TaxTMI 
TaxTMI 
2018 (4) TMI 1342
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.....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 Rs. 2,21,43,125/- (equivalent to GBP 2,69,677/-) in respect of Savings Bank account number 008490700001612 held by Shri Ashwani Kumar Mehra, the appellant in appeal no. 01/2018, (PAN No. AAHPM8959M) standing with YES Bank, Chattarpur Branch, New Delhi vide Seizing Order No. HIU/S.O.- 2/37A/2017/AD (AHK) dated 15.06.2017. The said seizure was effected on the reason to believe that foreign exchange worth GBP 2,69,677/- (worth Rs. 2,21,43,125/- as on 14.06.2017) was suspected to be held outside India in contravention of Section 4 of the FEMA, 1999. It is alleged that, acting upon an information that Shri Ashwani Kumar Mehra s/o late Shri Devi Dass Mehra, had stakes/interests in various offshore entities in contravention of the provisions of the FEMA, enquiries were made with Reserve Bank of India to ascertain whether Shri Ashwani Kumar Mehra and C.No. Appl/DLH/CUS/ED Petition/02/2017 made any application regarding any overseas investments and whether he figures in the Overseas Investment Database....
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....of India, vide order dated 15.06.2017, seized balance amount to the tune of Rs. 5,01,215.55/- in respect of various bank account(s)/deposit(s) as detailed below held by Shri Navin Mehra, Appellant in appeal no. 04/2018, standing with various Banks, vide Seizing Order No. HIU/S.O.- 4/37A.2017/AD (AHK) dated 15.06.2017. The said seizure was effected on the reason to believe that foreign exchange worth GBP 2,97,070 (worth Rs. 2,43,92,538 as on 14.06.2017) was suspected to be held outside India in contravention of Section 4 of the FEMA, 1999. The details of amount/type of A/c and name of the banks are as below: - S.No. Balance Amount available (Rs.) Type of Account Name of Bank 1 1,26,713.39 FDR A/c Oriental Bank of Commerce 2 1,27,452.63 FDR A/c Oriental Bank of Commerce 3 5,126.00 FDR A/c 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....
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.... 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 appeal before us. 9. The case of all the appellants in appeals are that the order passed by the Res....
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....tances 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, Nigeria, Philippines and Ukraine. iv) Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of te....
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....nager, 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/Sirs, Liberalised Remittance Scheme of USD 25,000 for Resident Individuals- Investor Protection - Disclosure Requirements Attention of the Authorised Dealers is invited to the instructions contained in A.P. DIR (Series) Circular No. 64 dat....
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....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, under the Scheme, for any permitted current of capital account transaction or a combination of both. 3. All other terms and conditions mentioned in A.P. (DIR Series) Circular No. 64 dated February 4, 2004, A.P. (DIR Series) Circular No. 24 dated December 20, 2006 and A.P. (DIR Series) Circular No.....
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.... 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 Rs. 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 Rs. 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 amount was remitted through authorised dealer of the RBI. 18. The said appellant on receipt of the seizure order by communications on 14.07.2017 made a request for recall of the order, interalia, on the grounds that with the freezing order no "material" and "reason to believe" have been supplied and that admittedly the transactions had....
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.... 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 could use the said remittances freely to acquire, hold immovable property or shares or any other assets outside India, without prior approval of the Reserve Bank of India. 25. The individuals (persons resident in India) could open, maintain and hold foreign currency accounts with the banks outside India, for making the remittances under the scheme. Th....
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.... 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 fiction/non-fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of "interpretation of statutes". Vis-à- vis ordinary prose, a legislation differs in its provenance, layout and....
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.... 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, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are (sic not) confronted with any such situation here. 31. In such cases, retrospectivity is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the ....
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....rative 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. A Constitution Bench of this Court in KeshavlalJethalal Shah v. MohanlalBhagwandas11, while considering the nature of amendment to Section 29(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows: (AIR p. 1339, para 8) "8. ... The amending clause does not seek to explain any pre- existing legislation ....
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.... 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 contrary to "LRS investment" without explaining the terms "LRS investment" or stating how and in what manner contravention is made out. 36. Remittances are made during the period 3-2-10 to 8.1.2013 while as Section 37A of FEMA came to statute book on 14.5.2015 hence action u/s 37A could not be applied retrospectively. 37. In communication it was further informed that impugned foreign exchange ha....
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....laced 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 such stay order..." 41. The impugned transactions admittedly have taken place between the period 2010-13 and in no way could order be passed u/s 37A of FEMA, 99 which came on Statute Book on 14/5/2015. Hence the whole proceedings are void ab initio. The appellant submits that under Section 37A (4) itself provides that if amount is brought back to India, the Competent Authority on receipt of an application in t....
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....om 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 writing, but nowhere required to communicate those reasons to the aggrieved person, as in the case of Section 17 of PMLA, there is no express requirement for communicating the reasons so recorded, the Hon'ble Supreme Court held that irrespective of there being no such requirement in the statute, the concerned officer is bound to communicate the said reasons, as the failure to communicate shall materially prejudice the person s....
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....ut 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 record reasons separately but the order would be an incomplete order unless either the reasons are incorporated therein or are served separately along with the order on the affected party. Reasons for the order must be communicated to the affected party. " This decision has been followed in various judgments by various Courts, including the Hon'ble Supreme Court of India. 47. Mr. Rana, learned counsel for the respondent during the course ....
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.... 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 was pointed to Mr. Rana, he says that these are not applicable. The said arguments of Mr. Rana is without any force as the circulars speak for themselves and those are applicable. 52. It is also a matter of surprise that the hearing were conducted by the Ld. Competent Authority in disjoint manner, separately for appellant and separately for complainant. The said practice is not a healthy practice in our system. It is apparent that the Competent Authority d....
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....ingh 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 said statements as if they were by themselves substantive evidence." (iii) The Hon'ble High Court of Delhi in Devashis Bhattacharya Vs. Union of India 159 (2009) DLT 780, while deciding a case under Foreign Exchange Regulation Act, 1973 had observed that: "18. It is well settled that where an action under the statute entails civil consequences, then even if an opportunity of being heard may not be explicitly set out in the applicable legal provisions, the adheren....
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....dgments, 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 violative of the Principles of Natural Justice. (vi). In Lakshman Exports Ltd. v. Collector of Central Excise, (2005) 10 SCC 634, the Apex Court, while dealing with a case under the Central Excise Act, 1944, considered whether to grant permission for cross-examination of a witness. In that case, the assessee had specifically asked to be allowed to cross- examine the representatives of the concerned firm, in order to establish that the goods in question had been accounted for in the firm"s books of accounts and e....
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....d 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-examination" (xi). Hon"ble High Court in Mehar Singh Vs. The Appellate Board Foreign Exchange 1986 (10) DRJ 19, while dealing with a case under the Foreign Exchange Regulation Act, 1973, decided the appeal in favour of the Appellants on the short ground that the applications made to the Director of Enforcement and before the Appellate Board during the pendency of the appeal to summon four witnesses for cross-examination, were not dealt with by the authorities below. It was held: "5. Non-summoning of the said witnesses for purpo....