2018 (7) TMI 446 - HC - FEMA

Court defers decision on 2015 notice, permits independent action under Section 16, deems assessment premature, dismisses petition.

MMC Exports Limited & Others Versus Director, Directorate of Enforcement & Others

The court refrained from deciding on the conclusiveness of the 2015 notice and allowed authorities to proceed independently under Section 16 for ... Validity of show cause notice - Held that:- It appears from the provisions of the Act of 1999 that, the authorities can invoke the provisions of Section 16 for contravention of Section 13 of the Act of 1999, independent of exercise of powers under Section 37 of such Act. Apparently, the authorities have invoked Section 16 for the alleged contravention of Section 13 of the Act of 1999. At this stage, it would be premature for the writ Court to arrive at a finding that, the authorities have no material before it to invoke such provisions assuming that, the exercise of powers under Section 37 of the Act of 1999 remains inconclusive and that, such exercise did not bring forth any materials in support of the case of the authorities. It is for the adjudicating authority envisaged under Section 16 of the Act of 1999 to arrive at such a finding. The petitioners have replied to the impugned show cause notice. It has dealt with the show cause notice in detail. Therefore, it would be premature on my part to arrive at a finding that, the petitioners are not aware of the charges made against it. In any event, it would be open for the petitioners to contend such ground before the adjudicating authority. Issues:Challenge to show cause notice dated November 1, 2017 under Foreign Exchange Management Act, 1999.Analysis:The petitioners challenge the show cause notice dated November 1, 2017, arguing it is a repetition of an earlier notice from 2015 and lacks a basis for proceeding against them. They claim the previous notice from 2015 was not decided upon despite court orders and subsequent correspondence, indicating it remains inconclusive. The petitioners assert the impugned notice is devoid of material particulars and grounds, alleging mala fide actions by the authorities. They contend that the authorities cannot invoke the provisions of the Foreign Exchange Management Act, 1999, and seek to have the notice set aside.The respondents argue that the petitioners replied to the impugned notice and should contest the proceedings before the adjudicating authority. They maintain that the show cause notice from 2015 was disposed of in 2015, opposing the petitioners' stance on its inconclusiveness.The impugned show cause notice quotes provisions of the Foreign Exchange Management Act, 1999, requiring the petitioners to appear and provide explanations and documents. The notice is based on a complaint alleging contravention of Section 13 of the Act, with the adjudicating authority tasked with establishing the petitioners' guilt. The petitioners responded to the notice, raising detailed arguments.The court refrains from deciding on the conclusiveness of the 2015 notice, noting that authorities can invoke Section 16 for contraventions of Section 13 independently of Section 37. It deems premature to conclude on the sufficiency of material before the authorities, leaving it to the adjudicating authority to make such determinations. Given the petitioners' detailed response to the notice, the court declines further interference and disposes of the petition without costs, vacating any interim orders.