2013 (11) TMI 759 - HC - FEMA

Court upholds dismissal of appeals due to time-barred show-cause notice under FEMA, applying FERA regulations.

Director, Enforcement Directorate Versus M/s Shangrila Latex Industries Private Ltd.

The Court upheld the Tribunal's decision to dismiss the appeals, finding the show-cause notice time-barred under FEMA due to the expiration of the ... Bar of limitation - Whether the show cause notice issued was time barred - Tribunal has quashed the show-cause notice as time barred - Held that:- order of the Tribunal is self-explanatory and the reasons mentioned in the impugned order to the effect that the action, if any, for the alleged breach under Foreign Exchange Regulation Act, 1973 (hereinafter referred to as 'FERA') could be taken within a period of two years, which has, in any case, expired on 1.6.2002, whereas the memorandum of the show-cause notice is on 26.7.2005. Even if the receipt of the report for the first time by the Assistant Director to the Special Director is considered, the same was on 5.5.2005. Under these circumstances, even if the earliest date is considered in respect of the report for the alleged breach under FERA, the period of limitation for two years for initiation of the action under FEMA under Section 49(3) had, in any case, expired - Decided against Revenue. Issues:Appeals arising from Tribunal's judgment under FEMA, validity of show-cause notice under FERA, interpretation of Section 49(3) and 49(5)(1) of FERA, applicability of FEMA over FERA breaches.Analysis:The appeals in question stemmed from a common judgment by the Tribunal under FEMA, where the Tribunal deemed the show-cause notice as time-barred and subsequently quashed it. The Tribunal's order was based on the expiration of the two-year limitation period for initiating action under FEMA, as the alleged breach under FERA was dated back to 1998, well before the relevant timeline. The appellant argued that Section 49(5)(1) of FERA could save the proceedings for alleged FERA breaches, contending that FERA provisions were akin to FEMA regulations. However, the Court noted that the alleged breach occurred during the period when FERA was in effect, falling under Section 49(3) of the Act rather than Section 49(5), as suggested by the appellant.The Court emphasized that if the breach occurred during the FERA era, the proceedings would be governed by Section 49(3) of the Act, making the show-cause notice time-barred under FEMA. The Court rejected the appellant's argument that the proceedings could be saved under Section 49(5)(1) of FERA, as the breach was clearly dated back to a period covered by FERA. Consequently, the Court found no substantial legal question for consideration and upheld the Tribunal's decision to dismiss the appeals, as the actions taken under FERA were not consistent with FEMA regulations, rendering the show-cause notice invalid under FEMA.In conclusion, the Court held that the show-cause notice and subsequent proceedings were indeed time-barred under FEMA, as the alleged breach occurred during the period when FERA was in force, falling under Section 49(3) of the Act. The Court dismissed all appeals, affirming the Tribunal's decision and ruling them meritless.