunal cannot be entertained as it ought to have filed before Special Director who alone has jurisdiction and Competent Authority to hear the appeal. Even on merit the appellant has no case.

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Admittedly the appeal arising out of Adjudication Orders passed by the Adjudicating Authority being an Assistant Director of Enforcement or Deputy Director of Enforcement have been detailed under section 17 of the Foreign Exchange Management Act.

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FPA-FE-07/MUM/2015

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The relevant portion Section 17 FEMA is reproduced hereafter:-

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17. Appeal to Special Director (Appeals):(1) The Central Government shall, by notification, appoint one or more Special Directors (Appeals) to hear appeals against the orders of the Adjudicating Authorities under this section and shall also specify in the said notification the matter and places in relation to which the Special Director (Appeals) may exercise jurisdiction.

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(2) Any person aggrieved by an order made by the Adjudicating Authority, being an Assistant Director or Enforcement or a Deputy Director of Enforcement, may prefer an appeal to the Special Director (Appeals).”

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Section 19(1) itself mandates that appeals other than those referred to in Section 17(1) or Special Director (Appeals) may be preferred before the Appellate Tribunal for Foreign Exchange, meaning thereby that appeals against Adjudication Orders passed by the Adjudicating Authority being the rank of Deputy Director of Enforcement or Assistant Director must mandatorily lie to the Special Director (Appeals) under section 17 and thereafter to Appellate Tribunal for Foreign Exchange.

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Relevant portion of Section 19 is reproduced as under:

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19. Appeal to Appellate Tribunal:

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(1) Save as provided in sub-section (2), the Central Government or any person aggrieved by an order made by an Adjudicating Authority, other than those referred to in sub-section (1) of Section 17, or the Special Director (Appeals), may prefer an appeal to the Appellate Tribunal:

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Provided that any person appealing against the order of the Adjudicating Authority or the Special Director (Appeals) levying any penalty, shall while filing the appeal, deposit the amount of such penalty with such authority as may be notified by the Central Government : Provided further that where in any particular case, the Appellate Tribunal is of the opinion that the deposit of such penalty would cause undue hardship to such person, the Appellate Tribunal may dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the realization of penalty.

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FPA-FE-07/MUM/2015

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As per settled principle of law that a strict interpretation of the statute must be adopted and the legislative intent which is abundantly clear from the recitals of section 17 and section 19 of FEMA must be adopted. Reliance is placed in this respect on Polestar Electronic (P) Ltd. Vs. Addl. Commissioner, Sales Tax 1978 SCR (3) 98.

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The position as regards the application of FEMA for a contravention in the FERA issue in hand has been settled in the case of Tirumalai Chemicals Ltd. Vs. Union of India (AIR 2011 SC 1725):-

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28. Above discussion will clearly demonstrate that Section 49 of FEMA does not seek to withdraw or take away the vested right of appeal in cases where proceedings were initiated prior to repeal of FERA on 01.06.2000 or after. On a combined reading of Section 49 of FEMA and Section 6 of General Clauses Act, it is clear that the procedure prescribed by FEMA only would be applicable in respect of an appeal filed under FEMA though cause of action arose under FERA. In fact, the time limit prescribed under FERA was taken away under the proviso to sub-section (2) of Section 19 and the Tribunal has been conferred with wide powers to condone delay if the appeal is not filed within forty-five days prescribed, provided sufficient cause is shown. Therefore, the finding rendered by the Tribunal as well as the High Court that the Tribunal does not have jurisdiction to condone the delay beyond the date prescribed under FERA is not a corrected understanding of the law on the subject”

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The question in relation to the forum where an appeal is to lie is a procedural matter and this has been dealt by the Hon’ble Supreme Court in the case of Maria Cristina De Souza v. Amria Zurana Pereira Pinto AIR 1979 SC 1352, wherein it was held that:

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“It is no doubt well-settled that the right of appeal is a substantive right and it gets vested in a litigant no sooner the lie is commenced in the Court of the first instance, and such right or any remedy in respect thereof will not be affected by any repeal of the enactment conferring such right unless the repealing enactment either expressly or by necessary implication takes away such right or remedy in respect thereof. This position has been made clear by Clauses (b) and (c ) of the proviso to Section 4 of the Central Act XXX of

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1965 which substantially correspond to Clauses (c ) and (e ) of Section 6 of the General Clauses Act, 1867. This position has also been settled by the decisions of the Privy Council and this Court (vide the Colonial Sugar Refining Company Ltd. v. Irving 1905 AC 369 and Garikapatti Veeraya v. N. Subbiah Choudhury) 1957 SCR 488 but the forum where such appeal can be lodged is indubitably a procedural matter and, therefore, the appeal, to right to which has arisen under a repealed the Act, will have to be lodged in a forum provided for by the repealing Act. That the forum of appeal, and also the limitation for it, are matters pertaining to procedural law will be clear from the following passage appearing at page 462 of Samond’s Jurisprudence (12^th Edn.):

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Whether I have a right to recover certain property is a question of substantive law, for the determination and the protection of such rights are among the ends of the administration of justice; but in what courts and within what time I must institute proceedings are questions of procedural law, for they relate merely to the modes in which the courts fulfil their functions.

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It is true that under Clause (e ) of the proviso to Section 4 of Central Act XXX of 1965 (which corresponds to Section 6 (e ) of the General Clauses Act, 1897) it is provided that a remedy or legal proceeding in respect of a vested right like a right to an appeal may be instituted, continued or enforced as if this Act (meaning the repealing Act) had not been passed. But this provision merely saves the remedy or legal proceeding in respect of such vested right which it is open to the litigant to adopt notwithstanding the repeal but this provision has nothing to do with the forum where the remedy or legal proceeding has to be pursued. If the repealing Act provides new forum where the remedy or the legal proceeding in respect of such vested right can be pursued after the repeal, the forum must be as provided in the repealing Act.”

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Even in the light of the Judgement rendered in M/s Premier Ltd. & Ors. v. Union of India & Ors. 2006 (5) BOM CR 12, the appeal shall lie before the Special Director (Appeals) in case of a FERA contravention. The relevant paragraph is reproduced below:-

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“From the aforesaid analysis of the provision contained in FEMA, we have no hesitation in holding that the appeals against the adjudication orders passed by the Assistant Director/Deputy Director (Appeals) and appeals against the orders of all other Adjudicating Authorities are maintainable before the Appellate Tribunal constituted under FEMA.”

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It is evident from the Judgement Chitturi Subbanna vs. Kudapa Subbanna & Others 1965 AIR 1325, 1965 SCR (2) 661, that a pure question of law can be raised at any point of the proceedings. Thus the appeal filed by the appellant before this tribunal is not maintainable. The ignorance of law has no excuse once there are statutory provisions of the Act.

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The present appeal in view finding arrived in the case of Tirumalai Chemicals case (supra) should have been initiated before the Special Director (Appeals) instead of the Appellate Tribunal for Foreign Exchange. The appellant could not have approached this Appellate Tribunal for Foreign Exchange directly under Section 19 FEMA.

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The present appeal instead of being preferred before the Special Director (Appeals) under Section 17 of FEMA has being filed this Tribunal for Foreign Exchange under section 19 FEMA is not maintainable and thus the same is liable to be dismissed.

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17. No costs.

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(Justice Manmohan Singh) Chairman

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New Delhi, 20^th March, 2018

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‘d’

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