TaxTMI 
TaxTMI 
2022 (11) TMI 1233
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....nd Mr. Yash Prakash, Advocates i/b PDS Legal for Petitioners in Writ Petition No. 2298 of 2005. Mr. Sameer Pandit a/w Ms. Krina Gandhi and Mr. Anmol Menon, Advocates i/b Wadia Ghandy & Co. for Respondent No.5 in Writ Petition N0. 744 of 2005. Mr. Parag A. Vyas a/w Ms. Karuna Yadav, Advocates for all the other Respondents. ORAL JUDGMENT : (PER : K.R. SHRIRAM, J.) 1. In these petitions the grounds taken are almost identical. According to petitioners, the show cause notices were issued by a person who was not so empowered as per law. Hence, the show cause notices issued are ex-facie without jurisdiction and illegal. Consequently, the order passed against petitioner/s could not have been passed as the adjudicating authority was not legally empowered to perform such acts under the repealed Foreign Exchange Regulations Act, 1973 (FERA). Moreover, as provided in Section 49(3) of the repealing act, Foreign Exchange Management Act, 1999 (FEMA) no adjudication under the repealed act can now start after the expiry of the limitation of two years since the repeal of FERA. FERA was repealed on 31st May 2000. Some petitioners have approached this court on receipt of the show cause notice its....
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.... before Respondent No.1 in respect of the impugned Show Cause Notices. (m) 19th August 2004 Petitioners wrote to respondent no.1, inter alia, challenging his jurisdiction to carry out the functions of an Adjudicating Officer under the provisions of FERA and also requested additional time for hearing. (n) 20th August 2004 Respondent no.1 rejected the request for adjournment made by petitioners and stated that the hearing would be held as scheduled on 24th and 25th August 2004. (o) 21st August 2004 Petitioners once again wrote to respondent no.1 requesting for additional time for hearing, without prejudice to their legal objections to his authority for conducting the proceedings. (p) 9th September 2004 Petitioners filed in this court Writ Petition (L) No. 2482 of 2004, inter alia, challenging the authority and jurisdiction of respondent no.2 to issue the Show Cause Notices and of respondent no.1 to act as an Adjudicating Authority. (q) 18th October 2004 The said Writ Petition (L) No.2482 of 2004 was disposed by directing petitioners to appear before respondent no.1 who would be at liberty to hear the preliminary objection regarding jurisdiction. (r) 25th Oc....
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....as it thinks fit to be officers of Enforcement. XXXXXXXXX 50 Penalty:-If any person contravenes any of the provisions of this Act [other than section 13, clause (a) of sub-section (1) of [section 18, section 18A] and clause (a) of sub-section (1) of section 19] or of any rule, direction or order made thereunder, he shall be liable to such penalty not exceeding five times the amount or value involved in any such contravention or five thousand rupees, whichever is more, as may be adjudged by the Director of Enforcement or any other officer of Enforcement not below the rank of an Assistant Director of Enforcement specially empowered in this behalf by order of the Central Government (in either case hereinafter referred to as the adjudicating officer). 51 Power to adjudicate :-For the purpose of adjudging under section 50 whether any person has committed a contravention of any of the provisions of this Act (other than those referred to in that section) or of any rule, direction or order made thereunder, the adjudicating officer shall hold an inquiry in the prescribed manner after giving that person a reasonable opportunity for making a representation in the matter and if, on suc....
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.... and no adjudicating officer shall take notice of any contravention under section 51 of the repealed Act after the expiry of a period of two years from the date of the commencement of this Act. (4) Subject to the provisions of sub-section (3) all offences committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if that Act had not been repealed. (5) Notwithstanding such repeal,- (a) anything done or any action taken or purported to have been done or taken including any rule, notification, inspection, order or notice made or issued or any appointment, confirmation or declaration made or any licence, permission, authorisation or exemption granted or any document or instrument executed or any direction given under the Act hereby repealed shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act; (b) any appeal preferred to the Appellate Board under sub-section (2) of section 52 of the repealed Act but not disposed of before the commencement of this Act shall stand transferred to and shall be disposed of by the Appellate Tribunal c....
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....djudicating Officer could, notwithstanding the repeal of FERA, take notice of any contravention under Section 51 of FERA. A proceeding validly initiated by an Adjudicating Officer within the sunset period would therefore be valid and would, under section 49(5)(a), be deemed to have been done under the corresponding provisions of FEMA. 7.3 The officer empowered to adjudicate contraventions under FEMA is an "Adjudicating Authority" as defined in Section 2(a) read with Section 16(1) of FEMA. Section 16(1) of FEMA restricts the power of an Adjudicating Authority to hold adjudication proceedings under Section 13 of FEMA, which only deals with contraventions of FEMA. Further, Section 16(2) of FEMA provides that while appointing an Adjudicating Authority under Section 16(1) of FEMA, the Central Government shall specify its respective jurisdiction by an order in the Official Gazette. An Adjudicating Authority has no powers outside the scope of the jurisdiction mentioned in the Order published in the Official Gazette under FEMA, leave alone under FERA. 7.4 There is nothing in FEMA (including the detailed provisions of section 49) that indicates that an Adjudicating Authority appointed un....
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....Adjudicating Officer under FERA. Mr. A. K. Bal therefore had no power or authority to issue the Show Cause Notices. The proceedings impugned in the present proceedings are therefore invalid and entirely without jurisdiction. 8. Mr. Kevic Setalvad submitted as under : 8.1 The facts in Writ Petition No. 3157 of 2006 relate to purported violations committed in respect of Sections 8 and 9 of FERA. Whilst the present petition is restricted to the issue of jurisdiction - what is relevant is that: the search proceedings pursuant to which the purported FERA violations were unearthed were carried out only in September 2000. FERA had already been repealed on 1st June 2000. During the subsistence of FERA no action had been taken under FERA. 8.2 Six Show Cause Notices - all dated 30th May 2002 - came to be issued in respect of purported violations of FERA. There is intrinsic material in the Show Cause Notices themselves that - on the date of the Show Causes Notices, i.e., on 30th May 2002, adjudication proceedings had not commenced. All the Show Cause Notices were served upon Petitioners after 1st June 2002. All the Show Cause Notices were issued under Rule 3(1) of the Adjudication Proceedi....
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.... or expectation" of acquiring a right or liberty to acquire for a right. (vi) In the present case, as nothing was done and no action was taken during the subsistence of FERA; no show cause notice could have been issued under Rule 3(1) of the Rules. Such action was not saved. 8.5 "No contravention" under Section 49(3) of FEMA and Section 51 of FERA : (i) Section 49(3) of FEMA provides for the sunset clause and states that no adjudicating officer shall take notice of any contravention under section 51 of the repealed Act after the expiry of a period of two years, i.e., after 31st May 2002. (ii) Section 51 of FERA states, for the purposes of adjudging under Section 50 of FERA whether any person has committed any contravention of the provisions of FERA, the adjudicating officer shall hold an inquiry in the prescribed manner after giving that person a reasonable opportunity. The words "in the prescribed manner" referred to in Section 51 of FERA, refer to the procedure laid down in Rule 3 of the Rules. (iii) Rule 3(1) of the said Rules states that the Adjudicating Officer shall, in the first instance issue a show cause notice to such person requiring him to show cause as to why ....
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....al saving under Section 6 of the General Clauses Act, with respect to Section 49(3) of FEMA. The provisions of Section 49(3) of FEMA must be strictly construed and applied. 8.6 No authority under FEMA to retrospectively vest power to adjudicate cases of contravention under FERA: (i) Section 16 of FEMA contemplates the appointment of Adjudicating Authority, which is defined in Section 2(a) of FEMA. In the absence of any specific language in FEMA which vests power to Adjudicating Authority to adjudicate cases of contravention under FERA with retrospective effect, the impugned notification F. No. 4/5/2000-Ad 1-C dated 20th November 2002 deserves to be quashed and set aside. (ii) Government of India cannot invest Mr.A.K. Bal (who is an Adjudicating Authority) with the powers of an Adjudicating Officer retrospectively. The courts will not ascribe retrospectivity to new laws affecting the rights unless by express words or necessary implication, it appears that such was the intention of the legislature. (iii) It is also trite law that the authority which has the power to make subordinate legislation cannot make retrospective legislation unless authorized by the legislature. (iv) ....
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....It would be pertinent to point out that Section 49(5)(a) seeks to continue the actions under FERA (and not inconsistent with FEMA) under the corresponding provisions of FEMA and not vice versa. Besides this, there is nothing in FEMA authorizing Adjudicating Authority to issue notice for violations under any provision of FERA. (vi) It is well settled that where a statute provides for a thing to be done in a particular manner, then it has to be done in that manner, and in no other manner. For the purpose of Section 49(3) of FEMA, there has to be a proper authorization of the 'Adjudicating Officer' who issues the notice of contravention under the provisions of FERA. Only because an officer has been appointed for the purpose of acting in terms of the provisions of an act, the same would not by itself entitle an officer to discharge all or any of the functions of the Central Government, unless specifically authorized. 8.8 Gross delay on part of Respondents in initiating proceedings: (i) Show cause notices issued after gross delay from the date of alleged transaction are not tenable in law. (ii) In the facts of the present case, 5 notices are issued by Mr. A. K. Bal and there is g....
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....There was no power to issue notification to appoint officers of Enforcement under Section 4 of FERA or to entrust the function of director or other officer of Enforcement under Section 5 of FERA with effect from 1st June 2000. 9.3 The Union of India cannot and does not have any authority to appoint Adjudicating Authorities with retrospective effect. 9.4 After FERA was repealed, there was no power to issue any Notification or make any appointment under FERA after its repeal. FERA admittedly stood repealed on 31.5.2000. The effect of the repeal is to obliterate the statute repealed completely as if it had never been passed, and it must be considered as a law which never existed, except for the purposes of those actions or suits which were commenced, prosecuted, and concluded while it was an existing law. [Tata Communication Transformation Services Ltd Vs. Assistant Commissioner of Income Tax 2022 SCC Online Bom 664]. 9.5 If the subordinate legislature is to survive the repeal of its parent statute, the repealing statute must say so in so many words and by mentioning the title of the subordinate legislation. Once the parent statute is repealed, the consequence is that the subordina....
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....been issued under sub-section (4) of Section 49 of FEMA cannot empower Mr. A. K. Bal to adjudicate cases of contravention of provisions of FERA under Sections 50 and 51 of FERA, when notification dated 10th July 2001 does not empower Mr. A. K. Bal to adjudicate cases under Section 50 of FERA. The said office order is claimed to have been issued in purported exercise of powers under sub-section (4) of Section 49 of FEMA. No adjudicating Authority could have been appointed pursuant to such a Notification to adjudicate the alleged contravention of FERA. 9.8 Sub-section (4) of Section 49, "Subject to the provisions of subsection (3)", only provides that all offences committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if repealed Act had not been repealed. This means, by virtue of sub-section (4) of Section 49 of FEMA, all the offences committed under the repealed FERA will be governed by FERA and for that limited purpose FERA shall be considered as if it had not been repealed. Later part of the provisions of sub-section (4) of Section 49 of FEMA are deeming provisions for the limited purpose that contravention under FERA shall be go....
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..... 9.11 Once the show cause notices are without jurisdiction, the consequential order is liable to be set aside as being devoid of jurisdiction. 10. Mr. Parag Vyas submitted as under : 10.1 Mr. A. K. Bal, who had issued the said show cause notices was appointed as Special Director under FEMA vide Notification dated 10th July 2001 and by virtue of the said notification, Mr. A. K. Bal was empowered to discharge functions in his capacity as Special Director under FEMA including adjudication of the cases within his competence / jurisdiction. The Government of India issued an order dated 20th November 2002 which is clarificatory in nature and was to be read in conjunction with Notification dated 10th July 2001. While Notification dated 10th July 2001 appointed Mr. A. K. Bal as Special Director of Enforcement under FEMA, the order dated 20th November 2002 clarifies that Mr. A. K. Bal is empowered to adjudicate cases of contravention under FERA by virtue of sub Section (4) of Section 49 of FEMA. The order dated 20th November 2002 is not a Notification but only a clarification. The authority to proceed under FERA is provided under the Savings Clause namely Section 49(3) and Section 49(4....
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....right accrued etc. There is a distinction between a legal proceeding for enforcing a right acquired or accrued liability, penalty forfeiture punishment incurred and the legal proceedings for acquisition of a right, the former is saved whereas the later is not. In spite of the repeal the right to investigation or to take legal proceedings remain unaffected as if old act continues to be operative." The term adjudicating officer as used in section 49(3) of FEMA therefore would also include an officer appointed under section 16(1) of FEMA. 10.5 Notices were issued on 30th/31st May 2002 u/s 51 of FERA read with section 49(3) and (4) of FEMA. At the time of issue of notice Special Directors under FEMA were already appointed as Adjudicating Officers vide Notification No.11/2000 SO 535(E). Therefore at the time of issue of notices dated 30th/31st of May 2002 Mr. A.K.Bal had jurisdiction. 10.6 In the case of Income-Tax Officer, Alleppey vs M.C. Ponnoose & Ors. (supra), the facts were that the definition of the term Tax Recovery Officer U/s. 2 (44) of the Income Tax Act, 1961 (the Act ) as existing when Act came into force on 1st April 1962 was substituted by the Finance Act 1963, w.e.f. ....
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.... Section 50 of FERA and the notifications no 11 of 2000 (F.NO.1/2/2000-Ad.I.C), 5/2001(F.N.4/5/2000-Ad.IC) dated 10th July 2001 and order dated 20th November 2002 Mr. A.K.Bal was competent to adjudicate in respect of contraventions under FERA from 2nd July 2001. 10.9 In the alternative, Section 50 of FERA, for the power to be effective does not use the words "prior order" of Central Government. Whenever legislature intended to that any power granted requires prior approval the same is specifically provided for in the statute like for example in Section 153D of Income Tax Act, where it says "No order of assessment or reassessment shall be passed .......... except with the prior approval of the Joint Commissioner" or in the proviso that was inserted in section 153D of the Income Tax Act by the Finance Act, 2013, w.e.f., 1-4-2016 where it said "Provided that nothing contained in this section shall apply .......... with the prior approval of the [Principal Commissioner or] Commissioner under subsection (12) of Section 144BA, or Section 124 in the Customs Act, 1962 which provides ".......... no order confiscating any goods or imposing any penalty on any person shall be made under this ....
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....s 2011 (264) ELT 353 (Bom.) has also confirmed the same that adjudication proceedings commenced with issuance of show cause notice by the adjudicating officer under Rule 3(1) of the Rules. Findings : 11. At the outset let us deal with P.V. Mohammad Barmay Sons versus Director of Enforcement (1992) (61) ELT (SC) relied upon by Respondents in support of the contention that an officer appointed under Section 16(1) of FEMA would be an 'adjudicating officer' under FERA for the purposes of Section 49(3) of FEMA. 12. P.V. Mohammad Barmay Sons (supra), in our view, does not deal with the issue - Whether an officer appointed under FEMA, (i.e., an adjudicating authority) has the authority and jurisdiction to adjudicate on contraventions of FERA. This issue of the competence of a particular officer or authority to take notice of a contravention was not raised or considered in the judgment. In fact, Section 81 of FERA, 1947 does not even contain a provision analogous to Section 49(3) of FEMA, (which makes a specific reference to an "adjudicating officer"). It is well settled law that a decision can only be considered an authority for what it actually decides and not what may appear to logic....
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....6. The relevant excerpts of Section 49 of FEMA, 2000, read as follows: "49. Repeal and saving. (1) The Foreign Exchange Regulation Act, 1973 (46 of 1973) is hereby repealed and the Appellate Board constituted under sub-section (1) of section 52 of the said Act (hereinafter referred to as the repealed Act) shall stand dissolved. XXXXX (3) Notwithstanding anything contained in any other law for the time being in force, no court shall take cognizance of an offence under the repealed Act and no adjudicating officer shall take notice of any contravention under section 51 of the repealed Act after the expiry of a period of two years from the date of the commencement of this Act. (4) Subject to the provisions of sub-section (3) all offences committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if that Act had not been repealed. (5) Notwithstanding such repeal,- (a) anything done or any action taken or purported to have been done or taken including any rule, notification, inspection, order or notice made or issued or any appointment, confirmation or declaration made or any license, permission, authorization or exemption grante....
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....ng the operation of Section 6 of the General Clauses Act. Unless such contrary intention is manifested, liabilities, penalties, forfeiture or punishment under the Repealed Act will continue to exist and remain in force by operation of Section 6 of the General Clauses Act". (emphasis supplied) 20. Having said that, let us examine the provisions of FERA and FEMA in the background of the matters at hand. 21. Before we proceed further we shall dispose certain submissions of Mr. Setalvad with which we disagree. On Mr. Setalvad's submissions that no proceedings were initiated under FERA in the absence of anything done prior to 31st May 2000 and as Section 49(5)(a) of FEMA states "anything done or action taken" under the repealed Act when it was in force, no right will accrue under the repealing enactment, we do not agree with Mr.Setalvad. In our view, if such a stand is taken then Sub Section (3) of Section 49 of FEMA, which is the sunset clause, will be rendered redundant. Theoretically, there could be situations where an offence may have come to light only on 31st May 2000 or after 31st May 2000. If we adopt the submissions made by Mr. Setalvad, it would amount to letting off all th....
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....provisions of Section 50 of FERA. How to hold the adjudicating proceedings, is provided for in Rule 3 of the said Rules, which read as under: "Rule (3) Adjudication Proceedings : (1) In holding an inquiry under section 51 for the purpose of adjudging under section 50 whether any person has committed contravention as specified in section 50, the Adjudicating Officer shall, in the first instance, issue a notice to such person requiring him to show cause within such period as may be specified in the notice (being not less than ten days from the date of service thereof) why adjudication proceedings should not be held against him. (2) Every notice under sub-rule (1) to any such person shall indicate the nature of offence alleged to have been committed by him. (3) If after considering the cause, if any, shown by such person, the Adjudicating Officer is of the opinion that adjudication proceedings should be held, he shall issue, a notice fixing a date for the appearance of that person either personally or through his lawyer or there authorised representative. (4) On the date fixed, the Adjudicating Officer shall explain to the person proceeded against or his lawyer or authorised....
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....ne whether A.K.Bal, took notice of any contravention under Section 51 of FERA before 31st May 2002. But, before he takes notice, he should first be validly appointed under Section 50 of FERA as an "Adjudicating Officer". Was Mr. A.K. Bal validly "specially empowered in that behalf" by an order of the Central Government under Section 50 of FERA? is the moot question. When FERA was repealed on 31st May 2000 Mr. A. K. Bal was not Director of Enforcement. Pursuant to the Notification dated 10th July 2001, Mr. A. K. Bal was appointed as Special Director in Enforcement Directorate under FEMA (not FERA) on deputation basis, only w.e.f. 2nd July 2001 (more than one year after FERA was repealed) for a period of 5 years or until further orders, which ever is earlier in the Mumbai Zone Office of Enforcement Directorate. Therefore, by this Notification, Mr. A. K. Bal was appointed as Special Director in the Enforcement Directorate under FEMA and not FERA. This is very relevant because as provided in Section 50 of FERA, Mr. A. K. Bal should have been "specially empowered" by order of Central Government to adjudge a person who has contravened any of the provisions of FERA. This Notification does....
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....commenced, prosecuted and concluded while it was an existing law. Consequently, once the parent statute is repealed, as held by the Hon'ble Apex Court in Air India (Supra), the subordinate legislation made under the statute ceases to have effect after the repeal of the parent statute except to the extent saved by saving clause. 28. Clause (a) of sub-section (5) of Section 49 seeks to save anything done or any action taken or purported to have been done or taken including any rule, notification, inspection, order or notice made or issued or any appointment, confirmation or declaration made or any licence, permission, authorisation or exemption granted or any document or instrument executed or any direction given under the Act hereby repealed shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act. Clause (a) of sub-section (5) of Section 49 is similar to Section 24 of the General Clauses Act. It only saves past action pending on the date of repeal. 29 It saves, amongst other things, any notification issued, or any appointment made under the repealed FERA prior to its repeal. The ....
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.... sub-section (4) of Section 49 are deeming provisions for the limited purpose that contravention under FERA shall be governed by FERA. 32. It is trite law that a deeming provision cannot be extended beyond the purpose for which it is intended. Sub-section (4) of Section 49 does not empower Union of India to appoint a special director under Section 5 of FERA for adjudication of contravention under FERA, post its repeal. The power to appoint any officer of customs or any Central Excise Officer or any police officer or any other officer of the Central Government or a State Government to exercise such of the powers and discharge such of the duties of the Director of Enforcement or any other officer of Enforcement under FERA as may be specified in the order under Section 5 of FERA cannot be exercised after repeal of FERA on 31st May 2000. In absence of any power to appoint Mr. A. K. Bal, as an officer of enforcement post the repeal of FERA, the impugned Show Cause Notice issued by him under Section 51 of FERA is ex-facie without jurisdiction and liable to set aside. 33. Therefore, in view of Sub Section (3) of Section 49 no Adjudicating Officer could take notice of any contravention u....