Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles SMS News Highlights
        Home        
Case Laws
 
Home Case Index All Cases FEMA Tri FEMA + Tri
← Previous Next →
TMI ID= 193779
  • Contents
  • Cases Cited

2016 (5) TMI 1383 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE, NEW DELHI

Enforcement Directorate, Chennai Versus Icomm Tele Ltd.

Contravention of Sections 8(3) and 8(4) of FERA, 1973 - direction of furnishing corporate guarantee - interpretation in the review petitioner that the corporate guarantee is a business consideration - Held that:- The guarantor is bound to indemnify the authority to whom corporate guarantee is furnished. Relationship of business is not a necessary condition. Generally the corporate guarantee is furnished on the basis of overall performance and goodwill of the company for which the guarantee is furnished. This Tribunal earlier used to demand bank guarantee, however, when it was brought to the notice of the Tribunal that banks now a days provide bank guarantee only when the entire deposit is made to it, the Tribunal stopped demanding bank guarantee from the parties at the time of disposal of the applications for stay and waiver from pre-deposit. Demanding a bank guarantee in view of the poor financial conditions of an appellant in my view may tantamount to deprivation of the statutory right to appeal and for all practical purposes it will amount to demanding the deposit of entire amount of penalty imposed through the adjudication order. The case laws relied upon by the ld. counsel for the respondent justifying the order of modification of furnishing of corporate guarantee in place of bank guarantee. It may be pertinent to mention here that the corporate guarantee has been filed in compliance and must have been accepted, therefore, also the application is misconceived.

It may be observed that moving such applications and contending that the Tribunal has deviated from the routine procedure without any ground amounts to scandalizing the Tribunal & attempt to lower its image in the estimation of public and is an aspersion upon the functioning of the Tribunal. The Enforcement Directorate is warned for future to desist from making such bald aspersions against the Tribunal which may have no basis. Safeguarding the interest of revenue does not mean that a party may be deprived of its statutory right to file an appeal. The review petition consequently deserves to be dismissed. Since the petition has been argued and might have been drafted by ld. legal consultant who is fairly new in the legal field, therefore, taking a lenient view, I am not imposing costs against the Enforcement Directorate for wasting the precious time of the Tribunal involved in the litigation and not directing for initiation of any other action. The review petition is dismissed.

No.- Misc. Application No. 17/2014 in Appeal No. 24/2012

Dated.- May 6, 2016

Citations:

  1. Col. Avtar Singh Sekhon Versus Union of India - 1980 (7) TMI 269 - SUPREME COURT OF INDIA

  2. SOW CHANDRA KANTA AND ANOTHER Versus. SHEIK HABIB - 1975 (3) TMI 136 - SUPREME COURT

  3. Hotel Seaview Versus The Commercial Tax Officer (FAC) - 2014 (8) TMI 781 - MADRAS HIGH COURT

  4. Vodafone India Limited Versus Union of India through the Secretary (Ministry of Finance) New Delhi, Income Tax Appellate Tribunal (Mumbai) , Deputy Commissioner of Income Tax, Commissioner of Income Tax, Circle 7 (3) , Mumbai - 2014 (4) TMI 1194 - BOMBAY HIGH COURT

  5. M/s. Royal Insulation (P) Ltd. Versus The Commercial Tax Officer - 2005 (7) TMI 609 - MADRAS HIGH COURT

  6. Vodafone India Services Private Ltd. Versus Asst. CIT - 2014 (3) TMI 15 - ITAT MUMBAI

Mr. Vinay Kumar Mathur, Chairperson

Ms. Pavitra Warriar, Legal Consultant, for the Petitioner.

Shri V. Shiva Kumar, Advocate, for the Respondent.

ORDER

The instant review petition under Section 28(2)(f) of the Foreign Exchange Management Act, 1999 has been moved for review of the order dated 12-1-2015 passed by this Tribunal in Appeal No. 24/2012.

2. The facts relevant for the disposal of the review petition are that, aggrieved from the Adjudication Order dated 8-9-2004 whereby the appellant-company which was earlier functioning in the name and style of M/s. Advanced Radio Masts Ltd. was held guilty for contravention of Sections 8(3) and 8(4) of FERA, 1973, r/w Para 7A.20(i) of Exchange Control Manual while the Managing Director Mr. Warlu was held guilty for contravention of Section 68(1) r/w Section 68(2) of FERA, 1973. A consolidated penalty of ₹ 30 lakhs was imposed. An application for stay and waiver from pre-deposit of penalty was moved which was disposed of by this Bench vide order dated 25-11-2014 with the direction that the recovery of the amount of penalty imposed against the appellant shall remain stayed during the pendency of the appeal provided the appellants deposit with the respondent 15% of the penalty amount imposed and furnish bank guarantee of the balance 85% within a period of 30 days from the date of communication of the order.

3. The appellant moved an application thereafter for modification of the interim order dated 25-11-2014 contending that the appellant has already deposited 15% of the penalty imposed in compliance of the order. It was contended that for ensuring full compliance of the interim order the applicant/appellant approached Axis Bank, Bank of Baroda, Bank of Maharashtra, Corporation Bank and ICICI Bank in order to seek bank guarantee for the 85% amount. However, all the banks refused the request of the appellant on the ground that the bank guarantee can be issued in favour of the company only on the payment of 100% of the bank guarantee amount as pre-deposit to the bank. It has been prayed that since the financial position of the company is poor and the company is not in a position to either deposit the balance 85% with the respondent or with the bank, therefore, the order dated 25-11-2014 may be modified and instead of demanding bank guarantee, corporate guarantee may be ordered for the balance amount, which the appellant may furnish and the interest of the revenue may be secured. Prayer for extension of the period for furnishing the security has also been made.

4. After hearing both the parties and taking into consideration the communication which was received by the appellant from various banks stating their inability to provide bank guarantee without the deposit of the amount for which bank guarantee was being sought. The Tribunal vide its order dated 12-1-2015 allowed the modification application with the direction to the appellant to instead furnish corporate guarantee of the balance 85% of the penalty imposed through impugned order within a period of 30 days. The order dated 25-11-2014 was modified to this limited extent.

5. The instant review petition has been filed by the Enforcement Directorate for review of the modified order dated 12-1-2015. Ms. Pavitra Warriar, ld. legal consultant has contended that Section 19(1) proviso clearly stipulates that the Tribunal while granting relief, if any, to the appellant at the time of deciding dispensation application shall safeguard the realization of the penalty. However, the direction of furnishing corporate guarantee may jeopardize such interest of the Enforcement Directorate and could be departure from the procedure followed by the Tribunal. It has also been contended that while in the case of corporate guarantee, guarantee of payment is made on behalf of another business entity. Guarantee is provided in consideration of a vendor providing credit to business of the person on whose behalf the guarantee is provided, while a bank guarantee is given by a bank on behalf of its customer to the beneficiary of the bank that in case of non-happening of the particular event which is being covered by that particular guarantee, the bank will pay to the beneficiary the same amount as is mentioned in the guarantee. Submission is that directing furnishing of corporate guarantee would be a departure from the procedure followed by the Tribunal regarding pre-deposit of penalty. Therefore, it has been prayed that the order dated 12-1-2015 needs to be modified to the extent of furnishing of corporate guarantee.

6. Mr. V. Shiva Kumar, Advocate for the respondent has opposed the review petition and has defended the order dated 12-1-2015 and has contended that the respondent-company has submitted detailed evidence in proof of its  precarious financial conditions which was taken into consideration while passing order dated 25-11-2014 whereby the application for stay and waiver was disposed of. Submission is that an amount of ₹ 4,50,000/- as directed by the Tribunal has been deposited and the respondent has approached the Tribunal to allow it to furnish corporate guarantee in place of bank guarantee on the ground that several banks whom the respondent-company approached insisted pre-deposit of 100% of the bank guarantee amount for issuing bank guarantee. The respondent-company has filed copies of the letters issued by the banks in support of its contention. Further submission is that after considering the factual matrix placed before the Tribunal, order under review dated 12-1-2015 directing the respondent to furnish corporate guarantee for the balance 85% of penalty has been passed and the respondent-company has duly complied the directions of the Tribunal. Further, submission is that prayer for furnishing corporate guarantee instead of bank guarantee was allowed considering the hardship which the appellant-company was likely to be subjected to. Further submission is that the procedure adopted by the Tribunal is no departure and this Tribunal after realization that demanding a bank guarantee will occasion hardship and the statutory right to file the appeal may be frustrated due to the fact that now a days the banks insist on depositing of the entire amount for which bank guarantee is sought. This Tribunal has allowed several modification applications in this back drop. Further submission is that in the case of Vodafone India Services Pvt. Ltd. v. ACIT - S.A. No. 339/Mum/2013, dated 27-12-2013 the Tribunal directed furnishing of corporate guarantee for a demand of ₹ 3,538.49 crores. In another matter the Hon’ble High Court in the case of Vodafone India Ltd. v. UOI - (2014) 35 Taxmann.com 511 BOM upheld the judgment of the Tribunal demanding corporate guarantee for an amount of 238.70 crores. Further submission is that in WP Nos. 1787 to 1791/2014 the Hon’ble Madurai Bench of Hon’ble Madras High Court in Hotel Seaview v. CTO in its order dated 3-6-2014 directed the respondent to accept personal bond instead of bank guarantee till disposal of the appeal. Further submission is that in the matter of Royal Insulatation (P) Ltd. v. CTO, Chennai, the Hon’ble Madras High Court in W.P. No. 1384/2005, dated 21-7-2005 has modified the order passed by the single judge wherein entire tax demand was directed to be paid in cash and instead directed that the petitioner should furnish personal bond for the amount of tax. On the basis of the above it has been prayed that the review petition may be dismissed.

7. I have considered the submission of ld. legal consultant as well as ld. counsel for the respondent/appellant and have also perused the record. It is a settled legal position as has been filed in the case of Col. Avtar Singh Sekhon v. UOI [AIR 1980 SC 2041] that a review is not a routine procedure and review is not permissible of the earlier order unless the Court is satisfied with the material error manifest on the face of the order is there which undermines its soundness or results in miscarriage of justice. It has been held in the judgment of Sow Chandra Kante and Anr. v. Sheikh Habib [MANU/SC/0064/1975] that a review of a judgment is a serious step and reluctant resort to it is proper only where a glaring omission or patent mistake or like grave error has crept in earlier by judicial fallibility.

8. The interpretation in the review petitioner that the corporate guarantee is a business consideration is misconceived and patently wrong in the instant matter. The guarantor is bound to indemnify the authority to whom corporate guarantee is furnished. Relationship of business is not a necessary condition. Generally the corporate guarantee is furnished on the basis of overall performance and goodwill of the company for which the guarantee is furnished. This Tribunal earlier used to demand bank guarantee, however, when it was brought to the notice of the Tribunal that banks now a days provide bank guarantee only when the entire deposit is made to it, the Tribunal stopped demanding bank guarantee from the parties at the time of disposal of the applications for stay and waiver from pre-deposit. Demanding a bank guarantee in view of the poor financial conditions of an appellant in my view may tantamount to deprivation of the statutory right to appeal and for all practical purposes it will amount to demanding the deposit of entire amount of penalty imposed through the adjudication order. The case laws relied upon by the ld. counsel for the respondent justifying the order of modification of furnishing of corporate guarantee in place of bank guarantee. It may be pertinent to mention here that the corporate guarantee has been filed in compliance and must have been accepted, therefore, also the application is misconceived.

9. It may be observed that moving such applications and contending that the Tribunal has deviated from the routine procedure without any ground amounts to scandalizing the Tribunal & attempt to lower its image in the estimation of public and is an aspersion upon the functioning of the Tribunal. The Enforcement Directorate is warned for future to desist from making such bald aspersions against the Tribunal which may have no basis. Safeguarding the interest of revenue does not mean that a party may be deprived of its statutory right to file an appeal. The review petition consequently deserves to be dismissed. Since the petition has been argued and might have been drafted by ld. legal consultant who is fairly new in the legal field, therefore, taking a lenient view, I am not imposing costs against the Enforcement Directorate for wasting the precious time of the Tribunal involved in the litigation and not directing for initiation of any other action. The review petition is dismissed. List on 14-6-2016 for final hearing before appropriate bench. Copies be sent to concerned parties.

 
 
← Previous Next →
Discussion Forum
what is new what is new
 


Share:            

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version