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2008 (5) TMI 10

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.... with poor legal system earn greater profit margin. 4.   Appellants' business allegedly came to a standstill because of its inability to repatriate export proceeds to the tune of 16.5 crores from a few overseas buyers. A notice was issued by the Enforcement Directorate under Sections 18(2) and 18(3) of the Act alleging that in view of their failure to repatriate the entire sale proceeds of the exports which the appellants have made during 1997-98, the said provision is attracted. They, in the cause shown, allegedly furnished details of repatriation they could bring about as also the steps taken by them in that behalf. They applied for extension of time through the authorized dealer, viz., the Canara Bank. However, with the passage of time, the Branch Manager of the Bank did not grant any extension of time for repatriation of the export proceeds. A suit was also filed by the Canara Bank before the Debt Recovery Tribunal, Mumbai. 5.   The Enforcement Director, in the aforementioned proceedings, imposed a penalty of Rupees One Crore on the firm and Rs. 25 lakhs each on the partners. An appeal preferred by the appellants before the Appellate Tribunal was allo....

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....he provisions of the Income Tax Act, 1961 make a provision for bad debt. When a trader suffers loss, it is permissible to make a provision for writing off such bad debts. It was furthermore urged that in terms of the provisions of the Income Tax Act, the accounts are required to be audited by a Chartered Accountant and, thus, the impugned law being contrary to the accounting practice should not be sustained. Such repatriation of exports proceeds, thus, being uncertain, it was urged, the impugned provisions as also the Constitution 39th Amendment Act cannot be sustained. 9.   Mr. G. E. Vahanvati, learned Solicitor General appearing on behalf of the respondents, on the other hand, would submit that a domestic trader and an exporter belong to different classes and such classification,  being valid, the impugned provisions are not ultra vires Article 14 of the Constitution of India. It was pointed out that having regard to the nature of business and the risk involved in the export of commodities, the appellant could approach the Reserve Bank of India for grant of exemption and in that view of the matter it does not cause even any hardship to any individual. 10. Sectio....

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....cle 14 of the Constitution of India. Apart from the fact that the Act is protected under Article 31B of the Constitution of India having been placed in the Ninth Schedule thereof, even otherwise, we do not find any reason to arrive at a conclusion that the Act is ultra vires Article 14 of the Constitution of India. A discrimination on the ground of valid classification which answers the test of intelligible differentia does not attract the wrath of Article 14 of the Constitution of India. Hardship, by itself, may not be a ground for holding the said provision to be unconstitutional. In Ajoy Kumar Banerjee v. Union of India [(1984) 3 SCC 127], this Court held: "50. Differentiation is not always discriminatory. If there is a rational nexus on the basis of which differentiation has been made with the object sought to be achieved by particular provision, then such differentiation is not discriminatory and does not violate the principles of Article 14 of the Constitution.  This principle is too well-settled now to be reiterated by reference to cases. There is intelligible basis for differentiation. Whether the same result or better result could have been achieved and better basi....

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....having been pleaded, we are of the opinion that no case has been made out for declaring the said provision ultra vires the Constitution of India. 15. A domestic trader and an exporter stand on different footings. The said provisions were made when the country was undergoing severe 'foreign exchange crunch'. The Parliament in its wisdom has inserted the said provisions so as to prevent fraud. Sub-section (1) of Section 18 of the Act provides for filing of an application for grant of exemption by the Reserve Bank of India. Refusal to give such an exemption is required to be preceded by reasonable opportunity of making a representation. 16. A legal provision does not become unconstitutional only because it provides for a reverse burden. The question as regards burden of proof is procedural in nature. [See Hiten P. Dalal v. Bratindranath Banerjee, (2001) 6 SCC 16 and M.S. Narayana Menon v. State of Kerala, (2006) 6 SCC 39] 17. The presumption raised against the trader is a rebuttable one. Reverse burden as also statutory presumptions can be raised in several statutes as, for example, the Negotiable Instruments Act, Prevention of Corruption Act, TADA, etc. Presumption is rais....