TaxTMI 
TaxTMI 
2022 (11) TMI 1233
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....Mr. Prakash Shah a/w Mr. Jas Sanghavi and 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could not have been passed as the adjudicating authority was not legally empowered to perform such acts under the repealed Foreign Exchange Regulations Act, 1973 (FERA).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provided in Section 49(3) of the repealing act, Foreign Exchange Management Act, 1999 (FEMA) no adjudication under the repealed act can now start after the expiry of the limitation of two years since the repeal of FERA. FERA was repealed on 31st May 2000.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 t....
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.... under FERA. (l) 16th August 2004 Petitioners received a notice for a hearing on 7th September 2004 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 ....
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....cement; and (e) Such other class of officers of Enforcement as may be appointed for the purposes of this Act. 4. Appointment and powers of officers of enforcement.- (1) The Central Government may appoint such persons 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 (othe....
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....e their respective offices and no such Chairman or other person shall be entitled to claim any compensation for the premature termination of the term of his office or of any contract of service. (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 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....
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....assed. 7. Mr. Rustomjee submitted as under : 7.1 Section 51 of FERA [referred to in Section 49(3) of FEMA] confers the power to adjudicate contraventions of FERA on an "Adjudicating Officer" as defined in section 50. This is also evident from multiple other provisions of FERA which refer to the "Adjudicating Officer". 7.2 Section 49(3) of FEMA provides for a 'sunset period' of two years (i.e. from 1 June 2000 to 31 May 2002) within which an Adjudicating 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 Adju....
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.... inter alia, as it was issued beyond the sunset period). The notification of 25 August 2003 specifically and explicitly provides that the officers are appointed under FERA. 7.8 In the present case, Mr. A. K. Bal (Respondent No. 2), who has purported to take notice of the alleged contraventions of FERA on the last day of the sunset period, has been appointed as an Adjudicating Authority under the provisions of FEMA. He has not, at any stage, been appointed as an 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 tak....
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.... (iv) Section 6 (a) of the General Clauses Act, 1897 sets out that the repeal shall not revive anything not in force or existing at the time at which the repeal takes effect. (v) In the absence of "anything done" or "action taken" under the repealed act when it was in force, no right will accrue under the repealing enactment. The right must be accrued and not merely an inchoate one. What is unaffected by the repeal is a right "acquired" or accrued" under the repealed statute and not "a mere hope 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....
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....n 49(3) of FEMA does not extend FERA for 2 years. It only keeps alive the ability to take action for a contravention - which has already occurred - under Section 51 of FERA. (vii) In the present case, Show- Cause Notices dated 30th May 2002 were issued under the provisions of Rule 3(1) of the said Rules, as to whether adjudication proceedings should commence. Clearly, at that time there was no contravention under FERA and the show-cause notices issued on 30th May 2002, are not saved by Section 49(3) of FEMA. (viii) Section 49(6) of FEMA excludes the general 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....
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....ve any power to issue the impugned show cause notices. (iv) Section 50 FERA refers to an officer of enforcement "specially empowered" in this behalf by order of the Central Government. The Impugned Notification states that the Adjudicating Officer was deemed to have been empowered. A plain reading of Section 50 of FERA shows that there must be a specific empowerment. A deemed empowerment is impermissible in law. (v) The Impugned Notification is issued in continuation of earlier notification dated 10th July 2001 (appointing Mr. A. K. Bal as the Adjudicating Authority) and also bears reference to Section 49(5)(a) of FEMA. 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 t....
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.... taken; and show-cause notice has to be issued and served before 31st May 2002. The show cause notices dated 30th May 2002 were served upon Petitioner after 31st May 2002. Therefore, not valid. 9. Mr. Prakash Shah submitted as under : 9.1 Petitioners, who he was representing, were issued five Show Cause Notices (SCNs) for the alleged contravention of provisions of FERA, calling upon them to show cause why adjudication proceedings as contemplated under section 51 of FERA read with Section 49(3) and (4) of FEMA should not be held against them for aiding and abetting an Indian advertiser for advertising product of other exporters in contravention of Section 8 (1) of FERA read with paragraphs 14.D1, 14.D4 and 6E.1 of Exchange Manual of RBI. 9.2 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 ....
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....isdiction or authority for issuing a Notification after the repeal of FERA on 31st May 2000. Thus, Notification dated 10th July 2001, appointing Mr. A. K. Bal as Special Director in the Enforcement Directorate was under section 36 of FEMA and not under FERA. 9.7 Mr. A. K. Bal could not have been appointed a Special Director under Section 5 of FERA on 10th July 2001 since as on that date FERA stood repealed and was not in existence. The office order dated 20th November 2002, purports to clarify the notification dated 10th July 2001. It is not appointing Mr. A.K. Bal as Special Director. The purported clarification vide office order dated 20th November 2002 is ex-facie beyond the notification dated 10th July 2001. In any event, the office order purported to have 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....
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....een given retrospective effect or retroactive operation as it is now well settled that in absence of any provision contained in the legislative Act, a delegate cannot make a delegated legislation with retrospective effect.'' In this regard reliance was also placed on Hon'ble Supreme Court's Judgement in MRF Ltd. Kottayam v. Assistant Commissioner (Assessment) Sales Tax and Ors 2006 (8) SCC 702 and the Hon'ble Kerela High Court's Judgment in Ramalingam Nadar Sons v. State of Kerala 1993 (91) STC 61. In FERA or FEMA, no power is conferred on the Union of India to issue any notification with retrospective effect. Thus, neither the notification nor the office order can have retrospective effect. The entire exercise is ex-facie invalid and devoid of jurisdiction, power and authority. 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 t....
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....edings, therefore, were initiated against petitioners within the frame work of the statutory provisions of Section 49(3) and (4) of FEMA. 10.3 Section 2(a) of FEMA defines the term 'adjudicating authority as an officer authorized under sub-section (1) of section 16 of FEMA. 10.4 The Supreme Court of India in the case of P.V.Mohammad Barmay Sons vs Director of Enforcement 1992(61) ELT 337(SC) has, in a case of repeal of Foreign Exchange Regulation Act 1947 and the savings clause of FERA, observed that "Section 81(2) of the Act empowers to effectuate the liabilities, penalties etc. as if they have been in existence and amenable to be pursued under the Act or under the repealed act by operation of section 6 of the General Clauses Act. What is unaffected by the repeal of the Act 7 of 47 is a 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 operati....
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....er 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). Although the offences/contraventions under FERA continue to be governed by FERA, the procedure to be followed is governed by FEMA. In the case of Tirumalai Chemicals Ltd V/s. Union of India AIR 2011 SC 1725 it was held that Section 19 of FEMA was applicable for the purpose of determining limitation in an Appeal against adjudication Order under FERA. Since there is already an order authorizing Special Directors to act as Adjudicating Authority since 1st June 2000 there is no requirement of any separate specific order. 10.8 On a combined reading of sections 2(a), 16 and 49 of FEMA alongwith 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 Cent....
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.... Allahabad High Court in the case of Fiserv India Pvt. Ltd. vs. Assistant Director and Ors. Manu/UP/0273 /2021 reasonable period for issue of notice commences from the date of receipt of information. The adjudication proceedings commenced upon the adjudicating authority taking notice of any contravention. Rule 3(1) of the Adjudication Proceedings and Appeal Rules 1974 (Rules) notified in exercise of the powers conferred by Section 79 of FERA upon Central Government to make Rules under Rule 3(1), the issuance of notice to show cause under Rule 3(1) is first step for commencement of the adjudication proceedings and not when a notice of hearing issued under Rule 3(3) of the Rules. In fact, Mr. Rustomjee in fairness, submitted that a Division Bench of this Court in Star India Private Ltd. & Ors. Vs. Union of India & Ors 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 content....
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....epeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not- ... (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed." 15. On the other hand, Section 49 of FEMA, which is in issue in the present matter, is differently worded with respect to: (i) the effect of repeal; (ii) the period during which an adjudicating officer may take notice of a contravention under FERA and (iii) the application of Section 6 of the General Clauses Act, 1897, as further explained below. 16. 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 sa....
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....; and (ii) by the non-obstante clause contained in section 49(3) of FEMA, 2000, the language of which supersedes 'any other law for the time being in force," thus including the provisions of the General Clauses Act. (C) The language of the provisions makes it clear that both Section 49(4) as well as Section 49(5) are subject to Section 49(3) of FEMA. 18. In the light of the above, the two enactments and their repealing provisions are distinct and the reasoning in P.V. Mohammad Barmay Sons (supra), is inapplicable to the present facts of the matter. 19 It may be noted that P.V. Mohammad Barmay Sons (supra), itself contains a caveat against an unrestricted application of Section 6 of the General Clauses Act in other fact situations. Paragraph 7 thereof, inter alia, holds as follows: "7. ....Even in case of bare repeal accompanied by a fresh legislation on the same subject, the provisions of the new Act will have to be looked into to find where and how far the new Act envisages a contrary affecting the operation of Section 6 of the General Clauses Act. Unless such contrary intention is manifested, liabilities, penalties, forfeiture or punishment under ....
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....his behalf" by order of the Central Government. Therefore, the person to adjudge whether any person who has contravened any of the provisions is liable to penalty, is the Director of Enforcement or any officer from the rank of Assistant Director of Enforcement or above, who is "specially empowered in this behalf". Therefore, the officer has to be specially empowered to adjudge. 23. Where any person has committed contravention of any of the provisions of the Act, to adjudge under Section 50 of FERA, the adjudicating officer, i.e., the Director of Enforcement or any other officer of Enforcement from the rank of Assistant Director Enforcement or above, who is "specially empowered in that behalf" shall; under Section 51 of FERA hold an inquiry in the prescribed manner after giving that person a reasonable opportunity for making a representation in the matter and if, on such inquiry, if the adjudicating officer is satisfied that the person has committed the contravention, he may impose such penalty as he deems fit in accordance with the 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: ....
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....waived." This was the position till 31st May 2000 when FERA was repealed subject to certain Savings provisions. 24. To get over the difficulty of contraventions under FERA coming to light after FEMA came into force on 1st June 2000, Section 49(3) read with Section 49(4) and Section 49(5)(a) of FEMA took into account such situations. Under Sub Section (3) of Section 49 of FEMA, starting with a non-obstante clause, an adjudicating officer could take notice of any contravention under Section 51 of the repealed Act (FERA) before the expiry of a period of two years from the date of commencement of FEMA. Therefore, as FERA was repealed with effect from 31st May 2000 the Adjudicating Officer can take notice of any contravention under Section 51 of FERA upto 31st May 2002 and not later. If the Adjudicating Officer takes notice of any contravention under Section 51 of FERA on or before 31st May 2002, then as provided under sub Section (4) of Section 49 of FEMA all offences committed under FERA shall continue to be governed by the provisions of FERA as if FERA had not been repealed. 25. Now let us examine whether A.K.Bal, took notice of any contravention under Section 51 of FERA ....
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....per Black's Law Dictionary means to Treat (something) as if it were really something else or it has qualities that it does not have. It was submitted that it was actually a clarification and not fresh Notification because if it was to be taken as fresh Notification, it being issued after 31st May 2002 will be invalid as beyond the sunset period provided. In our view, even such a clarification cannot be issued because Section 50 of FERA requires the officer of Enforcement Directorate not below the rank of Assistant Director Enforcement to be "specially empowered in this behalf" to take steps under Section 50 of FERA. There is no Notification issued by the Central Government specially empowering Mr. A.K. Bal to be an Adjudicating Officer under Section 50 of FERA. 27. Admittedly, FERA was repealed on 31st May 2000. As held by this court in Tata Communications Transformation Services Limited (supra) the effect of the repeal is to obliterate the statute repealed as completely as if it had never been passed and it must be considered as a law that never existed except for the purpose of those actions or suits which were commenced, prosecuted and concluded while it was an existing law. ....
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....he notification dated 10th July 2001. In any event, the office order purported to have 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. 31. Sub-section (4) of Section 49, subject to the provisions of sub-section (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. By virtue of sub-section (4) of Section 49, 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 are deeming provisions for th....
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....November 2002, Mr. A. K. Bal had not been appointed before the repeal of FERA but has been appointed under the provisions of FEMA, therefore, this appointment in our view is not valid in any event to be appointed as an Adjudicating Officer under Section 50 of FERA. 34. Notably, Section 50 FERA refers to an officer of enforcement specifically empowered in this behalf by order of the Central Government. The Impugned Notification states that the Adjudicating Officer was deemed to have been empowered. A plain reading of Section 50 FERA shows that there must be a specific empowerment. A deemed empowerment is impermissible in law. The Impugned Notification is issued in continuation of earlier notification dated 10th July 2001 (appointing Mr. A.K. Bal as the Adjudicating Authority) and also bears reference to Section 49(5)(a) FEMA. 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. It is well settled that where....