TMI Blog2018 (4) TMI 1342X X X X Extracts X X X X X X X X Extracts X X X X ..... the presence of both parties. The Competent Authority has violated the principles of natural justice by not affording cross-examination of respondent authority while passing the order by which the Appellant would have been able to establish the fallacy of allegations and also the fallacy of patent illegality of the order apart from exhibiting that there was no material nor the reason to believe as envisaged under Section 37-A(1) of FEMA, 99. In the nature of the seriousness of present case, the right to cross- examination would have been given in view of gravity of the matter. Had the said right been granted, there might have been different result. Rather in the present case, the adjudicating authority has issued the notice after the expiry of five months knowingly well that the proceedings were to be completed within the period of 180 days. Even no time left for the purpose of cross-examination of relevant witnesses. In the interest of justice equity and fairplay we allow the respondent to again verify the position as to whether the appellants have brought the entire amount of remittance within four weeks, from the date of the order after verification the amounts seized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verseas investments and whether he figures in the Overseas Investment Database maintained by the Reserve Bank of India. The Reserve Bank of India vide their letter dated 24.11.2016 replied that the name of Shri Ashwani Kumar Mehra does not figure in their Overseas Investment Database. Enquiries were also made with the Income Tax Department and Income Tax Department vide their letter 27.12.2016 provided the Income Tax Returns of Shri Ashwani Kumar Mehra for assessment year from 2009-10 to assessment year 2016-17. 4. The Respondent, in exercise of powers conferred upon him by virtue of the provisions of Section 37A(1) of FEMA, 1999 and in terms of G.S.R. 702 (E) dated 16.09.2015 and G.S.R. 701 (E ) dated 16.09.2015 issued by the Ministry of Finance (Department of Revenue), Government of India, vide order dated 15.06.2017 seized balance amount to the tune of ₹ 3,08,45,942/- (equivalent to GBP 3,75,667) in respect of saving bank account number 008490700001167 held by Shri Deepak Mehra, Appellant in appeal no. 03/2018, (PAN No. AALPM1743P) standing with YES Bank, Chattarpur Branch, New Delhi vide Seizing Order No. HIU/S.O.-1/37A/2017/AD/(AHK) dated 15.06.2017. The said seizu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oriental Bank of Commerce 4 10,169.00 FDR A/c Oriental Bank of Commerce 5 5,258.00 FDR A/c Oriental Bank of Commerce 6 78,572.00 FDR A/c Oriental Bank of Commerce 7 28,571.53 SB A/c Oriental Bank of Commerce 8 29,542.00 SB A/c Canara Bank 9 26,150.00 SB A/c City Bank 10 63,661.00 SB A/c HDFC Bank It is alleged that, acting upon an information that Shri Navin Mehra had stakes/interests in various offshore entities in contravention of the provisions of the FEMA, 1999 enquiries were made with the Reserve Bank of India to ascertain whether Shri Navin Mehra had made any application regarding any overseas investments and whether he figures i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas investments and whether she figures in the Overseas Investment Database maintained by the Reserve Bank of India. The Reserve Bank of India vide their letter dated 24.11.2016 replied that the name of Mrs. Shalini Mehra does not figure in their Overseas Investment Database. Enquiries were also made with the Income Tax Department and Income Tax Department vide their letter 21.02.2017 provided the Income Tax Returns of Mrs. Shalini Mehra from Assessment Year 2009-10 to Assessment Year 2016-17. 7. The aforesaid freezing orders were passed against the appellants. The said orders of freeze were confirmed by Competent Authority, i.e. The Commissioner of Customs by his order Nos. (1) ED/02/2017 dated 8/12/2017 against Ashwani Kumar Mehra (2) ED/1/2017 against Shri Deepak Mehra, (3) ED/4/2017 against Shri Navin Mehra and (4) ED/3/2017 against Smt. Shalini Mehra. 8. The Appellant in the appeal no. 1/2018 challenged the order passed by the Respondent and of Competent Authority before the Hon ble High Court of Delhi in writ appeal No. W.P. (C) No.11387/2017 and the Hon ble High Court by its order dated 20/12/2017 directed the Appellant to file and avail appropriate remedy of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout prior approval of Reserve Bank. The foreign currency account may be used for putting through all transactions connected with or arising from remittances eligible under this scheme. 3.3 It is further clarified that the facility under the scheme is in addition to those already available for private travel, business travel, gift remittances, donations, studies, medical treatment etc as described in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000. (Annexure B). 3.4 The remittance facility under the scheme is not available for the following: i) Remittance for any purpose specifically prohibited under Schedule- I (like purchase of lottery/sweep stakes, tickets proscribed magazines etc) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000. (Annexure B). ii) Remittances made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan. iii) Remittances made directly or indirectly to countries identified by the Financial Action Task Force (FATF) as non co-operative countries and territories viz Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Nauru, Nige ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A2, in respect of remittances exceeding USD 5000. Authorised Dealers may arrange to furnish on a quarterly basis, information on the number of applicants and total amount remitted to the Chief General Manager, External Payment Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai-400001. 6. Necessary amendments to the relevant Foreign Exchange Management Regulations, 2000 as also the relevant Notifications, issued under FEMA, 1999 are being issued separately. 7. Authorised Dealers may bring the contents of this circular to the notice of their constituents concerned. 8. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999). Yours faithfully, Grace Koshie Chief General Manager Encls.: As above 13. The Reserve Bank has also issued another circular dated 18.03.2004, extract of the same is reproduced below:- RESERVE BANK OF INDIA FOREIGN EXCHANGE DEPARTMENT CENTRAL OFFICE MUMBAI-400001 RBI/ 2004/105 A.P. (DIR Series) Circular No. 80 March 18, 2004 To all Authorised Dealers in Foreign Exchange Madam/Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the contents of this circular to the notice of their constituents concerned. 7. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999). Yours faithfully, Grace Koshie Chief General Manager The RBI circular dated 26.9.2007 to be extracted. RBI/2007-08/146 A.P. (DIR Series) Circular No. 9 September 26, 2007 To, All Category I Authorised Dealer Banks Madam/Sir, Liberalised Remittance Scheme for Resident Individuals- Enhancement of limit from USD 100,000 to USD 200,000. Attention of Authorised Dealer Category I (AD Category I) banks is invited to A.P. (DIR Series) Circular No. 51 dated May 8, 2007 on the Liberalised Remittance Scheme for Resident Individuals (the Scheme). 2. With a view to further liberalize the Scheme it has been decided, in consultation with the Government of India, to enhance the existing limit of USD 100,000 per financial year to USD 200,000 per financial year (April March) with immediate effect. Accordingly, AD Category I banks may now allow remittance up to the USD 200,000, per financial year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not denied by the respondent that Citi Bank is the authorised dealer of RBI. 16. On 15th June, 2017 the Income Tax Department initiated inquiries who did not find any fault with the transactions made by them. However the respondent while exercising of powers under section 37A(4) of FEMA, passed an interim order dated 15.06.2017 seizing the balance lying n the saving accounts of the appellant in appeal no. 1/2018 with YES Bank, Chattarpur branch, New Delhi to the tune of ₹ 2,21,43,1251/-, allegedly equivalent to GBP 269677 as on 14.06.2017. The said order was confirmed by order dt. 8.12.2017 by the Competent Authority. Similar orders were passed against the other appellants. 17. It was the case of the respondent at the time of passing the order that as per material and reason to believe the appellant Shri Ashwani Mehra suspected to hold outside India, GBP 269677 (worth ₹ 2,21,43,125/- as on 14.6.2015) allegedly in contravention of Section 4 of FEMA. However, it is also not denied by the respondent that appellant at the time of remittance had declared the purpose as LRS investment , but instead has purchased shares, extended loans to such companies. The am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for passing an order under the said section are not fulfilled, even otherwise, the basic material in possession of the officer; his reasons to believe (which already exist in writing as per Section 37-A of FEMA) have not been served nor any valid reasons are stated as the findings as to the violation of Section 4 of 1 FEMA have not been supplied, nor the communications with RBI and even the appellant had already repatriated the amounts as contemplated under section 37A (4) of FEMA,99 by which the freeze order deserves to be vacated. 23. After hearing both parties separately, on 8.12.2017 Competent Authority confirmed the freeze order and passed the impugned order which is the subject matter of the present appeals. 24. It is not in dispute that the appellants availed the Liberalise Remittance Scheme (hereinafter called LRS Scheme) of the Government of India/RBI under which RBI has granted general permission permitting all the individuals, resident in India, to remit up to the prescribed limit foreign exchange abroad for all transactions, both capital account transactions and current account transactions or combination of both. As per scheme the individuals resident in India co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /05/2015, hence no order could be passed against the Appellant u/s 37(A)(1) by retrospectively applying Section 37(A) of FEMA, 99. 31. The Ld. Competent Authority has held that section 37A of FEMA, though incorporated on the Statute Book on 14.5.2015 could be applied retrospectively as there was no such bar for applying said section retrospectively, ignoring that such section having penal consequences cannot apply retrospectively. There is no saving clause. The relevant period in the matter is 2010-13 which is not denied by the counsel appearing on behalf of respondent. 32. The said finding is contrary to settle law laid down by the Supreme Court judgment, in the case of CIT v. Vatika Township (P) Ltd., (2015) 1 SCC 1, at page 21. See para 27-35 : General principles concerning retrospectivity 27. A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later. 30. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Govt. of India v. Indian Tobacco Assn.8, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in Vijay v. State of Maharashtra9. It was held that where a law is enacted for the benefit of community as a whole, eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is to explain an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended. The language shall be deemed always to have meant is declaratory, and is in plain terms retrospective. In the absence of clear words indicating that the amending Act is declaratory, it would not be so construed when the pre-amended provision was clear and unambiguous. An amending Act may be purely clarificatory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect and, therefore, if the principal Act was existing law which the Constitution came into force, the amending Act also will be part of the existing law. The above summing up is factually based on the judgments of this Court as well as English decisions. 33. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. (emphasis supplied) 36. In CIT v. Scindia Steam Navigation Co. Ltd.14, this Court held that as the liability to pay tax is computed according to the law in force at the beginning of the assessment year i.e. the first day of April, any change in law affecting tax liability after that date though made during the currency of the assessment year, unless specifically made retrospective, does not apply to the assessment for that year 33. It is not denied by Mr. Rana that in the impugned order the issue of benefit of the scheme and circulars have not been considered by the Competent Authority. 34. After insertation of section 37A on 14.05.2015 if any contravention of section 4 of the FEMA, the circulars issued by RBI have to be read alongwith the said section i.e. 37A sub section (4). 35. A mere reading the scheme that Remittances under LRS are for all purposes (Both current and capital account transfer) and permit an Indian resident individual to do all what has been erroneously alleged in petition before competent authority to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, by an order, seize value equivalent, situated within India, of such foreign exchange, foreign security or immovable property: Provided that no such seizure shall be made in case where the aggregate value of such foreign exchange, foreign security or any immovable property, situated outside India, is less than the value as may be prescribed. (2) The order of seizure along with relevant material shall be placed before the Competent Authority, appointed by the Central Government, who shall be an officer not below the rank of Joint Secretary to the Government of India by the Authorised Officer within a period of thirty days from the date of such seizure. (3) The Competent Authority shall dispose of the appeal within a period of one hundred eighty days from the date of seizure by either confirming or by setting aside such order, after giving an opportunity of being heard to the representatives of the Directorate of Enforcement and the aggrieved person. Explanation.-While computing the period of one hundred eighty days, the period of stay granted by court shall be excluded and a further period of at least thirty days shall be granted from the date of communication of vacation of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellants, the entire position of the matter would have been different. The result of the impugned order might have been different. 46. Section 37A envisages material and reasons to be recorded in writing, however copies of the same was not provided to the appellant. Copy of reasons to believe not served even upto the stage of deciding the appeal. Admittedly no copy was served. This issue has been decided from time to time. We are of the view atleast conducting the searches the appellant is entitled to receive the copy thereof. (i) In P.P Abdullah Vs. Competent Authority 2007 2 SCC 510 para 7 to 8 wherein it has been held by the Apex Court that reason to believe must be communicated along with counter affidavit at least and the authorities are bound to place the same before the court to check the veracity of the same and to come to the conclusion whether such reason to believe are relevant or germane or not. (ii). In the case of CIT Ors. v. Oriental Rubber Works, [(1984) 1 SCC 700], while considering the powers of retention of seized documents under Section 132 of the Income Tax Act, 1962, wherein the reasons for retention were required to be recorded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmunicate the Commissioner's approval as also the recorded reasons to the person concerned. In the absence of such communication the Commissioner s decision according his approval will not become effective. (iii). In the case of C.B. Gautam vs. Union of India (1993(1) SCC 78), a Constitution Bench of the Hon'ble Supreme Court of India held that the reasons to be recorded in writing shall not only be incorporated in the order but also shall be communicated to the affected parties. The relevant extract from the judgement is as under: Sec. 269UD(1), in express terminology, provides that the appropriate authority may make an order for the purchase of the property for reasons to be recorded in writing'. Sec. 269UD(2) casts an obligation on the authority that it shall cause a copy of its order under sub-s. (1) in respect of any immovable property to be served on the transferor . It is, therefore, inconceivable that the order which is required to be served by the appropriate authority under sub-s. (2) would be the one which does not contain the reasons for the passing of the order or is not accompanied by the reasons recorded in writing. It may be permissible to rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have applied retrospective dates. 50. In para 9 in the impugned order it is incorrectly held to that Appellant in his statement had stated that he do not obtain or apply for permission or approval, neither before or subsequently from RBI without appreciation that there was general permission to this effect by RBI as admittedly all the transactions were done by the appellant through authorised dealer as per schedule of RBI. If the scheme is read, it is clear that the transaction could be done through authorised dealer. The appellant has applied all prescribed forms which were annexed to the said scheme through authorised dealers. The allegation of contravention of Section 10(6) of FEMA, 1999 is not correct. The Respondent has completely ignored as to eligibility, purposes and prohibitions as declared under LRS Scheme, which is a general permission of RBI binding on all including Respondent Enforcement Directorate in terms of Section 11 of FEMA, 99. 51. The main error in the impugned order is that RBI scheme has not been discussed at all. The impugned order is totally silent about the scheme. The relevant circulars of RBI 2004 to 2007 have not been considered. When, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said statements had been retracted as they had been given under threat and coercion. In order to determine whether the claim of the appellants that they were subjected to torture, threat and coercion was a credible one, the SD sought to have permitted the appellants to cross-examine the officers of the ED who recorded the statements. As regards Prem Singh, his statement is stated to have been recorded by A.K. Narang, Assistant Director. The statement of Rajendra Singh was recorded by Devender Malhotra. Neither of these officers was tendered for cross-examination. In the considered view of the Court, in the context of the specific allegation that the retracted confessional statements were obtained under torture and coercion, that aspect ought to have been examined by the SD. In the circumstances, the reasons given by the SD in the impugned AO for disallowing the request of the appellants for cross- examination of the ED officials only because it would tantamount to further delay in finalising the proceeding were not tenable or justified. The denial of cross examination of the ED officials by the appellants indeed has caused them severe prejudice since the ED was relying on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) An opportunity to defend himself by cross-examining the witnesses produced against him and by examining himself or any other witnesses in support of his defense; and finally (c ) An opportunity to make his representation as to why the proposed punishment should not be inflicted on him. iv). The Hon ble Supreme Court of India in Ayubkhan Noorkhan Pathan Vs. The State of Maharashtra Ors. Decided on 08.11.2012, Civil Appeal No. 7728 of 2012, after relying upon various authoritative judgments, has observed that cross-examination is an integral part and parcel of the Principles of Natural Justice. It held that Cross-examination is one part of the principles of natural justice. (v) A Constitution Bench of the Hon ble Supreme Court in State of M.P. v. Chintaman Sadashiva Vaishampayan, AIR 1961 SC 1623, has held that the Principle of Natural Justice require that a party be given the opportunity to adduce all relevant evidence upon which it relies, that evidence of the opposite party be taken in his presence, and that he be given the opportunity to cross-examine the witnesses examined by that party. Not providing the said opportunity to cross-examine is viol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of judicial review. (ix). The Hon ble Supreme Court of India in New India Assurance Company Ltd., v. Nusli Neville Wadia Anr., AIR 2008 SC 876, while considering a case under the Public Premises (Eviction of Unauthorised Occu pants) Act, 1971, held that though the statute may not provide for cross-examination, the same being a part of Principles of Natural Justice should be held to be an indefeasible right. It was held as follows:- If some facts are to be proved by the landlord, indisputably the occupant should get an opportunity to cross-examine. The witness who intends to prove the said fact has the right to cross-examine the witness. This may not be provided by under the statute, but it being a part of the principle of natural justice should be held to be indefeasible right (x). The Hon ble Supreme Court in Needle Industries (India) Ltd. Ors. v. N.I.N.I.H. Ltd. Ors., AIR 1981 SC 1298, considered a case under the Indian Companies Act, and observed that: It is generally unsatisfactory to record a finding involving grave consequences with respect to a person, on the basis of affidavits and documents alone, without asking that person to submit to cross-exam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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