TaxTMI 
TaxTMI 
2010 (12) TMI 657
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....sp;On 6-6-2002, the petitioners received a show cause notice dated 31-5-2002 whereby the Assistant Director, Enforcement Directorate called upon the petitioners to show cause in writing within 10 days as to why adjudication proceedings, as contemplated under Section 51 of the Foreign Exchange Regulation Act, 1973 ('FERA' for short) read with Section 49(3) and (4) of the FEMA Act should not be initiated against the petitioners. 4. The petitioners in their reply to the show cause notice raised a preliminary objection regarding the jurisdiction of the adjudicating officer to initiate adjudication proceedings after 31-5-2002, because the show-cause notice dated 31-5-2002 was dispatched on 5-6-2002 and the same was received by the petitioners on 6-6-2002 which was beyond the period of two years from the date of commencement of FEMA and therefore barred by time. 5. By the impugned order dated 20-8-2004 the Assistant Director, Enforcement Directorate held that the show cause notice was signed by the adjudicating officer on 31-5-2002 which implies that the adjudicating officer had taken notice of the alleged contravention of FERA in terms of Section 51 of FERA and since the dat....
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....ication Proceedings and Appeal Rules, 1974 ('Appeal Rules' for short). He submits that the adjudication proceedings under the Appeal Rules is held in two stages. The first stage is when a notice is issued under Rule 3(1) of the Appeal Rules to a person to show cause within the period specified in the notice as to why adjudication proceedings should not be held against him. After the person to whom such notice is issued and cause is shown by the noticee, the adjudication officer is required to form an opinion that adjudication proceedings should be held. The second stage is when after forming such opinion, the adjudicating officer issues a notice (second notice) fixing a date for the appearance of the person on which date the adjudicating officer is required to explain to the noticee the violation alleged to have been committed by such person and giving an opportunity to such a person to produce documents and evidence as the adjudicating officer may consider relevant to the inquiry. According to the counsel, when the adjudicating officer forms an opinion either to proceed or not to proceed further, it can be said that he has "taken notice" of the alleged violation of FERA. In the pr....
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....when he forms an opinion after 10 days of service of the notice under Rule 3(1) of the Appeal Rules. 9. Counsel for the petitioners further submitted that the legislative mandate is that the adjudicating officer must form an opinion only after the first notice is issued and the period prescribed in the notice to show cause has expired and that requirement of forming an opinion is not a mere formality, but a condition precedent to proceed in a particular way. It is at that stage the adjudicating officer applies his mind to the materials placed before him. He submitted that the adjudicating officer is required to take notice at a stage prior to the issue of the second notice and not when the first notice is issued. The legislature mandates the adjudicating officer not to form an opinion without issuing the first notice and giving an opportunity to show cause for which the period is specified in the notice and which is not less than 10 days. In the present case the notice dated 31-5-2002 being the first notice, the adjudicating officer could not take notice or form an opinion on 31-5-2002 and, therefore, the adjudicating officer had no jurisdiction to proceed further since....
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....ings. Taking of cognizance is thus a sine qua non or condition precedent for holding a valid trial. Cognizance is taken of an offence and not of an offender. Whether or not a Magistrate has taken cognizance of an offence depends on the facts and circumstances of each case and no rule of universal application can be laid down as to when a Magistrate can be said to have taken cognizance. Chapter XIV (Sections 190-199) of the Code deals with 'conditions requisite for initiation of proceedings'. 13............. 14............. 15. From the above scheme of the Code, in our judgment, it is clear that 'Initiation of proceedings,' dealt with in Chapter XIV, is different from 'commencement of proceedings' covered by Chapter XVI. For commencement of proceedings, there must be initiation of proceedings. In other words, initiation of proceedings must precede commencement of proceedings. Without initiation of proceedings under Chapter XIV, there cannot be commencement of proceedings before a Magistrate under Chapter XVI. The High Court, in our considered view, was not right in equating initiation of proceedings under Chapter XIV with commencement of proceedings, under Chapter XVI." 12.....
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....jurisdiction to take cognizance of the offence after 31-5-2002 where as the adjudicating officer would be entitled to take notice of the alleged violation after 31-5-2002. Such an interpretation which renders the provisions of statute unconstitutional should be avoided and the words "take notice" should be interpreted as ejusdem generis to the words "take cognizance". 14. Lastly, counsel for the petitioners submitted that assuming that the issuance of first notice constitutes "taking notice" under Section 49(3), then, in view of Section 49(5)(a) of FEMA the first notice must be served before 31-5-2002. In support of the above submission, counsel for the petitioners relied upon the decision of the Apex Court in the case of K. Narasimhiah v. H.C. Singri Gowda [AIR 1966 S.C. 330], C.W.T. v. Kundan Lal [AIR 1976 S.C. 1150], decision of the Gujarat High Court in the case of Ambalal Soni v. Union of India [AIR 1972 Guj. 126), decision of the Rajasthan High Court in the case of Mool Chand v. Union of India [AIR 1990 Raj. 24 = 1990 (48) E.L.T. 374 (Raj.)] and the decision of Calcutta High Court in the case of Supdt. & Legal Remembrancer (supra). Accordingly, counsel for the petitione....
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....r Rule 3(1) of the Appellate Rules constitutes taking notice of the alleged contravention of FERA. In support of the above contention, he relied upon the decision of the Apex Court in the case of S.K. Sinha (supra). 17. Relying on the decision of the Apex Court in the case of Director of Enforcement v. M.C.T.M. Corporation Pvt. Ltd. reported in (1996) 2 SCC 471, counsel for the revenue submitted that adjudicating proceedings and criminal proceedings are quite distinct and separate. It is for this reason that the statements made by a person under the relevant statutes can be used against that person in adjudication proceedings but not in criminal proceedings. Similarly, Article 20(2) of the Constitution is not invoked when a person penalized in the adjudication proceedings is sought to be prosecuted. Therefore, rule of ejusdem generis cannot be applied in interpreting Section 49(3). Assuming that the rule of ejusdem generis applies, even then the show cause notice under Rule 3(1) of the Appellate Rules can be compared to issuance of the process which is done only after the Magistrate has taken cognizance. 18. Dealing with the alternative submission of the counsel for the....
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....ecified (being not less than ten days from the date of service thereof) as to why adjudication proceedings should not be held against him. The second stage is, when the adjudicating officer after considering the cause if any shown by such person forms an opinion that the adjudication proceedings should be continued and accordingly issues a notice (second notice) in respect of the alleged contravention of FERA by fixing a date for the appearance of that person either personally or through his representative. In the present case, the show-cause notice dated 31-5-2002 is the first stage notice. The question is, whether the adjudicating officer can be said to have taken notice of the alleged contravention of FERA on 31-5-2002? 24. The first notice issued under Rule 3(1) is a show cause notice, which requires the noticee to show cause as to why adjudication proceedings should not be initiated for the alleged contravention of FERA. Rule 3(2) requires that the show cause notice issued under Rule 3(1) must indicate the nature of the offence allegedly committed under FERA. Unless the adjudicating officer forms a prima facie opinion that the provisions of FERA have been violated, he ca....
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....ere is no reason as to why he cannot form such opinion on the basis of the materials placed by the enforcement officer before issuance of the first notice. Forming an opinion as to the alleged contravention of FERA on the basis of the materials placed by the enforcement officer, obviously means that the adjudicating officer takes notice of the alleged contravention of FERA on the basis of the materials placed by the enforcement officer. If the contention of the petitioners that the adjudicating officer takes notice of the alleged contravention of FERA only after ten days of issuance of the first notice and after considering the cause shown by the noticee is accepted, then it would mean where the noticee fails to show cause, the adjudicating officer cannot take notice that there is contravention of the provisions of FERA. Such a construction would defeat the very object of initiating adjudication proceedings under FERA and must be avoided. 27. Moreover, if the argument of the petitioners that the adjudicating officer applies his mind to the materials placed before him only after the first notice is issued and the period prescribed in the notice to show cause has expired is acc....
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....edings, in our opinion, it would not be proper to construe the words 'take notice' in adjudication proceedings ejusdem generis with the words 'take cognizance' in the criminal proceedings, so as to hold that the notice under Rule 3(1) amounts to issuing notice for further investigation without taking notice of the alleged contravention of FERA. Once the show cause notice is issued under Rule 3(1) there is no scope for making any further investigation and the adjudicating officer on considering the cause, if any, shown by the noticee has to form an opinion, either to drop the adjudication proceedings or continue with the adjudication proceeding and issue notice accordingly. Therefore, the argument that the notice under Rule 3(1) is for further investigation cannot be accepted. 29. The argument of the petitioners that if the words 'take notice' is not construed to be equivalent to 'take cognizance', then anomalous situations would arise and result in hostile discrimination is also without any merit. A Magistrate takes cognizance of an offence on perusal of the complaint filed before him, whereas the adjudicating officer takes notice of the alleged offence on perusal of the mate....