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2025 (7) TMI 286 - HC - FEMAOffences u/s 56 of FERA and u/s 49 of FEMA - allegation of Overdue Export Bills Pending Realisation of the equivalent value of Rs.84.46 Crores involving 119 GRs - Evasion of Customs through fraudulent means Whether the Settlement Officer Granted Immunity Under FERA to the Petitioner? - Petitioner who is the sole proprietor of a Trading House engaged in manufacture and export of cotton acrylic woollen knitwear was also trading/exporting various other items like stainless steel utensils shaving cream marble kitchenware etc. to Russia USA Middle East and other countries and was having a turnover for last two years of about 65 Crores per annum - HELD THAT - A perusal of the Settlement Commission Order shows that neither the violations under the FERA/FEMA were a subject matter nor were they adjudicated by the Settlement Commission. Notice was given to the Directorate of Enforcement by the Settlement Commission only because certain Orders on the Applications filed by the Petitioner were required to be complied by the Directorate. It is also evident that the amounts which were the subject matter of FEMA were only referred to take a lenient view in permitting the Petitioner to deposit the outstanding amount under the Customs Act by way of instalment. The present Complaint u/s 56 FERA is based on the allegations that the Petitioner had failed to take any steps to realise the Export amount from its buyers in the prescribed manner and in the prescribed period. Further no requisite permissions were acquired from the RBI for securing extension of time for realisation of the said proceeds which has also resulted in violation of Section 18(2) of FERA 1973 r/w Central Government Notification No. F.1/67/EC/73-1 and 2 making him liable to be prosecuted under Section 56 FERA. As abundantly clear from the Order of the Settlement Commission that the subject matter of the Complaint under S.56 FERA was not under consideration before the Settlement Commission. Consequently no immunity in substance has been granted by the Settlement Commission vide the Order dated 06.03.2002 in regard to FERA. Whether the Settlement Commission was Competent to Grant Settlement under FERA/FEMA? - The entire scheme under Chapter XIV-A as enumerated hereinabove clearly indicates that the Settlement Commission has been given widest discretionary powers to protect the interests of the Revenue and even with regard to the grant of immunity from prosecution and penalty settle the matter. It also has the power to declare the Settlement to be void and to direct denovo adjudication. The jurisdiction of the Settlement Commissioner is related to case which is defined u/s 127A(b) to mean any proceeding under this Act or any other Act for the levy assessment and collection of customs duty pending before an adjudicating authority on the date on which an application under sub-section (1) of section 127B is made. The Person seeking immunity may make the Application under Section 127B of the Customs Act in such Form and in such manner as may be specified by Rules containing a full and true disclosure of his duty liability which has not been disclosed before the proper Officer in respect of which he admits short-levy on account of mis-classification or otherwise of goods. Similar view was taken in the case of Vinod M. Chitalia vs. UOI 2012 (5) TMI 157 - BOMBAY HIGH COURT wherein it was observed that the Settlement Commission under Section 127H of the Customs Act 1962 has power to grant immunity to any person who has made an application to it for settlement. The immunity is from prosecution under the Customs Act 1962 and also either wholly or in part from the imposition of a penalty or fine under the Customs Act. Therefore the immunity is only from penalty under the Customs Act and not in respect of any other Act including the FEMA. As abundantly clear that the jurisdiction of the Settlement Commission applies to only cases involving assessment/levy /collection of Customs Duty and any immunity granted is in respect of Customs Act only and would in no manner extend to tendering immunity from prosecution under FERA. In the present case the offences under Section 18(2) and (3) FERA for which a Notice under Section 61 FERA Act was issued to the accused to Show Cause whether he has obtained requisite permissions from the RBI in respect of the outstanding proceeds is punishable under Section 56 FERA. Section 60 FERA contains a mechanism for seeking immunity but was never invoked by the petitioner. No immunity could have been granted by the Settlement Commission constituted under Section 127 H Customs Act for the alleged offences under section 18 (2) and 18(3) FERA; any immunity even if tendered under this Act is without jurisdiction and void ab initio. Settlement Commission neither was competent nor granted any immunity to the Petitioner for the offence punishable under S.56 FERA. The Application for Discharge filed by the Petitioner has been rightly dismissed by the Ld. ACMM. Petition is devoid of any merit and is hereby dismissed. Pending Applications are disposed of accordingly.
Issues Presented and Considered:
The Court considered two core legal questions: 1. Whether the Settlement Commission granted immunity to the Petitioner from prosecution under Section 56 of the Foreign Exchange Regulation Act, 1973 (FERA) for alleged violations of Sections 18(2) and 18(3) of FERA; 2. Whether the Settlement Commission was competent and had jurisdiction to grant immunity for offences under Section 56 FERA, given that the Settlement Commission was constituted under the Customs Act, 1962. Issue-wise Detailed Analysis: I. Whether the Settlement Commission Granted Immunity Under FERA to the Petitioner: Relevant Legal Framework and Precedents: The Settlement Commission was constituted under Chapter XIV-A of the Customs Act, 1962, specifically Sections 127A, 127B, and 127H, empowering it to settle cases relating to levy, assessment, and collection of customs duty, and to grant immunity from prosecution and penalty under the Customs Act and other Central Acts in relation to such cases. The Petitioner relied on the Settlement Commission's Order dated 06.03.2002, which purportedly granted immunity from prosecution under the Customs Act, Indian Penal Code, and FERA. Court's Interpretation and Reasoning: The Court scrutinized the Settlement Commission's Order and the Petitioner's submissions. It was found that the Order primarily concerned the settlement of customs duty liabilities under the DEEC (Duty Entitlement Exemption Certificate) scheme, DEPB (Duty Exemption Remission Scheme), and Drawback Scheme. The Settlement Commission had settled an amount of Rs. 8.63 crores towards customs duty liabilities and directed payment with interest, acknowledging the Petitioner's financial hardship due to non-realisation of export proceeds. However, the Court observed that the subject matter of the Complaint under Section 56 FERA-non-realisation of export proceeds amounting to approximately Rs. 40.06 crores and consequent violations of Sections 18(2) and 18(3) FERA-was not adjudicated or settled by the Settlement Commission. The mere mention of facts relating to non-realisation of export proceeds in the Settlement Commission proceedings did not amount to the subject matter being before the Commission. The Settlement Commission's jurisdiction and order related solely to customs duty liabilities and not to foreign exchange violations under FERA. Key Evidence and Findings: The Petitioner's application before the Settlement Commission was under Section 127B Customs Act, seeking settlement of customs duty liabilities and immunity from prosecution under the Customs Act and other Central Acts. The Enforcement Directorate's investigation and prosecution for alleged FERA violations were independent and separate from the customs duty matters before the Settlement Commission. The Settlement Commission's Order did not expressly or implicitly grant immunity from prosecution under FERA. Application of Law to Facts: Since the Settlement Commission's jurisdiction and order were confined to customs duty matters, and the FERA violations were not a subject of adjudication or settlement, no immunity under FERA was granted. The Petitioner's contention that immunity was granted under FERA was thus rejected. Treatment of Competing Arguments: The Petitioner argued that the Settlement Commission's immunity order included FERA offences, citing the language in the Order and the participation of Enforcement Directorate officials in the proceedings. The Respondent countered that the Settlement Commission's jurisdiction was limited to customs duty cases and that FERA offences were beyond its scope. The Court sided with the Respondent, emphasizing the statutory scheme and the defined scope of the Settlement Commission. Conclusion: The Court concluded that no immunity from prosecution under Section 56 FERA was granted by the Settlement Commission to the Petitioner. II. Whether the Settlement Commission was Competent to Grant Immunity for Offences under Section 56 FERA: Relevant Legal Framework and Precedents: The Settlement Commission's powers and jurisdiction are governed by Chapter XIV-A of the Customs Act, 1962. Section 127A(b) defines "case" as any proceeding under the Customs Act or any other Act for levy, assessment, and collection of customs duty pending before an adjudicating authority. Section 127H empowers the Settlement Commission to grant immunity from prosecution and penalty under the Customs Act in respect of such cases. The Petitioner relied on precedents including Alpesh Navinchandra Shah v. State of Maharashtra and Commr. of Customs (Air), Chennai vs Customs & Central Excise Settlement Commission, which elucidate the object and scope of the Settlement Commission. Court's Interpretation and Reasoning: The Court analyzed the statutory scheme and case law to determine the Settlement Commission's jurisdiction. It held that the Settlement Commission's jurisdiction is strictly limited to customs duty-related cases and does not extend to offences under FERA, which is a special and self-contained Code with its own investigation and prosecution mechanisms. The Court noted that FERA contains comprehensive provisions for investigation, inquiry, trial, and punishment, and also provides a separate mechanism for immunity under Section 60 FERA, which was not invoked by the Petitioner. The Court further observed that the Settlement Commission cannot expand its jurisdiction to grant immunity for offences under FERA, as such immunity would be without jurisdiction and void ab initio. The Court relied on the Bombay High Court decision in Vinod M. Chitalia v. Union of India, which held that immunity granted by the Settlement Commission under the Customs Act does not extend to other Acts such as FEMA or FERA. Key Evidence and Findings: The Settlement Commission's jurisdictional provisions, the nature of the Petitioner's application, and the statutory framework of FERA were examined. The Court found that the Petitioner did not invoke the immunity provisions under Section 60 FERA, and the Settlement Commission's immunity order was limited to customs duty matters. Application of Law to Facts: Applying the statutory definitions and judicial interpretations, the Court held that the Settlement Commission lacked jurisdiction to grant immunity under FERA. The immunity purportedly granted under the Settlement Commission's Order for FERA offences was therefore invalid. Treatment of Competing Arguments: The Petitioner contended that the Settlement Commission's immunity order included FERA offences and was conclusive and binding. The Respondent argued that the Settlement Commission's jurisdiction was limited and that FERA offences must be dealt with under FERA's own provisions. The Court upheld the Respondent's position, emphasizing the self-contained nature of FERA and the statutory limits of the Settlement Commission. Conclusion: The Court concluded that the Settlement Commission was not competent to grant immunity from prosecution under Section 56 FERA, and any such immunity is void ab initio. Significant Holdings: "It is abundantly clear that the jurisdiction of the Settlement Commission applies to only cases involving assessment/levy/collection of Customs Duty and any immunity granted is in respect of Customs Act only and would in no manner, extend to tendering immunity from prosecution under FERA." "FERA being a self-contained Code in itself... the Settlement Commission under Customs Act cannot expand its jurisdiction to grant immunity from offences under FERA." "No immunity could have been granted by the Settlement Commission constituted under Section 127H Customs Act for the alleged offences under section 18 (2) and 18(3) FERA; any immunity even if tendered under this Act, is without jurisdiction and void ab initio." "The Settlement Commission neither was competent nor granted any immunity to the Petitioner for the offence punishable under S.56 FERA. The Application for Discharge filed by the Petitioner has been rightly dismissed."
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