TaxTMI 
TaxTMI 
2024 (10) TMI 392
X X X X Extracts X X X X
X X X X Extracts X X X X
....India) Regulations, 2000 (in short `the Regulation of 2000). The penalty was imposed on delay of 24 days in reporting of the Foreign Direct Investment (FDI) of USD 3,09,00,000 equivalent to Rs. 204,91,04,000/- to the RBI. 2. Learned counsel for the appellants submitted that M/s Shell India Markets Pvt. Ltd. is one of the well-diversified international energy companies in the Oil and Gas sector in India. Reserve Bank of India (RBI) vide its Circular No.77 dated 12.02.2015 initiated online filing of (i) Advance Remittance Form (ARF) to report FDI inflows; and (ii) Foreign Currency Gross Provisional Return (FCGPR) Form to report issue of eligible instruments to the overseas investors. The online reporting on the e-Biz platform from 12.02.2015 was in addition to the manual system of reporting. 3. The RBI vide its another Circular No. 9 dated 21.08.2015, in order to promote and ease reporting transaction under FDI enabled online filing of the Foreign Currency Transfer of Shares (FCTRS) convertible debentures etc. from a person resident in India or vice versa. It was again in addition to manual operation. On 01.02.2016, RBI issued another Circular to provide online filing of the AR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er, the appellant immediately preferred this appeal. 8. Learned counsel for the appellant submitted that the imposition of penalty is in reference to Section 6(3)(b) of FEMA though it was omitted by the Act of 2015 w.e.f. 15.10.2019. Simultaneously, Section 47(3) was inserted to provide that the regulation made by RBI under Section 6 and 47 of FEMA on capital account transaction would now vest with the Central Government, however, it shall continue to be valid until amended or rescinded by the Central Government. 9. The Central Government through the Ministry of Finance notified the regulation called as the Foreign Exchange Management (Non-debt Instruments) Regulations, 2019. The regulations of 2019 were made relating to the mode of payment and reporting requirement for investment in India by a person resident out of India. The imposition of penalty was, however, made in reference to the provision omitted w.e.f. 15.10.2019 while the proceedings were initiated in the year 2022. It was even in ignorance of the fact that the appellant had faced technical difficulties in reporting the FDIs after introduction of online system. This was informed to the RBI with a prayer to condone ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....also, the prayer was made for interference in the impugned order. 14.Per contra, the appeal has been contested by the counsel for the respondents on the legal as well as on factual issues. It is submitted that as per Section 6(3) (b) of FEMA read with Para 9(1)(A) of Schedule-I of Regulation 5(1) of 2000, the appellant was under obligation to report receipt of FDI within 30 days. However, in the instant case, appellant made report of the FDI on 54th day i.e. with the delay of 24 days. The lame excuse in reference to change of system from manual to online for reporting of the FDI on the forms (ARF) has been taken. The excuse of technical difficulties has been taken but no material was submitted to support it. It is otherwise a vague statement of fact regarding teething difficulties on the start of online system for ARF. 15. The learned counsel clarified that online system was not introduced by the RBI for the first time on 08.02.2016 rather it was introduced by the Circular dated 12.02.2015 though there was option to submit ARF manually also. However, online system became operational from 12.02.2015. The further circular in reference to it was issued on 21.08.2015 in order to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0 of 2015 w.e.f. 15.10.2019, the amendment was made from the same date in Section 47 of FEMA where sub-section (3) was added w.e.f. 15.10.2019. Section 47(3) so added saved the regulation of RBI notified under Section 6 and 47 on capital account transactions till rule making power in reference to it is exercised by the Central Government. The regulation framed in reference to capital account transaction by the RBI remain operational. 20. By virtue of the amendment w.e.f. 15.10.2019 in Section 47 of the FEMA, the appellant remained under obligation to follow the mandate of Rule 5 (1) of the Regulation of 2000 as per the Schedule 9(1)(A). It was however clarified that Regulations of 2000 were superseded by the subsequent Regulation i.e. Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 (for short `Regulation of 2017') and thereafter Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instrument) Regulations, 2019 (for short `Regulation of 2019') but the provisions contained in the Regulation of 2000 remain part of the Regulation for reporting of FDI. Therefore, the legal issue raised by the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tor Shri Nitin Prasad. To analyse the legal issues, we may refer to Section 6(3)(b) as was existing before its repeal/omission and is quoted hereunder: "6. Capital Account transactions. (1) and (2)** ** ** (3) Without prejudice to the generality of the provisions of sub-section (2), the Reserve Bank may, by regulations, prohibit, restrict or regulate the following- (a) transfer or issue of any foreign security by a person resident in India; (b) transfer or issue of any foreign security by a person resident outside India; (c) transfer or issue of any security or foreign security by any branch, office or agency in India of a person resident outside India; (d) any borrowing or lending in foreign exchange in whatever form or by whatever name called; (e) any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India; (f) deposits between persons resident in India and persons resident outside India; (g) export, import or holding of currency or currency notes; (h) transfer of immovable property outside Ind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ents have demonstrated that online system for reporting was introduced on 12.02.2015 itself though with liberty to make reporting manually. The fact remains that online reporting was not introduced for the first time on 08.02.2016 but it was in operation from 12.02.2015 and was made compulsory w.e.f. 08.02.2016. On 21.08.2015, the reporting of transaction under FDI was made under the aegis of e-Biz project to promote and ease the reporting. The fact aforesaid shows that online system was in operation much before making it compulsory w.e.f. 08.02.2016. 27. In view of the above, we are unable to accept the excuse taken by the appellant in reference to teething problems. Teething problem, if substantiated, may remain initially but not in deplorable form under operation for a year before making it compulsory. Thus, the lame excuse taken by the appellant cannot be accepted to justify the delay. It is more so when there is no material placed on record to prove any teething problem in reporting. The appellant had not placed on record that even other Company also faced the difficulties which the appellant faced to substantiate their plea/excuse. 28. The appellants no doubt have made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y and to cause interference in the impugned order. 30. The next question is in reference to the provisions of Section 6(3)(b) and Regulation of 2000 superseded by the Regulation of 2017 followed by the Regulation of 2019. The provision of FEMA so repealed and the relevant provision of Regulation have been quoted earlier by us. It is not in dispute that Section 6(3)(b) was omitted or repealed w.e.f. 15.10.2019 but what would be the effect of omission needs to be considered in the light of Section 6, 6A and 24 of the General Clauses Act and the provisions aforesaid are quoted hereunder for ready reference: "6. Effect of repeal.- Where this Act, or any (Central Act) or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not- (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Canesugar Works Ltd. (supra) were considered. The relevant paras 19 to 35 of the judgment (supra) are quoted hereunder for ready reference to show as to what would be the effect of repeal, implied repeal or the omission of the provisions under the Statute or Regulation: "19. From a reading of the notes on clauses and the Memorandum of the Finance Bill, 1990, it is clear that Section 280Y(d) which was omitted with effect from 1.4.1990 was so omitted because it had become "redundant". It was redundant because it had no independent existence, apart from providing a definition of "urban area" for the purpose of Section 280ZA which had been omitted with effect from the very date that Section 54G was inserted, namely, 1.4.1988. We are, therefore, of the view that the High Court in not referring to Section 24 of the General Clauses Act has fallen into error. Section 24 states: "24. Continuation of orders, etc., issued under enactments repealed and re- enacted. -Where any 44 [Central Act] or Regulation, is, after the commencement of this Act, repealed and re-enacted with or without modification, then, unless it is otherwise expressly provided any 45 [appointment notificat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act, being two of the ingredients of Section 10(2)(xi) of the 1922 Act, must be read together with reference to an order under which debts had been written off. Accordingly, in the light of Section 24 of the General Clauses Act, 1897, the relevant order made under Section 10(2)(xi) of the 1922 Act with reference to which the debt in question had been written off, is deemed to be an order made under Section 36(1)(vii) of the 1961 Act and such order is what is contemplated under Section 41(4) of that Act. Any amount which is recovered on any such debt is attracted by the provisions of Section 41(4) of the 1961 Act and is, therefore, chargeable to tax in terms of that sub- section to the extent of the =excess' specified therein." (at para 7). 21. In State of Punjab v. Harnek Singh [2002] 3 SCC 481, this Court held:- "17. Section 24 of the General Clauses Act deals with the effect of repeal and re-enactment of an Act and the object of the section is to preserve the continuity of the notifications, orders, schemes, rules or bye-laws made or issued under the repealed Act unless they are shown to be inconsistent with the provisions of the re-enacted statute. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by this Court above, it becomes difficult to accept Shri Arijit Prasad's contention that Section 24 would only apply to notifications which themselves gave rights to persons like the appellant. Unlike Section 6 of the General Clauses Act, which saves certain rights, Section 24 merely continues notifications, orders, schemes, rules etc. that are made under a Central Act which is repealed and re-enacted with or without modification. The idea of Section 24 of the General Clauses Act is, as its marginal note shows, to continue uninterrupted subordinate legislation that may be made under a Central Act that is repealed and re- enacted with or without modification. It being clear in the present case that Section 280ZA which was repealed by omission and re-enacted with modification in section 54G, the notification declaring Thane to be an urban area dated 22.9.1967 would continue under and for the purposes of Section 54G. It is clear, therefore, that the impugned judgment in not referring to section 24 of the General Clauses Act at all has thus fallen into error. 23. But then Shri Arijit Prasad put before us two roadblocks in the form of two Constitution Bench decisions. He c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owed by another Constitution Bench in the Kolhapur Canesugar Works Ltd. case. After setting out paragraph 17 of the earlier judgment, the second constitution bench judgment states as follows: "33. In para 21 of the judgment the Full Bench has noted the decision of a Constitution Bench of this Court in Chief Inspector of Mines v. Karam Chand Thapar [AIR 1961 SC 838] and has relied upon the principles laid down therein. The Full Bench overlooked the position that that was a case under Section 24 of the General Clauses Act which makes provision for continuation of orders, notification, scheme, rule, form or bye-law, issued under the repealed Act or regulation under an Act after its repeal and re- enactment. In that case Section 6 did not come up for consideration. Therefore the ratio of that case is not applicable to the present case. With respect we agree with the principles laid down by the Constitution Bench in RayalaCorpn. Case [(1969) 2 SCC 412 : (1970) 1 SCR 639] . In our considered view the ratio of the said decision squarely applies to the case on hand." 27. The Kolhapur Canesugar Works Ltd. judgment also concerned itself with the applicability of Section 6 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... perhaps the appropriate course in the present case would have been to refer the aforesaid judgment to a larger bench. But we do not find the need to do so in view of what is stated by us hereinbelow. 31. First and foremost, it will be noticed that two reasons were given in Rayala Corporation (P) Ltd. for distinguishing the Madhya Pradesh High Court judgment. Ordinarily, both reasons would form the ratio decidendi for the said decision and both reasons would be binding upon us. But we find that once it is held that Section 6 of the General Clauses Act would itself not apply to a rule which is subordinate legislation as it applies only to a Central Act or Regulation, it would be wholly unnecessary to state that on a construction of the word "repeal" in Section 6 of the General Clauses Act, "omissions" made by the legislature would not be included. Assume, on the other hand, that the Constitution Bench had given two reasons for the non-applicability of Section 6 of the General Clauses Act. In such a situation, obviously both reasons would be ratio decidendi and would be binding upon a subsequent bench. However, once it is found that Section 6 itself would not apply, it would....
X X X X Extracts X X X X
X X X X Extracts X X X X
....epeal is posited, it matters little whether this is done expressly or inferentially or by the enactment of repugnant legislation. If such is the basis upon which repeals and implied repeals are brought about it appears to us to be both logical as well as in accordance with the principles upon which the rule as to implied repeal rests to attribute to that legislature which effects a repeal by necessary implication the same intention as that which would attend the case of an express repeal. Where an intention to effect a repeal is attributed to a legislature then the same would, in our opinion, attract the incident of the saving found in Section 6 for the rules of construction embodied in the General Clauses Act are, so to speak, the basic assumptions on which statutes are drafted......." (At page 484) 35. The two later Constitution Bench judgments also did not have the benefit of the aforesaid exposition of the law. It is clear that even an implied repeal of a statute would fall within the expression "repeal" in Section 6 of the General Clauses Act. This is for the reason given by the Constitution Bench in M.A. Tulloch & Co. that only the form of repeal differs but there is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsactions involving debt instruments determined under sub-section (7) of section 6, the limits of admissibility of foreign exchange for such transactions, and the prohibition, restriction or regulation of certain capital account transactions under section 6; (b) the manner and the form in which the declaration is to be furnished under clause (a) of sub-section (1) of section 7; (c) the period within which and the manner of repatriation of foreign exchange under section 8; (d) the limit up to which any person may possess foreign currency or foreign coins under clause (a) of section 9; (e) the class of persons and the limit up to which foreign currency account may be held or operated under clause (b) of section 9; (f) the limit up to which foreign exchange acquired may be exempted under clause (d) of section 9; (g) the limit up to which foreign exchange acquired may be retained under clause (e) of section 9; (ga) export, import or holding of currency or currency notes; (h) any other matter which is required to be, or may be, specified. (3) All regulations made by the Reserve Bank before the date on which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich was brought in exercise of the powers conferred by Section 47 of the Act of 2019 and consequent to the Rules of 2019. The reporting requirement was maintained under Regulation 4 and is quoted hereunder for ready reference: "4. Reporting Requirements: The reporting requirement for any Investment in India by a person resident outside India shall be as follows: (1) Form Foreign Currency-Gross Provisional Return (FC-GPR): An Indian company issuing equity instruments to a person resident outside India and where such issue is reckoned as Foreign Direct Investment, defined under the rules, shall report such issue in Form FC-GPR, not later than thirty days from the date of issue of equity instruments. Issue of 'participating interest / rights' in oil fields shall be reported in Form FC-GPR. (2) Annual Return on Foreign Liabilities and Assets (FLA): An Indian Company which has received FDI or an LLP which has received investment by way of capital contribution in the previous year including the current year, shall submit form FLA to the Reserve Bank on or before the 15th day of July of each year. Explanation: Year for this purpose shall be reckoned as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of receipt of the amount of consideration. (7) Form LLP (II): The disinvestment / transfer of capital contribution or profit share between a resident and a non-resident (or vice versa) shall be filed in Form LLP(II) within 60 days from the date of receipt of funds. The onus of reporting shall be on the resident transferor/transferee. (8) LEC(FII): The Authorised Dealer Category I banks shall report to the Reserve Bank in Form LEC (FII) the purchase / transfer of equity instruments by FPIs on the stock exchanges in India. (9) LEC(NRI): The Authorised Dealer Category I banks shall report to the Reserve Bank in Form LEC (NRI) the purchase / transfer of equity instruments by Non Resident Indians or Overseas Citizens of India on stock exchanges in India. (10) Form InVI: An Investment vehicle which has issued its units to a person resident outside India shall file Form InVI within 30 days from the date of issue of units. (11) Downstream Investment a. An Indian entity or an investment vehicle making downstream investment in another Indian entity which is considered as indirect foreign investment for the investee Indian entity in terms of the ....