TaxTMI 
TaxTMI 
2026 (9) TMI 559
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....r-Mrs. Pushpa Chachra. The firm was engaged in the business of exporting garments. In August 1998, the partnership was dissolved, and the business, along with its assets and liabilities, was taken over by appellant no. 2 as a sole proprietary concern. 3. Investigations were conducted by the Enforcement Directorate, which revealed that M/s Intersales and its partners-Mr. Rajiv Chachra and Mrs. Pushpa Chachra had effected shipments of goods valued at US$ 62256.50 under the cover of Guaranteed Remittance Forms (hereinafter referred to as, 'G.Rs.'). It was alleged that without obtaining permission from the Reserve Bank of India (hereinafter referred to as, 'RBI'), the appellants had refrained from taking necessary action for securing the export value of certain G.Rs. within the prescribed time period or within the time period as extended by the RBI. The details of the said G.Rs. are as follows: S.No. G.R. No. Amount 1. 7469786 US$ 26,000.00 2. AJ 238449 US$ 6067.35 3. AJ 238443 US$ 8730.00 4. AJ 238446 US$ 2662.65 5. 1102667 US$ 12736.00 6. 1102571 US$ 6060.50 Total US$ 62256.50 4. Accordingly, it was ....
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....erial no. 4. It was further held that though the previous Adjudication Order had not been brought to the notice of the learned Adjudicating Authority, the penalty imposed in respect of G.Rs. at serial nos. 2 and 3 cannot be sustained as the said two G.Rs. had already been adjudicated upon, resulting in a penalty on the appellant no. 2. Insofar as the remaining G.Rs., that is, G.Rs. at serial nos. 1, 5 and 6 were concerned, the learned Appellate Tribunal held that the export proceeds for the said G.Rs. were still outstanding and that the appellants had failed to bring any material on record to substantiate that they had taken reasonable steps for their realization. Accordingly, the penalty of Rs. 25,00,000/- imposed on appellant no. 1 was held to be not harsh or excessive and was, therefore, sustained. However, in view of the fact that the appellant firm had been taken over by appellant no. 2 as its sole proprietor, the learned Appellate Tribunal held that the separate penalties of Rs. 2,50,000/- imposed on the appellant no. 2 and Mrs. Pushpa Chachra could not be sustained. 11. Aggrieved thereby, the appellants filed the present appeal, challenging the order of the learned Tri....
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..... 16. He further submits that imposing a penalty is not automatic. Levy of penalty is discretionary in nature, but such discretion has to be exercised by the Adjudicating Authority/Appellate Tribunal after taking into consideration the relevant factors. In furtherance, he relies on the judgment of the Supreme Court in Excel Crop Care Limited. v. Competition Commission of India & Anr., (2017) 8 SCC 47. 17. The learned counsel submits that the learned Adjudicating Authority/Appellate Tribunal exercises quasi-judicial functions and, therefore, is bound to give reasons for the discretion exercised by it. In support, he relies on the judgment of this Court in Sunita Mehta and Others v. Special Director, Enforcement Directorate, 2026 SCC OnLine Del 1525. He submits that in the present case no reasons have been given by the learned Appellate Tribunal for imposing the penalty of Rs. 25,00,000/- on the appellant no. 1. He submits that penalty imposed by the learned Appellate Tribunal is untenable in law and deserves to be set aside for being without any reasons. In furtherance, he places reliance on the judgments of this Court in Marubeni India P. Ltd. v. The Special Director of Enfor....
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....herefore, the penalty of Rs. 25,00,000/- imposed on the appellant no. 1 cannot be said to amount to the appellants being vexed twice for the same contravention, and therefore, deserves to be upheld. 22. He also submits that the mens rea is not an essential ingredient for holding a delinquent liable for penalty under the FERA. He submits that the proceedings under FERA are adjudicatory in nature and not criminal proceedings, and the officers of Enforcement Directorate and other administrative authorities are expressly empowered to adjudicate. In furtherance, he relies on the judgment of the Supreme Court in Directorate of Enforcement v. M.C.T.M Corporation Pvt. Ltd. and Others, (1996) 2 SCC 471. ANALYSIS AND FINDINGS: 23. We have considered the submissions made by the learned counsels for the parties. 24. At the outset, we would note that the learned Senior Counsel for the appellants did not make any submissions regarding the violation of Sections 18(2) and 18(3) of the FERA by the appellants, as far as G.Rs. at serial nos. 1, 5, and 6 are concerned. He confined his challenge to the Impugned Order on a limited plea that the Impugned Order does not give any reasons for im....
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....lved by courts. If an action taken by any authority is contrary to law, improper, irrational or otherwise unreasonable, a court of law can interfere with such action by exercising power of judicial review. One of such modes of exercising power, known to law is the "doctrine of proportionality". 18. "Proportionality" is a principle where the court is concerned with the process, method or manner in which the decision-maker has ordered his priorities, reached a conclusion or arrived at a decision. The very essence of decision-making consists in the attribution of relative importance to the factors and considerations in the case. The doctrine of proportionality thus steps in focus true nature of exercise-the elaboration of a rule of permissible priorities. 19. de Smith states that "proportionality" involves "balancing test" and "necessity test". Whereas the former (balancing test) permits scrutiny of excessive onerous penalties or infringement of rights or interests and a manifest imbalance of relevant considerations, the latter (necessity test) requires infringement of human rights to the least restrictive alternative. [Judicial Review of Administrative Action (1995)....
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....dered is priorities, reached a conclusion or arrived at a decision. The very essence of decision making consists in the attribution of relative importance to the factors and considerations in the case......... 19.........the principle of proportionality needs to be imbibed in to any penalty imposed under Section 27 of the Act. Otherwise excessively high fines may over-deter, by discouraging potential investors which is not the intention of Act..." 25. We find that the Special Director has completely failed to apply the doctrine of proportionality as interpreted and elucidated by the Apex Court in its various decisions, while choosing to impose maximum penalty on Respondents. Having gone through the impugned order, this Court does not find anything perverse in the findings, reasoning and conclusion of the Tribunal. We are in agreement with the finding of the Tribunal that in the absence of any discussion or justification pertaining to the basis for imposing the maximum penalty and juxtaposing this with the alleged acts attributed to each individual, the order of the Special Director is unsustainable." 29. Similarly, while considering Section 50 of the FERA, the ....
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....the proprietorship firm has not been established except by filing a copy of alleged deed of dissolution of partnership this tribunal cannot loose sight of fact that in the instant case partnership firm was constituted by mother and son while son was solely responsible for looking after the affairs of the firm which was subsequently stated to be converted to the proprietorship firm of the son i.e. individual appellant. In such a situation separate penalty imposed on the individual appellant cannot be sustained but considering the amount of contravention involved in GR No. 1, 5 and 6 with the amount of penalty imposed on the appellant firm cannot be said to be harsh or excessive. In such a situation the penalty imposed on the appellant firm is to be maintained and sustained." 33. We may note that the Adjudicating Authority, in its order dated 04.02.2004, while imposing a penalty of Rs. 25,00,000/- on the appellant no. 1, had found the appellant to be in contravention of Section 18 of the FERA, even with respect to G.Rs. at serial nos. 2 and 3. However, this finding has been set aside by the learned Tribunal in its Impugned Order. The amount of contravention, therefore, stood reduc....